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Industry Roundup

Ever wonder why your cable rates keep climbing? Take a peek behind the scenes at what cable providers have to pay for programming: With only three months remaining on its current contract, ESPN, the sports network, and Cox Communications are still negotiating future annual affiliate rate increases—which are currently projected at 20%. Merrill Lynch analysts estimate that Cox pays ESPN (and parent Walt Disney Company) approximately $400 million per year, costs that are passed on to subscribers. Cox is seeking a reduction in fees, a move that could become a model for other cable companies and satellite services. Similarly, Fox Sports Net reportedly asked the Cox organization for a 35% increase for use of its 12 regional sports networks. Affiliate fees account for more than 10% of total annual revenue for big media companies like Disney, TimeWarner, and Viacom, according to The Hollywood Reporter.

New York—based cable giant Comcast Corporation hopes to sell its stake in Time Warner Cable, according to news reports dated January 2. Comcast filed its intent to sell with the Securities and Exchange Commission (SEC) on December 31, and notified Time Warner. The two companies, which between them control the New York metro cable market, operate several joint ventures. The move by Comcast is to "monetize" its 21% stake in Time Warner, which in turn announced that it wants to increase its share of the market. One possible outcome: an initial public offering of stock in Time Warner Cable.

Uncensored music videos? Universal Music Group (UMG) the world's dominant record label, is reportedly in discussions with satellite broadcaster DirecTV, independent music company Shady Records, the Endeavor talent agency, and adult video specialist Vivid Entertainment Group to produce a new subscription-based channel. To be called 1 AM, the channel would feature "uncensored" music videos, going boldly where MTV and VH-1 have feared to tread. Should the deal pan out, Universal and Vivid would each own 45%, with Endeavor and Shady Records each owning 5%.

Circuit City in the black? The Richmond, VA–based retail chain is finally back on its financial feet, thanks to a profitable third fiscal quarter, ended November 30. With strong sales of flat-panel televisions, portable DVD players, digital satellite systems, and digital imaging products, Circuit City posted earnings of $1.4 million for the period, compared to a $17.8 million loss for the same period a year earlier. Sales for the quarter totaled $2.41 billion, a 1% decrease from the $2.42 billion registered a year ago. The improvement in earnings was attributed to reduced expenses, including a discontinued bankcard operation. Comparable store sales were up 4% in November, CEO Alan McCollough told reporters. Circuit City is the second largest electronics retailer in North America.

Best Buy on top: Minneapolis-based Best Buy doubled its earnings in its fiscal third quarter, ended November 29. The largest North American electronics retailer reached $122 million in earnings on sales of $6 billion, compared with $59 million during the same period in 2002. Subtracting last year's $27 million loss from discontinued operations, Best Buy's earnings grew 42% during the third quarter, attributable to an 18% rise in sales during the period, a total of $6 billion. CEO Brad Anderson cited strong market share and brisk sales of "computers, digital televisions, digital cameras, even CDs." Best Buy sales rose 15% for the 9-month period, a total of $16.1 billion, with comparable store sales up 5.8%.

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