Report: The Absurd Cost of Sports Programming is Unsustainable We've long noted that one of the biggest driver of soaring cable TV price hikes is sports programming. And in many instances this is content many users may not even want; one survey indicating that 56% of consumers would ditch ESPN completely if it meant saving the estimated $8 per month the channel costs each subscriber. But when cable providers have tried to remove ESPN from core channel bundles, they've faced lawsuits from the "worldwide leader in sports," which apparently believes it will get to milk the existing bloated bundle cableTV cash cow indefinitely.

But there's every indication that this is a tenuous situation that's headed to the breaking point. Axios directs your attention to Magna's latest Media Sports Report. which indicates that the cost of sports programming licenses now well exceeds the money cable providers make via advertising during games. For the NBA alone, the $2.6 billion in broadcast fees well exceeds the $1.3 billion made from ads during the broadcasts. The same is true for the NFL, where cablecos pay $4.4 billion for licensing rights, but make $3.9 billion on game ads. This dynamic has had a devastating impact on channels like ESPN, where executives failed to notice cord cutting until it was already too late. The channel has lost more than 11 million regular viewers in just the last few years, despite consistently ramping up the money spent on sports licensing deals. As a result, ESPN laid off many of its best writers and reporters, but none of the executives that failed to notice the massive revolutionary shift occurring in the cable sector. As such, Magna analysts state the obvious when they say they "don't see the ever-increasing gap between ad revenues and rights fees as sustainable in the long term," something consumers likely could have told them several years ago. Of course cable providers have plenty of additional options when it comes to making up any lost revenue. That includes not only the often bi-annual rate hikes for cable TV, but the Of course cable providers have plenty of additional options when it comes to making up any lost revenue. That includes not only the often bi-annual rate hikes for cable TV, but the sneaky fees cable providers increasingly use to falsely advertise a lower price. And as profit margins tighten on TV, most pay TV providers have begun abusing the lack of competition in the broadband space as well, imposing arbitrary and unnecessary broadband usage caps and overage fees -- useful in grabbing their pound of flesh from users that cut the cord for streaming alternatives.







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RR Conductor

Ridin' the rails

Premium Member

join:2002-04-02

Redwood Valley, CA 39 recommendations RR Conductor Premium Member Sports in the US is disgustingly overpaid These guys get paid way too much money as it is, while teachers struggle for things like pencils for their class, disgusting where our priorities are

telcodad

MVM

join:2011-09-16

Lincroft, NJ 20 recommendations telcodad MVM Altice may challenge Disney/ESPN price hikes in their retrans negotiations said by Karl Bode: ... one survey indicating that 56% of consumers would ditch ESPN completely if it meant saving the estimated $8 per month the channel costs each subscrber. But when cable providers have tried to remove ESPN from core channel bundles, they've faced lawsuits from the "worldwide leader in sports," which apparently believes it will get to milk the existing bloated bundle cableTV cash cow indefinitely.



But there's every indication that this is a tenuous situation that's headed to the breaking point. ...



Analyst: Altice could challenge Disney price hikes in carriage negotiations

By Kendra Chamberlain, FierceCable - September 18, 2017

»www.fiercecable.com/cabl ··· tiations quote: Disney's first set of contract negotiations with service provider Altice are proving to be more challenging for the content owner than expected, according to BTIG analyst Rich Greenfield. Greenfield predicts these negotiations have already deteriorated and notes the likelihood of a carriage interruption is growing.



Altice is the first in a series of contracts Disney is seeking to renegotiate in hopes of offsetting recent revenue declines. Disney may have trouble justifying its per-subscriber rate increases for its top sports network, ESPN, in light of the network's recent and well documented subscriber declines.



ESPN has found itself stuck with extremely pricey sports rights at a time when the pay TV industry is seeing record numbers of cord-cutters leaving the ecosystem. EPSN has lost some 5 million subscribers over the past two years, a fact that has continued to weigh down Disney’s quarterly profits.



Disney's strategies for raising revenues typically include contract provisions that determine which pay TV packages carry ESPN. But Disney has received pushback from service providers like Verizon in recent years against these practices, as the value of ESPN and other premium cable networks has come under scrutiny amid cord-cutting.



After its acquisitions of Suddenlink in 2015 and Cablevision in 2016, the Netherlands-based Altice is considered a newcomer to the US pay TV ecosystem, a fact that’s led analysts to believe Disney may try to strong-arm the service provider during in this first round of negotiations. But BTIG’s Greenfield predicts Altice won’t be an easy win for Disney.



"Unfortunately for Disney, their legacy practice of strong-arming distributors is no longer going to work,” Greenfield said in a note. “[Altice] is taking a fresh look at the price [and] value of all programming as it has just recently entered the US market. ESPN/ESPN2 are no longer worth the $7-$8 per-sub per-month that they are paid by distributors." ... Yes, and Altice (Suddenlink and Cablevision) looks like they're about to challenge Disney/ESPN on this:By Kendra Chamberlain, FierceCable - September 18, 2017

maartena

Elmo

Premium Member

join:2002-05-10

Orange, CA 18 recommendations maartena Premium Member Big market problems.... Take Los Angeles. We currently have 2 MLB teams, 2 NFL teams, 2 NBA teams, 2 NHL teams, 2 MLS teams and on top of that 2 PAC-12 Universities. Although the cost of NFL teams is partially rolled into broadcast networks (hint: "broadcast surcharge", all of the other teams are pretty much rolled into one cable package if you want to watch one of them.



The NBA Lakers split off onto their own (Charter owned) sports network, and charged $5 per subscriber to it. The MLB LA Dodgers did the same about a year later, but they have had trouble selling the network to other cable providers for the same price of $5 - DirecTV wasn't going to fall for it twice.... so its currently only available on Charter. But still, the customer pays in the end.



The costs of sports in Los Angeles can be broken down roughly like this:



Dodgers: $5.

Angels: $3.50 (per 2012 contract, this could go up - that is how they bought Pujols)

Lakers: $5

Clippers: $2.50 (estimate)

Kings: $1.50

Ducks: $1.50 - both NHL teams are estimated based on older news articles from 2014

MLS teams: $1 for both - MLS isn't pulling in the numbers just yet.

Pac 12: PAC 12 wants around $2 I believe for their networks, which would include local UCLA and UCS, as well as games from other PAC 12 Universities.



ESPN: valued at around $7.

ESPN2: valued at around $1.



Fox Sports, NBC Sports, other sports networks..... I don't know the price of all the other networks, but I don't think it would be unfair to assume around $3 for all Fox, NBC, CBS, and other niche sports networks combined.



With the national networks mentioned above included, that would total it up to around $33 for sports in Los Angeles.



Now lets go ahead and round it DOWN to $30, just because I may be off a little on some estimates and it makes for easier calculation. Additionally, we can say $25 for anyone that isn't on Charter because the $5 Dodgers will be missing.



$25 a month = $300 a year to have your favorite sports team.



But what if you only want to watch ONE of those sports teams? What if you are like me, and are pretty much meh.... on most sports, but you like NHL hockey and some soccer from time to time? Why would I want to pay for the Dodgers, the Angels, the Lakers, the Clippers and whatever else I need to pay for just to get the NHL Hockey team I want to watch?



THIS is where the problem lies.... it may not be as noticable in smaller markets, but if you live in a larger market.... think Los Angeles, New York, Chicago, Houston, Dallas, etc, etc.... you are paying through the NOSE for all these sports teams, half of which you may not even care for.



To me... it became no longer worth it. I would consider buying a streaming service that was $10 a month for JUST the Anaheim Ducks during NHL season..... but I no longer want to pay a monthly cable bill that quickly exceeds $100 (after promo price) with hundreds of channels I do not even want or ever watch.



When i cut the cord in 2014.... I said I would be happy to pay for a limited channel package that would include ONLY the sports team of my choice, and a set of 20-30 important channels. Now that I have gone without that for 3+ years completely, I don't even want that anymore..... I'll do on-demand only for all my content. And seeing the massive amounts of people leaving cable these days.... I think cable companies are going to be too late to do anything about it. And it is their own fault, as they let the channel owners dictate to them in which package the channel should be, which is why you have all the sports channels in the same package, and you can't watch NHL without paying for NBA, MLB, NFL, and MLS as well.



Cable either knows this and will just continue to milk cable as long as they can until they can't milk it no more.... Brim77

join:2012-03-16

Lansing, MI 16 recommendations Brim77 Member Good. Let them die. And let that be a lesson to those that voted to allow tax-payer subsidies for billionaire's stadiums: sport arenas are not a good investment. If they were, they wouldn't need our public tax dollars to survive.

Anon60487

@yesup.com 14 recommendations Anon60487 Anon Solution: Pay less to NFL, NBA, NCAA, PGA etc for broadcast rights Solution: Pay less to NFL, NBA, NCAA, PGA etc for broadcast rights. And thereby pay less to the overpaid millionaire athletes and to team owners. The cable companies and cable networks just have to bite the bullet and tell the sports leagues to go pound sand when deals come up for renewal.

Economist

The economy, stupid

Premium Member

join:2015-07-10

united state 8 recommendations Economist Premium Member And once those viewers are gone... ...they are gone. sparek

join:2002-06-10

united state 8 recommendations sparek Member Pay-per-view model? Is a pay-per-view model the answer?



For regional sports networks, how much money are they spending to fill in air-time between games? Would that produce enough savings to lower the cost of providing a pay-per-view model to viewers that really want to see the games? Probably more like a season pass than an actual pay-per-each-viewing. The point being, show the content that people want to see (the game) and not all of the superfluous stuff.



If they are charging cable companies $2 per subscriber to reach 10 million customers ($20 million). Then $5 to reach 4 million customers that really want to see the game, would still produce $20 million. Are the RSNs paying $10 million to the various talking heads that produce content to keep the channel active between games? So they really only need to make $10 million to keep their same profit margins. So they could offer a pay-per-view model of just the games at $2.50 to those 4 million customers and get the same profits.



The same with ESPN.



I really don't know how much money these sports networks are paying for the talking heads content (Sportscenter, Pardon the Interruption, Around the Horn, etc). It may not be that much. And I suspect that my numbers above are orders of magnitude off.



No doubt ESPN and the RSNs have overpaid for the rights to some of these sports broadcasts. But they were working under the false pretense that everyone that was forced to pay for those channels, were actually watching those channels. This is a case of inflating numbers to look good. It certainly looks nice when ESPN has millions and millions of subscribers. But what you really need to know is how many people actually watch your channel. Yea, it's going to sink your numbers pretty good, but it's going to be a more accurate depiction.

cork1958

Cork

Premium Member

join:2000-02-26 5 recommendations cork1958 Premium Member As much as I like sports As much as I like sports, I would gladly drop ESPN, if I had the choice, no mater what amount it saved me.



Have to agree that the players are far over paid, it's insane. nfotiu

join:2009-01-25 4 recommendations nfotiu Member The linked article misses a lot on a lot of points. This makes no sense:



"This economics are especially problematic for broadcast networks that carry live sports games, because they don't have access to subscription revenues to subsidize the high cost of programming, like cable networks do. Broadcasters rely on ratings, driven by viewership — which is getting increasingly older and aging out of the coveted 25-54 marketing demographic, as well as retransmission fees (more below)."



Retransmission fees and subscription revenues are basically the same thing. Sports channels and networks have been making far more money off these than advertising for years. It's true that it is not sustainable though.



The chart also only shows national TV revenue. Hockey and baseball both get many times more revenue for local tv contracts than for national. Those local TV contracts rely absurdly on collecting carriage fees, and in many cases the rights fees are in the 50-100 million dollar range while only a few thousand people watch their games. In those cases, advertising revenue is almost non-existent, and it is likely those deals that are going to cause the most harm to leagues.