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When the Rockets and Astros finished a deal to launch a regional sports network late in 2010, it was hailed as a great development for the two teams. Both could parlay the exclusive coverage into big contracts with distributors, and, at least according to estimates based on deals across the country, the subscriber fees could dwarf what the teams had made with Fox Sports.
Now, as the network has yet to secure carriage with any distributors outside of Comcast, the prospects are not so strong. David Barron of the Houston Chronicle reported Friday that the network might not get deals done until as late as 2015, nearly three years after the launch of the network. However, the outlook might even be worse than that. In response to that story, a Rockets source indicated that CSN Houston might not last that long. In fact, he noted that without a deal with the majority of carriers in the next year, the network might go under for good.
The Rockets and Astros made a big gamble by agreeing to launch a network without a plan for full carriage in the area, and that gamble has bit them back. The network has played up the I Want CSN Houston petition, but without serious subscriber losses to Comcast, the carriers have no reason to succumb to CSN Houston's demands. To this point, any losses to Comcast have been marginal at best.
With so little leverage in the talks, CSN Houston has struggled to overcome the many barriers to a deal. For one, there is the issue of subscriber fees. CSN Houston is seeking $3.40 per subscriber, but the carriers are unwilling to go that high. YES Network, by comparison, charges carriers $2.99 per subscriber to carry all Nets and Yankees games.
However, the subscriber fees are at least negotiable while there are other issues that may present a bigger hurdle to resolving this conflict. As carriers try to shift towards a model that has customers pay a la carte, Dish, U-verse, and Suddenlink are trying to push CSN Houston to a sports tier that includes channels such as MLB Network, NFL Network, and the like. CSN Houston would like to be broadcast to all subscribers over a five state area, but carriers complain that such a deal unfairly forces uninterested fans in other states to pay for a service they aren't interested in.
Relegation to a sports tier, the Rockets source said, would make the profits margins the Rockets and Astros aimed for "completely unfeasible." Unfortunately for the network, as was discussed earlier, the carriers have little incentive to back off their demands for a sports tier. Until Dish and the other carriers start losing customers to Comcast, they aren't going to feel the need to pay millions in subscriber fees. And, to this point, they haven't.
It is worth noting that in all of this doom and despair, the Rockets represent the greatest hope for a positive resolution to this conflict. In January and February of 2012, MSG and Time Warner Cable were locked in a dispute that kept 2.8 million viewers from watching the Knicks. The Knicks were stumbling, beat up, and irrelevant, and after falling to 8-15 with a loss on February 3rd to the Celtics, interest in the team had seemed to hit an all-time low. There was hope for a deal between TWC and MSG, but the uproar to make a deal happen had yet to appear.
Enter Jeremy Lin.
In the next week, Lin ignited the New York fan base with five straight 20+ point performances in his first five games, capped off by a 38 point game on national television against the Lakers. Knicks fans wanted to see the team again, and after coming under tremendous pressure to get a deal done, TWC and MSG got together and ended the conflict in time to see a Friday night contest less than two weeks after Lin's first start.
Houston is not New York in terms of fervent viewership, but the same phenomenon could happen if the Rockets return to contention in 2013. Right now, the Astros are headed for a third straight hundred loss season, and their fanbase of the team is steadily shrinking. In November, however, the Rockets, with James Harden and Dwight Howard leading the way, will take the Toyota Center court in a season that could see them challenging for a title.
Could that pressure be enough to see a budge on the carriers' side? Rockets fans can hope so. A full season without coverage wouldn't be the only loss. Without a deal, Houston fans could lose the best sports media presence the city has ever seen.
CSN Houston has brought the Rockets and Astros dedicated, round-the-clock coverage with production quality so far superior to that of FS Houston. They have hired a tremendous cast of commentators and announcers (even you, Bill), and have provided outstanding programming to a city that in the past only received gameday coverage on FS Houston.
Looking at the fantasy of lucrative distribution contracts and outstanding team coverage a few years ago, the Astros and Rockets had to be licking their chops at the possibility of launching CSN Houston. However, perhaps in their haste to get in on the RSN action, they rushed the process, failing to outline a path for full carriage before switching over. That lack of foresight might prove to be a colossal mistake.
In just the last few months, they have had not one, but two cash-calls to investors to infuse funds into the network. The Rockets' ownership structure is pretty simple, but the Astros, with some 40 minority owners in addition to Jim Crane, present some issues. How many more cash-calls can the investors take before a push to dismantle CSN Houston and return to Fox Sports begins? Could CSN Houston run out of money?
Nobody wants to talk about it, but the clock may be ticking on CSN Houston.