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Expert: Broken Regional Sports TV Model Screws Nuggets, Avs Fans

Nuggets and Avs mascots Rocky and Bernie react to being blocked in a video demanding that cable and satellite services reinstate access to Altitude TV.
Nuggets and Avs mascots Rocky and Bernie react to being blocked in a video demanding that cable and satellite services reinstate access to Altitude TV.
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At 8:30 p.m. tonight, October 8, the Denver Nuggets tip off their pre-season slate at Portland Memorial Coliseum versus the Trail Blazers, the same squad that prevented them from reaching the NBA Western Conference finals in May. But while the contest will be broadcast nationally on ESPN, fans in the Mile High City who'd rather watch the contest on Altitude TV, the network home of the Nugs and the Colorado Avalanche, among other local squads, are out of luck. The latter channel remains unavailable to customers of Comcast, DISH and DIRECTV, its three main platforms, because of a high-stakes pissing match that's been dragging on for weeks and has already impacted the start of the Avs' regular-season schedule.

Similar scenarios are playing out on cable and satellite services across the country, and Darrin Duber-Smith, a marketing professor and senior lecturer at Metropolitan State University of Denver, who recently told us how the Denver Broncos got hosed in a stadium-naming deal with Empower Retirement, understands why.

"The regional sports networks are a broken model, and we're right in the midst of it," Duber-Smith says. "People here are wondering who's going to get the blame, the carriers or KSE" — the abbreviation for Kroenke Sports & Entertainment, which runs Altitude TV for gazillionaire Stan Kroenke, owner of the Nuggets and Avs. "But everybody loses with this, especially fans. And this is a symptom of a far bigger problem. We're seeing the tip of the iceberg here."

Last month in this space, Kenny Miller, Altitude's general manager, executive vice president and executive producer, insisted that the impasse wasn't caused by KSE asking for a big increase in payments because the Nuggets and Avs are both viewed as legitimate title contenders in their respective sports this year. "We are offering to keep our rates flat to them, and honestly, they're roughly the same as what their own network charges to distribute the Rockies, Golden Knights and Jazz," he insisted. "Comcast owns seven regional sports networks and AT&T [DIRECTV's parent company] four, but they have not offered to them what they offered to us. They haven’t because it would put them out of business."

Comcast, DISH and DIRECTV see the situation very differently. Emblematic of their responses is this take from Suzanne Trantow, Rocky Mountain region lead public relations manager for AT&T. Via email, she wrote, "Unfortunately, Altitude forced AT&T to remove its channel from our customers’ lineups. ... AT&T made a fair offer to keep the channel available, but Altitude rejected it."

The specifics of these proposals haven't been made public, but Matt Hutchings, KSE's executive vice president and chief operating officer, recently claimed that Altitude has been asked to accept pacts as much as 67 percent lower than in the past. In reply, Altitude TV, which had already created a Don't Block My Nuggets/Avs public-relations campaign in an effort to put pressure on the carriers, has been getting more aggressive with its messaging.

For proof, watch the following video, in which Rocky and Bernie, the mascots of the respective outfits, teach a satellite dish a nasty lesson.

DISH and the other services rationalize the rates by arguing that viewers tend to tune in for games but seldom watch programming that fills the other twenty-plus hours of the day. "Live sports is the holy grail when it comes to advertising, because people don't DVR through it," Duber-Smith feels. "So much money is involved in it, so there's a lot at play here."

Understanding this, regional sports networks "have been raising their prices without a commensurate rise in viewership over the past ten years," he goes on. "But they haven't been able to raise their ad rates because they don't have enough eyeballs, with customers increasingly cutting the cord" — aka dropping expensive cable and satellite subscriptions in favor of streaming services. "So they have to charge more to carry the product, and that forces everybody who hasn't cut the cord to pay more whether they like the Avs and Nuggets or not. And it's not just them. Disney's been raising ESPN's price, too."

Meanwhile, the proliferation of sports networks is continuing at a dizzying pace. As Duber-Smith notes, "Now you have college football conferences with their own networks, and because you have so many expensive channels, there are these fights all the time." For example, Southern California-based fans of the Los Angeles Dodgers have had difficulty seeing the perennial playoffs performers on SportsNet LA for six years, and last month, Fox removed its assorted channels from DISH and Sling in seventeen markets across 23 states and Washington, D.C., to protest what the corporation saw as lowballing.

Even the mighty National Football League isn't immune from this scenario. DIRECTV recently hinted that it may walk away from the NFL Sunday Ticket franchise, which allows subscribers to watch any game, because of expense — "and the NFL does $8 billion in media rights," Duber-Smith says. "That's a lot different than Altitude."

Duber-Smith wonders if the proliferation of regional sports networks has reached a tipping point. If so, team owners may face some hard choices. "The way you turn a casual fan into an avid fan is through broadcasting. So why wouldn't you take a loss on your vertically integrated TV play and say, 'This is the way we're getting fans'? You could treat it as a loss leader, where you're leading consumers into something instead of acting like an individual network."

Another option? Going back to the future by selling broadcast game rights to traditional TV channels. "If you put the games on Channel 2 or Channel 20, you'd probably triple your audience, whereas if you stream them" — KSE has reportedly been exploring a deal with Amazon — "you'll probably lose half your audience. Not many casual fans are going to be looking for this on the Internet. So you're going to lose your casual fans, and that could have a long-term effect on your fan base."

Kroenke Sports has another major item on its plate aside from the Altitude TV issue: The company just extended its expiring deal for naming rights of the Pepsi Center, with the soda maker agreeing to stay on for one more year. "It's uncommon for something like that to happen," Duber-Smith concedes. "It could be because they're trying to strike a deal with Pepsi and they're still negotiating. But the other side of it could be that Pepsi doesn't want to do this anymore and Kroenke isn't ready to replace them — but they don't want to go the way of the Broncos," which went for two full seasons with the name of a dead company (bankrupt, shuttered Sports Authority) on its stadium before accepting an offer from Empower that was roughly half of what the team originally targeted.

For his part, Duber-Smith has great affection for Altitude TV. "I dig those guys," he says. "They hire a lot of my students. But I'm starting to see chinks in the armor."

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