Comcast's Next Big Battle May Be in Its Backyard

Comcast (CMCSA) will soon need to compete for the hearts and minds of sports fans in the Philadelphia area.

Under the terms of the recently approved takeover of NBC Universal, the world's largest cable company is required to make Comcast SportsNet Philadelphia channel, whose programing includes games from the Philadelphia Phillies, Flyers and 76ers as well as college teams and sports talk shows, available to satellite companies, along with its other regional sports networks.

For years, the Philadelphia-based company had refused to do so, arguing that FCC rules did not require it because unlike most cable channels, Comcast SportsNet is broadcast using terrestrial -- not satellite -- equipment. This has meant local sports fans have had little choice but to be Comcast customers or miss watching many of their favorite teams on TV.

"Sooner Rather Than Later"


"Comcast's market share in Philadelphia [and its suburbs] is higher than in other regions in the country," says Craig Moffett, an analyst at Sanford C. Bernstein. Moffett rates Comcast shares as outperform, and he says Comcast SportsNet is one of the reasons why. He says the channel would be available to other pay TV customers "sooner rather than later."

The impact of the sports channel is far reaching. As the FCC noted in the NBC Universal deal, "Comcast's withholding of the terrestrially delivered Comcast SportsNet Philadelphia RSN [Regional Sports Network] from DBS [Direct Broadcast Satellite] operators caused the percentage of television households subscribing to DBS in Philadelphia to be 40% lower than it otherwise would have been."

As the start of Major League Baseball's spring training approaches, Comcast's rivals are making their move. DirecTV (DTV), the top satellite-TV provider, tells DailyFinance that it's in talks with Comcast about offering the company's Philadelphia sports channel. Jade Ekstedt, a spokeswoman for the El Segundo, Calf.-based company, declined to elaborate further.

Her comments were echoed by the DISH Network's (DISH) Francie Bauer, who says in an email: "DISH Network continues to evaluate new programming additions but has nothing new to announce at this time." She also declined to elaborate further. Comcast does allow the sports channel to be broadcast over Verizon's (VZ) FiOS Network. Spokespersons for the cable giant did not return several calls and emails seeking comment for this story.

Because Comcast has offered Comcast SportsNet Philadelphia to FiOS, it has to try to strike a similar deal with the satellite providers under the terms of the merger agreement. The issue will go to an arbitrator if it can't be resolved. Striking a deal may prove to be a challenge.

Cable Giant Won't Surrender Easily

Comcast is serious about sports, which is one of the main selling points of any pay-TV service. Besides owning the Flyers and 76ers, the company's cable properties include the Golf Channel and Versus, which, thanks to the NBC Universal deal, may be transformed into a rival to Walt Disney's (DIS) ESPN. It also owns the Wells Fargo Arena in Philadelphia, where the two teams play.

Philadelphia sports fans are a market that Comcast won't surrender easily because of their passionate devotion to their teams, which sportscasters sometimes mock. This is exactly the type of audience that advertisers covet.

For instance, the first-place Flyers have the National Hockey League's fifth-largest TV viewership, while the National Basketball Association's Sixers have struggled for years to attract fans. In July, more than 200,000 fans tuned in to watch Phillies games, an increase of more than 16% from the previous season. At the time, the team was playing barely .500 baseball. The Phillies attracts the seventh-largest radio audience in the major leagues. Baseball fans have huge expectations for the Phillies this year because of the off-season signing of pitcher Cliff Lee, who was a fan favorite during his earlier tour with the team.

Comcast will have to offer these fans some sweet deals once they can watch their teams on satellite.


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