The New York Times ran a piece yesterday on Intel’s plans to offer TV channels via the Internet, and cable and satellite companies’ plans to fight tooth and nail to stop them. All of which is very interesting if you care about telecoms and tech giants beating each other over the head with lobbyists — or, as sports economist Rod Fort notes, if you watch sports:
— Rodney Fort (@RodneyFort) June 13, 2013
The implications if Intel is successful go far beyond whether you’ll be watching future NBA postseasons on your TV or your computer. Cable revenue, always a big deal for the sports industry (except for the NFL, where it’s swamped by network cash) has become an even bigger deal in recent years, as cable channels have thrown crazy money at the only events that people still watch en masse without DVRing through the commercials. To earn it back, they’ve — well, in part engaged in massive layoffs, but mostly turned around and gotten cable and satellite providers to pay through the nose for the rights to carry the sports channels. Hence the growth of “sports surcharges” that have caused your cable bill to head skyward. Sports teams, meanwhile, especially those in large cable markets, have been raking in record profits; it was the promise of future cable riches (albeit now slightly less rich, thanks to MLB revenue sharing rules) that led the Guggenheim Group to plunk down a ridiculous $3 billion for the Los Angeles Dodgers.
And here’s the part where I cop out by not actually answering the question raised in my headline: I don’t pretend to know precisely how adding Intel (and presumably other Internet-based providers) as competition will affect the cable-to-sports-owner money pipeline, but it certainly has the potential to be a doozy. More options for viewers could lead to a price war that would drive down cable fees, or it could lead to a programming war that could drive them up. Putting more content online, meanwhile, can only make piracy easier (I’m sure Intel has plans to keep people from re-streaming their services, just as I’m sure there are already people working to get around them), speeding the day when TV sports becomes just another thing that you look for illegal downloads of. Not to mention the day of reckoning for sports leagues to figure out those nasty local blackout issues.
Either way, it’s a huge bomb waiting to be dropped into what for the past 30 years has been a fairly simple system of steadily increasing payments from viewers to cable systems to cable channels to the pockets of sports team owners. It’ll likely be several years to a decade before we see how things will shake out, but for any teams making plans for the 2020s, it might be a good idea not to count their cable money before it’s hatched.