Time Warner Cable, MSG Win as Lin and Knicks Slide
NEW YORK ( TheStreet) -- A month after "Linsanity" hit its peak in the New York area, there are a trail of winners and losers on and of the court.
During seven straight wins with Knicks phenom Jeremy Lin in the lineup, New York hoops diehards, fair-weather fans and even the governor were crying foul on a standoff between Madison Square Garden (MSG) , the owner of the Knicks television rights, and Time Warner Cable (TWC) , a powerhouse cable provider to the region. While the standoff benched Lin in the living rooms of nearly 3 million local viewers, a truce brokered hours before the tip off of Lin's eighth start may have been the high-water mark of Linsanity.
|Jeremy Lin helped end a MSG and Time Warner standoff, but who won?|
Since MSG and Time Warner settled, the Knicks have cooled to a 6-9 record, but the best New York basketball story in a generation has created off-court financial winners and losers.
"The timing went to MSG's favor," says Martin Pyykkonen of Wedge Partners, when reflecting on the programming settlement agreed on Feb. 17. "It was not so great for Time Warner Cable to play hard ball," he adds of the dispute, which started with the New Year and ended after a 48-day blackout.
As 2011 drew to a close, MSG and Time Warner Cable were unable to come to terms on the price of a carriage renewal for the network that carries the Knicks and New York Rangers ice hockey team, causing a blackout of games to large chunks of New York. Time Warner Cable argued that MSG was trying to extract an over 50% price increase, while MSG said that the lift was closer to 6%, fair compensation for the improving teams. Analysts say that the settlement was somewhere in between, with a Lin-fueled Knicks surge putting the ball in the court of MSG, after Time Warner Cable began negotiations on the offensive.
Time Warner Cable would have wanted to wait until March to cut a deal, when the NCAA men's basketball tournament pulls hoops viewers from the pro game to the college ranks says Richard Tullo a director or research at Albert Fried. Instead, Lin's play and heightened interest in the Knicks catalyzed a February deal, which Tullo calculates will net MSG a 19% price increase for 2012.
Since terms weren't announced, earnings at MSG and Time Warner Cable will begin to reveal the pricing and impact of the deal in coming quarters. Ahead of the dispute resolution it was already clear that both companies needed to end their conflict, albeit for different reasons.
As the distributor of the Knicks to millions of New Yorkers, Time Warner Cable represented a big MSG audience and a key to its subscription and ad revenue. In February first quarter earnings, MSG reported an over 13% drop in revenue from 2011, largely a result of the NBA lockout. Without Time Warner Cable business, 2012 may have felt like a continued NBA lockout, making the impact of a prolonged dispute clear.