Cable/internet Exclusivity agreement

[Steve Lucas]

Hello All,

I am currently in negotiations with spectrum cable on a internet/cable 10 year exclusivity agreement for a 233 unit complex in Ohio.

They are offering me 23k upfront (which seems low) 7300 a year in revenue share. The are also trying to sell me on a bulk service deal. The bulk service deal would be for the whole complex. They are stating they would charge us $42 a month per door and we would sell it for $75 a month. I don't like this deal because I feel that it will hurt our chance of raising rents in the future under the thought process of tenants believing we are billing them for more things nickel and diming them etc.

Also is there anything I should know for the non bulk deal? Is the upfront bonus to low? Thanks!!

[Joe M.]

Trying to think of a tenant, I really wouldnt like having one option.  If there are other cheaper options in that area it would leave a very bad taste in my mouth.  

Are there other options available that would make tenants actually want to use spectrum (lower price, free premium channels, etc) instead of you forcing spectrum on them?

[Steve Lucas]

I believe they get a slightly cost in the bulk agreement. With the non bulk they are not forced to used spectrum either its just more of a marketing play and it makes it a bit harder for other companies to come in but not impossible. 

Your thought process is why I am trying to stay away from the bulk agreement though

[Matthew Paul]

Call their competition start a bidding war .   233 units is a BIG score for them , you can demand more .  Its too big of a fish to get away .  I would start with a 5 year , with options and other clauses to your benefit . 

[Steve Lucas]

I agree paul, from other posts I've seen the upfront should be 35-50k not 23k. I just wasn't sure if I was missing something or not. 

[Steve Lucas]

Bump for morning thoughts? Thanks

[Gino Barbaro]

@Steve Lucas

Hi Steve

I work with an individual who negotiates on our behalf. I can give you his contact info if you PM me.

I don't like the bulk service deal.

Gino

[Steve Lucas]

Originally posted by @Gino Barbaro:

@Steve Lucas

Hi Steve

I work with an individual who negotiates on our behalf. I can give you his contact info if you PM me.

I don't like the bulk service deal.

Gino

Gino the whole reason I reached out to the cable companies was due to your podcast! Absolutely amazing work!

I don't like the bulk service deal either, it would put us on the line for 140k a year in payments to the cable company and I feel that tenants wouldn't comprehend the value to them correctly and could hurt us potentially raising rents in the future 

[Gino Barbaro]

@Steve Lucas

Thanks for the kind words. These cable companies are all trying to go bulk. Problem is if tenants don't pay, we are on the hook.  

Gino

[Steve Lucas]

Exactly, more risk than reward but I can definitely see why they are pushing it so hard. Its a sweet deal for them

[Greg Hamer]

I would use your leverage as a large apartment building to your advantage.  Big companies are rushing to put in fiber in desirable buildings.  

I wouldn't lock in.  

If anything *I* would pay for several vendors to put in fiber (I don't know what kind of area you are in - A, B, C).  Then let the tenants decide who they want. Affluent tenants want high speed internet.  That could be your differentiating thing.   

Some local ISP's will hook your building up with Gigabit fiber/wifi.  Look at https://webpass.net/metros, https://www.monkeybrains.net/, or similar sized businesses.  Building specific high speed service is a thing.  

But then again, what do I know....   :)

Let me know if you have any questions.