Hardball Questions: Kevin Cattoor

The Minnesota Twins played 15 innings and over five hours of baseball last night, but the majority of Twins fans didn’t see a single pitch.

During the off-season, the Twins started their own channel, Victory Sports, and they have yet to reach agreements with the six major cable and satellite providers in the region. As of right now, that means just a fraction of Minnesota’s 162-game schedule will be available on television to most fans.

I recently had a chance to speak with Victory Sports president Kevin Cattoor….

THT: The main content being offered on Victory Sports is Twins baseball, University of Minnesota men’s basketball, and Big Ten football and basketball. Am I missing anything significant?

Cattoor: We also carry up to 30 high school games featuring boy’s and girl’s basketball and hockey, 30 WCHA hockey games featuring St. Cloud State and Minnesota State Mankato, Big Ten basketball and football, NCAA tournaments covering hockey, wrestling, soccer, lacrosse, swimming, etc., and local shows like the Sports Show. In the last winter season, Victory provided over 125 events from this list.

THT: At the moment, what percentage of households in Minnesota is Victory Sports available in?

Cattoor: About 8% of the homes or 200 communities.

THT: Which outlets are not carrying the channel?

Cattoor: The national providers — DirecTV, Dish Network, Comcast, Time Warner, Mediacom and Charter Communications.

THT: What is the specific dollar amount Victory Sports is asking for from the major cable/satellite companies?

Cattoor: We do not reveal our price, but it’s fair to say that regional sports networks average about $2. The YES Network just received an arbitration ruling that gave them $1.93.

THT: How did Victory Sports establish their asking price?

Cattoor: Some of us at Victory started MSC [Midwest Sports Channel] in both Minnesota and Wisconsin. We’ve been in the business for over 10 years. We have a sense of what the prices for some 20 regional networks in the country are. The price for ESPN has been highly publicized at $2.50.

Price for these networks is based upon number of events, viewership of the events, and year round program lineup. Victory has more events — and the events with highest viewership — than any network in the region.

THT: What have the counter-offers been?

Cattoor: This has been our main frustration. The national providers have not countered with written offers except for one that suggested a pay service. We will not let Victory be carried as a pay service. To resolve carriage of Victory, the national providers need to come to the table on behalf of their customers and negotiate.

An analogy that we refer to is if you are selling your house for $200,000. Someone comes to you and says that your price is too high. You state “how much are you willing to pay?” And they don’t give you a price. That’s what we’re dealing with.

We didn’t come up with $200,000 out of nowhere. We looked at what other houses like ours were sold for. In fact, we’ve sold 30 houses like ours for the same price. So we think we’ve priced our house at fair value. The national operators have given us no explanation except that “we’re too expensive.” Well, give us an offer.

THT: Are you closer to finalizing an agreement with one outlet over the others, or are they all similarly deadlocked in negotiations?

Cattoor: We’re closer with some and far apart with others.

THT: Is there a “final” date, at which point negotiations will cease, or will Victory Sports continue to negotiate throughout the season?

Cattoor: No. We anticipate that as the season starts, deals will get done. Achieving success sooner than later will depend on when the national providers deem it’s time to negotiate. It will all get done.

THT: There are similar, team-based television channels in other markets. As you mentioned, the Yankees have the YES Network, for instance. What are some of the other, similar channels to Victory, and how much do they receive from TV outlets?

Cattoor: The Yankees (YES) and Red Sox (NESN) both have their own nets. The Cubs and White Sox are going into Comcast’s network in Chicago in 2005. Houston is pursuing theirs also. In contrast to the stadium, where the Twins are one of the last teams to get one, we will be one of the first teams to establish our own network. NESN, we understand, gets over $2. YES, as ruled by the arbitrator, gets $1.93.

THT: Talk a little bit about the impact — or non-impact — of the recent ruling by arbitrators that New York Cablevision will have to carry the YES Network on “expanded basic” cable.

Cattoor: The arbitration ruling impacts us in three ways:

1) We believe that the national operators haven’t wanted to negotiate and enter into a deal with us because our deal would then be entered as evidence into the hearing. Now that the hearing is done, they should be able to proceed with Victory.

2) They ruled expanded basic carriage and not a pay service. That’s good for Victory and the Twins fans.

3) The price is $1.93. YES is a baseball centric network like ours. In fact, while the Yankees generate 50% of the total viewership in the New York market, the Twins generate 85%. So we certainly think our price is fair.

THT: Is one of the issues with the major outlets that Victory Sports has a limited amount of unique programming during the day? For instance, ESPNews makes up a large part of the daytime programming and that channel is already available in Minnesota.

Cattoor: Operators are making false statements regarding our carriage of ESPNews. Our standard week has ESPNews programmed at about 20% of our total 24-hour day.

It’s scheduled for two hours first thing in the morning, which we think provides our viewers a place to go to get all the scores and highlights from the previous evening. We think that is a good place for ESPNews. When you see our primetime schedule, which is what most viewers watch on our network, ESPNews is aired about 10% in the winter and less than 5% in the summer.

Don’t be misled by operator’s comments regarding ESPNews. It provides us our source for national news. I think ESPN puts on some pretty good programming and it has value to the Victory service.

THT: Last year, FOX Sports Net reportedly charged outlets $1.70 per subscriber, and they had the Timberwolves, Wild, Gopher’s hockey and significant national programming not available on other channels, in addition to the Twins. Why is Victory Sports asking for more than that?

Cattoor: We do not believe that FSN is going for $1.75. We know some systems are paying upwards of $2.50. So we’re actually less than FSN.

THT: Do you feel FOX Sports Net has had anything to do with the problems in the negotiations with the major outlets?

Cattoor: They are owned by the same company as DirecTV. They have stalled talks with us because of that.

As to the other providers, we know that they have told many operators that the Twins will be back on FSN. They will not. FSN has made offers to us back as far as 2002. We recently rejected their last offer earlier this year. Victory is too far down the line and it’s the right thing for the Twins organization to do.

FSN was the only regional network in the market. They were a monopoly and we believe they behaved like it. They didn’t come to the table with a fair deal. Our previous deal put the Twins in the bottom five teams in MLB for television revenue, so we needed to establish Victory as another alternative in the market. Victory will be good for sports fans and other teams in the market because now we have competition and more sports programming will come from that, which is a win for upper Midwest sports fans.

THT: How much revenue did the Twins generate from their local television contract last season?

Cattoor: We do not discuss our financials in the public.

THT: As I understand it, Victory Sports has exclusive rights to 100+ Twins games this season, and an additional 20-25 games will be shown on other stations, such as Channel 45. Is this correct?

Cattoor: Correct. And for those areas that do not get 45, we simulcast the games on Victory. So in many parts of the region, you receive 130 games exclusively on Victory.

THT: As it stands now, are there any ways for someone in the Twin Cities to watch Twins games this season, aside from the 20-25 offered on Channel 45?

Cattoor: No.

THT: Is there any chance of Victory Sports working out an agreement with Channel 45 to broadcast more than the scheduled amount of Twins games, should an agreement with Victory Sports and the major outlets not be reached?

Cattoor: No. We have agreements with 30 cable providers who we need to provide games on Victory.

THT: It seems like, right now, no one is getting what the want and the majority of fans won’t be able to watch the Twins. Why not agree to add Victory Sports as a “pay-tier” option, so that those fans who want to pay extra money to watch the team have the option do so? At least while negotiations continue?

Cattoor: This is exactly what the operators would like us to do. Once you do this, you lose your leverage and ability to get on expanded basic. If you recall, last December we offered the Victory service free of charge, inviting the operators to negotiate so fans could see the Gophers, Big Ten, SCSU and MSU hockey and more. None of the national providers accepted our offer. So, this option doesn’t work. We tried it.

THT: If negotiations continue to go nowhere, is there any way to make Twins games available on a pay-per-view basis for this season?

Cattoor: No. Pay-per-view is not an option for any local sports telecast.

THT: Have the Twins talked about the potential impact on ticket sales, should the majority of games not be televised?

Cattoor: No, we have not.

THT: I imagine it would have a similar impact to games being “blacked out” in other sports?

Cattoor: We do not know this and you could never measure it. We’ve never believed that having so many games on television suppresses our attendance. Conversely, if games are not on television, we don’t think it will increase our attendance. The main factor that causes fans to go to the games is winning.

THT: Should Victory Sports reach deals with the major outlets, how would this new revenue impact the Twins’ revenue sharing situation?

Cattoor: The goal for any franchise is to get to the point where you’re not taking in any revenue sharing or paying in. We hope to get there.

THT: The Twins’ payroll has been at approximately $55 million for the past two years. What level of payroll do you foresee the team being able to commit to in the future, with that additional revenue?

Cattoor: We should strive to be at the league average if we get a new ballpark and maximize all of our local revenue streams.

THT: What is your response to Twins fans who simply say that they want to watch the Twins, like they have every other year, and that Victory Sports’ existence has taken that option away, for whatever reasons?

Cattoor: We fully understand their feelings about this. They just want to watch the games. We knew launching Victory wasn’t going to be pleasant. We ask for their patience as we work to get the national providers to the table to negotiate a deal.

Unfortunately, we believe that these national providers aggressively leverage their customers against programmers like Victory. Victory is a better way for the Twins and their fans. This is your network that will telecast more local sports than any other network in the market. You’ll be able to trust having your children watch Victory as our programming will be family oriented.