Want to see a good, knock-down, drag-out fight? Think you need to order the latest boxing match on pay-per-view? Think again.

Small, independent cable operators, like Lawrence’s Sunflower Broadband, are predicting cable viewers soon will see a battle play out before their TV-watching eyes.

Patrick Knorr, general manager for Sunflower Broadband, is trying to prepare cable subscribers for an impending showdown between cable companies and the television and cable networks that provide viewer programming.

He’s also warning that cable subscribers may get caught in the middle, resulting in the unpopular combination of higher rates and fewer channel choices.

“I think one of the things that may happen is there will be a very public bloodbath in the industry over the next few years,” Knorr said.

Increasing fees

What has cable operators like Sunflower Broadband upset are rapidly increasing fees they must pay to networks. Sunflower Broadband is owned by the parent company of the Journal-World.

The fees are called programming fees, and Knorr said “almost every” network charges them. For example, cable operators pay a monthly, per subscriber fee to run networks such as ESPN, MTV, TNN and others.

According to industry surveys, those fees have been increasing 10 to 15 percent each year for the past five years. Powerhouse sports network ESPN has been increasing its fee 20 percent per year.

The increasing fees leave cable companies with unattractive options. They can either swallow the extra costs, pass them along to subscribers in the form of higher rates, or do a little of both.

Knorr said the increasing programming fees had been “almost the sole” factor in Sunflower’s decision to increase its basic extended rate from $24.50 in 1998 to its current rate of $34.95.

The increasing fees have caused a severe problem for the cable industry because historically cable operators have been able to increase rates by only 4 percent to 5 percent a year before they start losing subscribers, said Michael Pandzik, president and chief executive of the Lenexa-based National Cable Television Cooperative.

In the past three years, Pandzik said a study by his group showed programming fees had increased 44 percent for the average cable operator.

“The problem is, if a cable operator can only raise their rates 4 to 5 percent a year but their costs are going up 10 to 15 percent a year, they can almost calculate the date they’ll go out of business,” Pandzik said.

Not gonna take it

Knorr said Sunflower, along with several other cable operators, had a strategy for dealing with the increasing fees: Just say no.

Knorr said Sunflower was prepared to begin making tough choices about what channels to include on its system. It’s not likely that any cable operator will drop the likes of an ESPN, but it is possible some smaller channels that aren’t affiliated with larger companies may be dropped.

But the real battle may be with local TV stations. Currently, Sunflower doesn’t pay a programming fee to any of the area network stations, like KCTV 5 in Kansas City or WIBW 13 in Topeka.

It’s not because they haven’t asked. In fact, Knorr said Sunflower was prepared to drop KCTV from its system last year because the CBS affiliate was seeking a per subscriber fee.

The fee would have been less than $1 per month per subscriber, but Knorr said it would have activated clauses in other contracts with area affiliates that would have allowed them to start charging a fee as well.

“It would have resulted in a $5 a month rate increase pretty immediately,” Knorr said.

Since the cable system already has another CBS affiliate, Topeka’s WIBW, Knorr said it would have been an “easy decision” to drop the Kansas City station.

KCTV eventually agreed to a contract without a programming fee. When the contract expires in about three years, the station might not be so willing to go without a fee, the station’s general manager said.

Kirk Black, KCTV’s general manager, said satellite companies like DirectTV already were paying many local TV stations a programming fee. He predicted many of the area’s stations would be more insistent on a fee the next time their contracts were up for negotiation.

He said it was only fair for cable operators to pay a fee to stations like his.

“The main reason people get cable is to bring in their broadcast stations clearer and cleaner than they could with an antenna,” Black said. “They’re able to generate a lot of revenue because they have my signal on their system.”

But Knorr said cable companies couldn’t sit back and let more channels pour on even more fees.

“If it keeps going like it has been for the next 10 years, your cable bill will be around $100 a month, and that’s just not feasible,” Knorr said.

Whom to blame?

Knorr admits though that he does have concerns that dropping channels could cause some of his subscribers to sign up with satellite television providers or simply go without cable.

Black said Sunflower should be worried about losing subscribers if it started dropping area TV stations. Even though Lawrence is in a unique situation by having access to both Topeka and Kansas City stations, Black said there would still be massive complaints if Kansas City stations were dropped.

“I wouldn’t want to be the one answering the phones,” Black said. “It would be my strong guess that more people care about Kansas City news than Topeka news.”

Knorr said his job was to get customers to understand whom to blame. He said he must convince subscribers that when their cable bills increased or channels were dropped from the system, it was the fault of the networks and the fees they charged, not the fault of Sunflower.

“To beat this it will take cable companies saying no to the networks and hopefully consumers will support those decisions,” Knorr said.

Andy Muhl, communications director with the American Cable Assn., said that’s the message almost every small operator in the industry was trying to get out.

“People right now are blaming the cable operators, but when you drive by the 7-11 and see the price of gas is up, you don’t blame the gas stations. It is out of their control. That’s really the way it is in this industry, too.”

Muhl, in fact, said many of the problems can be traced back to one source: sports. He said networks — like ESPN, which recently paid $2.4 billion to broadcast the NBA — were making bad business decisions when it came to sports.

“They are negotiating almost obscene contracts,” Muhl said. “The networks can’t raise enough advertising revenue to pay for it, so who gets stuck with it? The cable operators and ultimately the consumer.”

Programmers laugh at that logic.

Katina Arnold, a spokeswoman with ESPN, said the network had no problem justifying its 20 percent annual increases in programming fees. She said the all-sports network now had contracts with all four major professional sports and provided tremendous value to cable companies.

“They generate a lot of local ad sale revenues off of our programming,” Arnold said.

Arnold said studies by the network showed that on the average cable system, local ad sales on ESPN generated 40 percent more revenue than any other network on the system.

“We still think ESPN is a bargain,” Arnold said.

Government help

Pandzik, at the cable co-op, thinks what’s needed is a fundamental change in the way cable operators charge their subscribers. He said he thought the industry within the next three to five years would move to a system that gave subscribers more choice to pick what networks they wanted.

“I think we’ll get a new model where subscribers say ‘I’ll buy CNN or I won’t, I’ll buy ESPN or I won’t,'” Pandzik said. “I don’t want to say it is an a la carte model, but it kind of is.”

Such a system would be hard to implement now because of the way contracts between networks and cable operators are written. Mega-companies like Disney, which owns ABC, ESPN and others, require many of their channels to reach 90 percent or more of a cable operator’s subscribers. In other words, a la carte deals aren’t allowed for most channels.

Pandzik said it may take some intervention from the federal government to require the networks to loosen up the terms of their contracts.

Pandzik said consumers probably ought to prepare themselves to see some channels disappear from their system, even at the same time rates rise, although hopefully not as fast as in the past.

“I’m very sympathetic with subscribers,” Pandzik said. “It is hard for them to understand. But what’s happening is there’s a fist fight going on in the industry right now. It started a couple of years ago in back rooms and behind closed doors. But now it is starting to spill out on the streets.”