TV Rights and the Sports Effect

No matter how many different ways you have to watch TV today – on your HD screen, 10” tablet, or Xbox Live – there is no free-for-all, a-la-carte nirvana. In fact, subscription costs for pay-TV services continue to go up, and, thanks in large part to sports programming, the trend shows no sign of reversing in 2012.

Sports franchises hold a lot of TV clout for several reasons. People don’t generally watch sports on time delay. Live events make mobile distribution more important. And sports fans can be fanatical, willing to pay large sums of money to catch their favorite teams. Because of program bundling, many others pay a lot of money too. In fact, Will Richmond calculated last February that folks who don’t watch sports and casual fans spend close to $3 billion a year on programming they don’t watch.

As we settle into 2012, there are a number of battles being fought between sports programmers and distributors over how much money sports are worth. Here’s a look at a few data points in the larger war. Is there a tipping point ahead? And how deeply will regulators get involved? Stay tuned.

  • ESPN predicted to hit $5-per-sub rate – ESPN is far more expensive than any other programming network. The New York Times quotes SNL Kagan as pegging retransmission rates for the sports network at about $4.69 per month per household. And this year SNL Kagan expects that number to rise above $5 per subscriber. Fans and non-fans alike shoulder that cost in monthly cable bills.
  • The NFL puts further pressure on retranmission rates – The NFL signed a new deal with broadcasters in December that amounts to roughly $27 billion for the right to carry NFL games over the next nine years. That amount of cash is bound to affect how much money broadcasters in turn expect pay-TV distributors to pay out in licensing fees, which then affects how much distributors charge consumers.
  • Comcast to fight the FCC on Tennis Channel decision – Just before Christmas, the FCC ruled that Comcast was discriminating against the Tennis Channel by not including it in the same service tier as the Golf Channel and Versus. However, Comcast isn’t going to take that ruling sitting down. The MSO has already said it will appeal the decision, and if necessary, take matters to the US Court of appeals.
  • The FCC to review broadcast ownership rules – As 2011 wrapped up, the FCC voted to launch a review of broadcast ownership rules – something the American Cable Association is pleased about. Part of the theory behind the review is that when distributors own certain programming content (as Comcast owns the Golf Channel, for example), there’s an impact on competition and retransmission negotiations.  The FCC promises to take a closer look at that impact in 2012.

7 thoughts on “TV Rights and the Sports Effect”

  1. Mari,

    There’s another factor driving up costs. We also have Disney and Fox not only negotiating rates for their own cable channels like FX and ESPN but also looking for a bigger cut from their local affiliates retransmission fees. TVNewsCheck did a good article on it recently.

  2. Hub- You’re right. There’s a lot more to this than just sports, but sports have become a major battleground. I’ve seen good coverage also in Fierce Cable, Hollywood Reporter and VideoNuze.

    Streaming rights are a topic for a separate post, but also a major point of contention in licensing negotiations.

  3. Time Warner and MSG are duking it out right now, with each trying to convince viewers that the other is being dastardly.

    Honestly, I already pay extra to get more sports, and I’m not even the biggest sports fan — it’s just that when I want to see a game, I don’t want to have to think about whether I get the channel.

    Much as I love food and travel and wildlife and architecture and the like, it’s the channels that focus on those I’m annoyed to be paying for. Also, “reality” shows. :-P

  4. Also, when I click “Notify me of follow up comments by email,” WordPress sends me a “Are you sure? We don’t believe you. Do you really want comments? Jump through these hoops!” e-mail. Any chance there’s a way to avoid that?

  5. No way to avoid that, as manages this functionality (and I assume it’s done to keep their email address clean, not flagged as spam). Also, it’s not a bad idea. When working at Dash Navigation, one disgruntled customer was not readmitted to the beta program registered me for several dozen mailing lists of all stripes that required no confirmation (and some had no obvious way to unsubscribe after the fact).

  6. I’m all for a la carte pricing, as I have pretty mainstream tastes and I won’t care about all the niche networks that will almost instantly disappear. It seems the fairest choice, but there is going to be a lot of bellyaching, because in the end I think most people will end up paying a little less money for a lot less variety.

  7. “Part of the theory behind the review is that when distributors own certain programming content (as Comcast owns the Golf Channel, for example), there’s an impact on competition and retransmission negotiations.”

    A theory with similar validity is that the sun rises in the East.

    A la carte programming simply will not happen until something akin to the 1948 United States v. Paramount Pictures decision happens.

    As long as distribution companies are permitted to own content companies, effective barriers will persist. As long as block booking deals are permitted, effective barriers will persist.

    We’ve been here before, 60 years ago…

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