Skip to comments.Will Sports TV Strike Out Big Media?
Posted on 04/05/2012 9:29:06 AM PDT by Beaten Valve
Bernstein Research analyst Craig Moffett says its possible in a provocative, and well timed, note this morning. The escalation in TV sports costs has gone to unimagined proportions, he says. If unchecked, he adds, it could blow the entire media model apart. And the business does appear to be unchecked. The huge price increases from the $15.2B NFL deals that ESPN, Fox, CBS, and NBC cut last year kick in with the 2014 season. Meanwhile, NBCUniversal likely will want higher payments for its NBC Sports Network formerly Versus before it was rebranded in January. News Corp is considering a similar upgrade of its action sports channel Fuel into a mainstream national sports service. And the Magic Johnson-led consortium that just paid more than $2B for the Los Angeles Dodgers is thinking about stealing a page from the playbook for the New York Yankees YES Network by launching its own regional sports channel which would be the sixth in LA. That means an already lopsided system is about to become even more distorted. Sports services collect about half of cable and satellite company programming payments about $12.15 per subscriber per month, according to SNL Kagan data even though they only represent 20% of all viewing. Disneys ESPN and ESPN2 alone account for 20% of programming costs, but just 2.5% of all viewing hours. That means sports fans are overwhelmingly being subsidized by non-sports fans, Moffett says.
Cant someone say enough? Not yet, it seems. Sports programmers are still too powerful, and fans too vocal. DirecTV probably reached its TV station carriage deal with Tribune last night because the satellite company didnt want to incur the wrath of baseball fans: Tribune outlets broadcast the New York Mets, the Chicago Cubs and White Sox, the Philadelphia Phillies, and the Washington Nationals. Time Warner Cable also discovered early this year that it couldnt just let regional sports service MSG go dark rather than pay the higher prices it wanted. New York Gov. Andrew Cuomo and other officials pressured the companies into settling in February as New York Knicks fans clamored to see the historic scoring run by point guard Jeremy Lin. On top of all that, last week a U.S. Federal Appeals Court upheld the business arrangement that makes all of this possible: bundling, or requiring subscribers to buy channels they dont watch in order to receive the ones that they do.
The danger for Big Media is that at some point, possibly soon, non-sports fans will decide that the package costs too much. The ecosystem built around the more than 100M cable and satellite customers who pay for stuff they dont want could collapse endangering the main source of profits for the industrys dominant players. Pay TV distributors have a fall back position: They can stop being middlemen in the process. In other words, Moffett says, let the media companies choke on their own prices by forcing them to go direct to consumer (and charging instead for pure transport). The media companies have no such fallback position.
As far as I am concerned, the NBA should be paying the networks to air their games.
I would ‘pay as you go’ (a reasonable fee) to watch NHL hockey games, motorcycle racing and Formula One car racing, but that’s about it.
Outside of that I usually never watch any TV sports programs.
Frankly, I can get more games and events over the internet that suit my interests ~ maybe 2 IU ball games, and curling every 4 years or so.
So why should I pay for the other stuff?
You mean the circuses aren’t free?
In this age of the DVR and the stream sports is pretty much the only thing on TV where more than half the audience is going to watch the commercials. And of course most of the ads now are for the networks other shows.
As long as media companies continue to pay $10MM for Olbermann and upwards of $5MM for the Tingler, the ceiling has not been reached.
(but toss a little somethin' in the bucket when they pass one ;-)
All these sports packages are loss leaders. Fox, for example, makes up the cost of overpaying for the NFL by endlessly promoting their other shows on NFL broadcasts (roughly 20-25% of the ads you see in an NFL game are promoting other programming). IOW, more people will watch other Fox programs because they were promoted during the NFL telecasts and more viewership means higher advertising rates Fox can charge for those programs.
Cable and satellite have a different challenge since their services are more subscription-based. Sports programming is a large part of increased cable fees and non-sports fans are picking up the tab thanks to bundling.
I google sports streams literally just type it into google I get a lot of sports from nfl, nba, MLB, nfl, and NCAA for free.
It was the most important factor in the creation of the "Professional Sports Thug Culture."
As more people get their programming off the net, the cable intermediary market will collapse, and not just in sports.