Cable companies love sports, but even love has its limits

The always-terrific Matthew Futterman has a great piece up at the Wall Street Journal laying out the details of the brewing war between sports leagues and cable carriers. (It’s behind their paywall, but if you’re not a subscriber you can go through the Google News link instead.) Among his findings:

  • Most televised sporting events bring in a relatively tiny audience, 4% or less of all households. Yet sports channels account for 19.5% of fees paid by cable and satellite operators.
  • Advertisers disproportionately love TV sports because 97% of viewers watch live (and so don’t skip commercials), as opposed to just 75% of viewers for non-sports programming.
  • Nonetheless, some cable carriers are balking at exorbitant fees. AT&T has decided not to carry a new regional sports network launched by the Houston Astros and Rockets, and networks started by the Kansas City Royals, Minnesota Twins and Charlotte Bobcats all failed to be picked up in recent years, leading those teams to give up and sell their TV rights to existing channels.
  • The number of TV households is growing, but the number with cable or satellite subscriptions is not, as more and more people choose to cut the cord. According to Nielsen, five million households in the U.S. now lack pay TV subscriptions, up from two million in 2007.

Add it all up, and it’s still not really clear where the cable price bubble is headed. But for any owners counting on ever-soaring TV revenue to fund their exorbitant purchase prices — or their pricey stadium or arena deals — it’s probably best not to bet too heavily on that.


35 comments on “Cable companies love sports, but even love has its limits

  1. There will be several teams whose TV Contract will be expiring soon. 1: Chicago Cubs (WGN). 2: Philadelphia Phillies (Comcast). 3: Seattle Mariners (Root Sports). Once these Contracts are signed (and we get the details), can it be determined if the bubble has burst. The Seattle Contract is most interesting, because the possibility of the NBA and (or) NHL moving there.

  2. Cubs are interesting because their rights are split between WGN and CSN Chicago. I think there is about a 4-5 year lag between the contracts (being too lazy to Google I think it’s 2019 for CSN). So they might find a short term deal for the WGN rights that expires the same time as the CSN. I believe they are currently part owners in CSN Chicago, but I wouldn’t be surprised if the Cubs want out to launch their own YES-type Cubs-only network.

    Then it gets really interesting because five or so years suddenly seems like soon enough for there to be a significant change in what people are willing to pay for sports (either a la carte or in a subsidized cable sports tier). Anyway what seems like a good idea today, mightn’t be feasible in five years.

  3. Neil,

    Regarding this excerpt from your article…

    “The number of TV households is growing, but the number with cable or satellite subscriptions is not, as more and more people choose to cut the cord. According to Nielsen, five million households in the U.S. now lack pay TV subscriptions, up from two million in 2007.”

    Is that five million households that lack pay TV subscriptions based on the total of all households, or just those with cable or satellite subscriptions?

  4. Holy shit… $3.40 per subscriber for the Rockets and Astros? No wonder providers balked. A) I’m an Astros fan and I have a hard time watching them much less paying that much per month. B) That’s 60% of the price of ESPN/ESPN2 (although maybe not getting Skip Bayless is worth a premium).

    Also as a cable cutter but subscriber it got me wondering what I do pay. Waited until the Father’s Day special this year. So paid about $60 for 3.5 months. That’s $17.14 a month, but that’s for all 28 teams (two teams in my market I don’t get… at least not without tricking MLB where my IP is). But because I’m getting all the teams, I can’t really count home and away as separate packages, so divide by 14 (half the teams). It works out to $1.22 per team per month.

    That seems reasonable, cheap even.

  5. Interesting stuff. How is advertising revenue split? If the cable companies are selling some of the ad time, the disproportionate fees might still make fiscal sense.

    At least sports can say they still put eyeballs on ads. Non-live cable programming is unwatchable without running it through your DVR. Really expect me to sit through five minute commercial breaks between 5-6 minute bits of content? No thanks.

    If your a sports fan, the “cutting the cable” concept only works when the rights holders let it work. Yesterday I was reading about NBC’s plans for England’s Premier League. Some folks are a bit upset that you won’t be able to watch on their online app if you’re not a subscriber to a cable package that carries NBC Sports Network. Apparently that wasn’t a requirement for Fox’s online viewing in past seasons.

  6. IIRC, Michael, the Cubs sale included 25% of CSN.

    Ricketts has been “fairly” clear that he expects a dramatic jump in tv revenues, so most Cub fans believe the WGN partnership will end next year (ex-Cubs announcer Bob Brenly moved to the Dbacks last fall at least in part because WGN could/would not guarantee the third year of the new deal he’d agreed).

    I tend to agree with Neil’s broader point here: Nobody knows if what the advertisers believe is actually true (probably including the advertising industry itself). I may not be representative of the sports watching public, but I have never considered sports to be PVR proof. In fact, I actually prefer to set my PVR to record an NFL or MLB game, then come in 40 mins or an hour after it starts and begin watching. I’m caught up by the end of the game and I don’t have to suffer through the commercials.

    So sports are no more PVR proof to me than any other form of programming.

    So… if you are a RSN, and you sign a 20 year deal for $200m per to broadcast your local team… what happens when advertisers figure out in year 4 or 5 that their revenues are actually dropping below the pre-RSN deal levels?

    Advertisers are smart enough to keep the term of their contracts relatively short (barring naming rights deals, of course). Not so the RSNs.

    The TV sports landscape will be very interesting to observe over the next decade or so. It seems unlikely that media revenues could increase much (or at all), but then again… I thought Jerry Jones was crazy to spend nearly $200m on a moribund has been NFL franchise.

    He seems to have done ok thus far….

  7. Keith: Re Fox Soccer 2 Go. First, it wasn’t cheap ($20/month). Second it wasn’t everything as the games being broadcast live on FSC were blacked out. And the games on FSC were usually the marquee matches, so you were paying $20/month and not getting to watch Arsenal v. Liverpool.

    If you were, say, a Norwich City fan, FS2G was probably awesome. If you were a fan of any of the Big 4 (or is it 5 now with Citeh?), you weren’t always SOL, but you were often not able to watch the match you wanted.

    If I’m not mistaken, NBCSN won’t have an option for non-subscribers but they are making every game available on any device if you get NBCSN as part of your cable. Still pretty forward looking. Or maybe it’s just an experiment for now.

  8. Michael: Thanks for the first-hand insight. In my little bit of researching yesterday, there was some disagreement on whether or not NBC’s plans would be an improvement. Your understanding that “NBCSN won’t have an option for non-subscribers” is how I read it, so those who are adamantly against giving anything to a paid TV service are understandably unhappy. They also have plans to offer all games on your TV. NBC isn’t charging anything extra for them but your carrier has to be willing to devote a few channels to it for a few hours a week. So far, it’s unclear how many will carry this “Premier League Extra Time”. Probably safe to assume you’ll get it if you’re with Comcast ;)

  9. Scott: I don’t understand the question. If you lack a pay TV subscription, by definition you don’t have cable or satellite, right?

    I may be off base here, but I feel like the wild card that Futterman doesn’t mention is that unlike all other digital media, there’s currently no easy way to pirate sports programming. If a channel that shows series or movies considers restricting online viewership to those who have a cable sub, they risk lots of people going and torrenting their programming instead if they jack up prices too high; channels that show sports can raise prices with impunity, since there’s no corresponding way to watch streaming video ( notwithstanding).

    That’s not going to last forever, though. Eventually televised sports is going to meet its Napster, and how they handle it is likely to determine what the pay-TV landscape looks like a decade from now.

  10. If you’re really against paying anything to cable companies for TV, FSC2Go wasn’t that great because of the price and the blackouts. You had to have the internet connection, so you figure after paying $20 on top of that it was still, what, $50 a month minimum? For another $20-$30 you could get a complete cable package (or at least a package with lots of sports and maybe FSC).

    In fact as a supplement to what you got if you had FSC as part of your cable package, it seemed a bit of an expensive luxury (again, unless of course you pulled for Norwich or Fulham or Stoke or Villa).

    NBC isn’t offering anything that helps cable cutters. It’s just much better for soccer lovers who are paying for cable sports already. You get all the EPL however you want to watch it without having to pay an additional fee.

    Now if someone could offer me $20 month for EPL, Bundesliga, La Liga and Serie A and Champions League on any device. I would jump all over that.

  11. @David Brown, the Mariners bought Root Sports NW earlier this year. They’ll be holding a lot of cards (assuming people are still interested in watching the Mariners/ads are still expensive during Mariners games).

  12. Neil: atdhe.whateverdomaintheyvemovedto is not alone. Finding a good sports stream is very easy. They are ubiquitous and some are even of excellent quality. It’s not quite Napster easy, but it doesn’t take long to find what you want. Sure sometimes you have no choice but to watch with a play-by-play guy speaking Arabic (and Al Jazeera does have its own Gus Johnson/Andres Cantor), but streaming usually takes nothing more than having the Flash player installed to watch. Not that I have first hand experience of this, mind. But with something as idiot-proof as AirPlay and an iPad, it is also pretty easy to watch it on your HD TV. Again, not that I have experience with this.

    Even if you miss the match live, you can find entire games in 1080 to download and watch at your leisure. That takes a little more doing. But if you are young and tech savvy and have some ethical flexibility you probably have a similar attitude about sports—”Wait, people pay for this? It’s free (or ‘free’).\'”—as you do with music.

  13. Right, but “not quite Napster easy” is the key there. When it’s something that tech-savvy folks can get around if they try, it’s not going to cut into paid market share all that much. Once it’s something that my mother-in-law can figure out, then they’re in trouble.

  14. Neil: If I knew about these kinds of things I would tell your mother-in-law it’s no more difficult than:

    1) Go to URL
    2) Look at schedule
    3) Click on link of game you want to watch

    Really, the grey market is already weeding out the streamers that are unreliable and/or interrupt games with an overabundance of their own ads (there is a reason people, oh, repurpose live sports… or so I’m told). When I say “not quite Napster easy” I mean it’s getting really close. In fact it might even be as easy, it’s just that unlike Napster which was for a time 1) unique (or close to it as a p2p) and 2) getting a ton of media coverage. No single stream aggregator is getting on the cover of Time magazine. But if you wanted to watch, say, the first leg of the Copa Lib final that kicks off in about half an hour, it’s not hard.

    And really, that match will be much more entertaining than the ESPYs.

  15. If sports programming ever gets to Game of Thrones numbers, for example…:

  16. Michael snuck in. Yes, agreed that it’s close, and it may well be more a matter of publicity than technology at this point. Just saying that sports programmers have been able to set prices without fear of being undercut by illegal downloads, but once that changes, a lot could change.

  17. WIth your last comment we are in agreement. And I have no idea how it is going to shake out. Part of the problem is that with cable providers (okay, just Comcast) also owning large networks, there is no incentive (market-drive or otherwise) to disintermediate. And if you own the delivery pipe and the content, you’re going to probably come out okay no matter what happens.

  18. Unless only one person signs up for your cable outlet and then bounces it to the whole world.

    Before anyone raises this point: Yes, content piracy is illegal, and yes, media company have legal remedies they can try to use to stop it. But as we’ve seen with music sharing, it’s really, really hard to completely stop, and can end up forcing the media companies to change their entire business model in order to head it off at the pass. That’s what I’m expecting here: Not that sports media companies will go out of business, but that how they operate will look very different in ten years, which could have major repercussions for the broader sports world that has grown accustomed to living off ever-expanding pay-TV revenues.

  19. Gotta love living a world where “I don’t want to pay what they’re asking and it’s easy to steal it, so it’s okay for me to steal it” is such a widespread attitude. Teach your children well, indeed.

  20. I think there’s a broad spectrum of attitudes running from “okay” to “justifiable” to “hey, everybody else is doing it.” My opinion on this is conflicted, but pretty much in line with The Oatmeal:

  21. Ok to steal, no…. impatient with not being able to legitimately watch a TV show in the same week it aired without paying an additional ~$15/episode to upgrade my cable account to the “package” needed and add HBO. Most “pirates” are still paying a non-small amount for the internet/computers/server access to obtain the illicit content.

  22. It’s all fine and good that they’re paying for internet access – but that has nothing to do with paying the person who created the content. Rationalizations abound. (And, please, let’s skip any “I’m okay with paying the true creators, but I’m not going to pay the ‘fat cat’ middlemen”-style arguments. Just another rationalization. This is how I choose to sell my stuff and the price I choose to sell it for. Pay up or move along.)

  23. Keith: Even then, though, there’s a lot of moral grey area. Is it legit for me to borrow my friend’s Star Wars DVD and watch the movie? If so, is it okay for him to copy it and email it to me instead of giving me physical media? What if my “friend” is someone I only know via the Internet?

    I’m not saying that just because it’s a slippery slope you can’t draw a line somewhere – but the lines that are drawn around what’s okay use of digital property and what’s not are ultimately arbitrary and determined more by social custom than by any innate rules about property rights. So making mixtapes for a friend is okay, as is recording shows to watch yourself at home – something that was a huge legal question when home videotape recorders were first invented – but other forms of sharing are considered piracy. Ten years ago, I’m sure plenty of companies/artists would have considered it piracy to copy your music to a server where you could listen to it from anywhere; now it’s the basis of the music industry’s entire business model.

    I’m less interested in the moral arguments here, though – since if history has shown anything, it’s that once a form of copying content becomes widespread enough, even mothers-in-law will start using it – than how media companies will respond if and when it starts happening. Because that’s what’s going to determine what the future sports media revenue landscape is going to look like.

  24. Keith: I agree that stealing content is not “ok”. As you suggest, though, we live in a world where nearly everyone (including high ranking elected officials, bankers, insurance companies, CEOs, energy traders you name it) appears to be of the belief that anything they can get away with (even if they have to use $100m of their $10Bn in ill gotten gains for lobbying and campaign contributions) is perfectly alright.

    It’s not right. But rationalization discussions aside, I can see why some people believe that “their” theft is not nearly as bad as the other guy’s. Theft seems to be the new speeding… if you do 4-6mph over the limit, it’s not really speeding… you aren’t as bad as all those lunatics going 15-20mph over…

    At some point in the last 30 years, cheating on exams or spouses or taxes became not just common but “normal”. I don’t know why this is, but it seems to be the case.

  25. Neil: There are huge grey areas in the “digital” media world. Canada’s new digital copyright laws as written actually make it illegal for a user to record something in digital form on the PVR the media company has sold them for that express purpose… (no, no-one has been prosecuted for this yet, but hey, there’s time…)

    “Personal use” provisions are also important (though the courts seem to disagree). If you record your old Styx albums and burn them to CD for your own use, you aren’t stealing anything. You’ve already paid a fee for a lifetime’s worth of listening to the record (or 8 track or cassette).

    It is possible that you could be prosecuted for copying that album and giving it to a friend (and not just because giving Styx albums to somebody is cruel…), but less likely than if you recorded it 5,000 times and gave it to 5,000 “friends” (which is the basis of the RIAA lawsuits – each digital download represents a lost album sale. It’s a garbage case, but it has been successful in a number of cases).

    Another issue that must be considered is “Is the content available in your area”?

    If you have an option to purchase an EPL package from a rights holder and choose to stream it illegally instead, I think it’s pretty clear that that is theft. But if your tastes run to Mongolian Yak racing and no domestic provider offers it, how can it possibly be illegal to download it?

    I have no problem with the RIAA going after major pirate operations who are making money (even indirectly) off downloads/streaming. But the average mixtape/song sharing doesn’t hurt the industry any more than carpooling or rental agencies hurts the automakers. In fact, the case can be made that digital file sharing is the “radio/tv” of the new millennium. I’ve purchased many CDs of artists I never would have heard of if it hadn’t been for napster (before it was deemed illegal and laws were rewritten to account for sites like it).

    If the digital media world’s rights were applied evenly across the business world, taxis and buses would be illegal and major automakers would be suing both cab companies and bus manufacturers.

    By the way, no-one has to steal game of thrones. Your local library either has it or can get it for you… all for a low annual membership fee. Assuming libraries haven’t been deemed illegal in this brave new world…

  26. Neal is right, unfortunately, the issue is going to be how the business changes due to the illegal activity. The cat’s outta the bag, but that doesn’t stop me from raging against the dying of the light…so, a couple more thoughts…

    “But the average mixtape/song sharing doesn’t hurt the industry any more than carpooling or rental agencies hurts the automakers.”

    “hurt” is irrelevant. If I own something, I get to decide how it’s used. Maybe it’s shortsighted of me to put limitations on how my creation gets used, but you don’t get to make business decisions for me.

    “If the digital media world’s rights were applied evenly across the business world, taxis and buses would be illegal…”

    No, because the makers of taxis and buses are perfectly okay with you using them as taxis and buses.

    If you haven’t figured it out already, yeah, I’m someone who’s been in the business of creating various forms of “digital media” – software, images, video. And it annoys the hell out of me that stealing the stuff I create is somehow viewed as less offensive than stealing a car – or a candy bar.

  27. Actually, Keith, if you file a claim for damages against a pirate company (or individual) you do have to prove damages have been inflicted. In the case of the RIAA, they were able to convince the courts that each download made of an uploaded file represented a lost sale. I would call that a case of “theoretical” damages, but they were able to prove same to the satisfaction of the court nonetheless.

    I understand that you are offended by the theft of digital media (particularly from “you”). It is a problem, particularly given how rarely the creators incorporate meaningful antitheft provisions (as the candy bar and auto makers/vendors do, to one degree or another).

    However, artists and creative content authors are not the only people who’s work is regularly stolen or used without their consent. Trades people, tech geeks and programmers of all kinds have made improvements to software and hardware of their customers/client companies that have improved the operation of those systems and saved their clients untold thousands of dollars. Those changes are regularly copied by other persons and in some cases even become incorporated into commercially available products sold by giant corporations, all without the originators earning any residual income from their work. It has happened to me in the past, it will happen to me again.

    BTW, the taxi and bus companies were not the plaintiffs in my example. If I didn’t make it clear, they occupied the “napster” role. The automakers were the plaintiffs, in effect claiming that each taxi or bus ride represented a lost vehicle sale opportunity.

  28. I hope they the bubble pops. We’ve been getting fleeced for years with cable TV.

  29. Great thread.

    Cord cutting seems to be the buzzword on a lot of these articles but the reality is the Pay TV subscribers have never been higher. 100M households in the US. The real phenomenon is Cord Nevers as in these households have never had Cable. That makes up the large chunk of 5Million Households that Neil referenced. They are also the same households that bit torrent Game of Thrones or watch live sports on internet sites. As they continue to grow up the % of non Pay TV subscribers will continue to increase to a point that will see declining subs. In the meantime the PayTV industry continue to move things into Cable Tiers. Think of the BCS games and NCAA basketball tournament. It is also why you say some of the Stanley Cup Finals game on Cable…it’s in the contract.

    The biggest issue is everyone is in this together. Nobody wants to see a la carte channel pricing except the consumer, even then I am not sure if we really want that as ESPN will be close to $20 or $30 a month then add in the rest of the households favorite channels and you might be close to $60 a month before DVR Fees, CableBox Fees and “taxes”.

    One thing that I didn’t hear discussed is bandwidth cost. If people want to go illegal and/or OTT to avoid cable charges, Comcast & TWC will just make up for it by charging you for usage.

    I went two years without cable and finally had to break down for the Stanley Cup playoffs. I figured it saved me lots of $ on bar tabs and plenty of calories.

  30. Keith, in case you haven’t noticed, I’m in the business of content (ick) creation as well, and I’m not happy if someone takes one of my articles and reprints it without permission.

    And yet: If someone emails one of my articles to someone who’s not a subscriber to a site I write for, do I mind? What if that same person looks up the article in a library? If they photocopy the library article and give it to a friend?

    The whole point of the creative process is to see your creations *used*. Hence the essential dilemma around distribution: More distribution is good because it means more people are paying attention, but if it doesn’t put money in your pocket (or your employer’s pocket, so they can keep paying you), it’s a mixed blessing.

    Maybe we need to start a t-shirt campaign that says “It’ll be a great day when schools have all the money they need and the NFL has to go to Kickstarter to pay its player contracts…”

  31. Oh, and re Game of Thrones and libraries: That only works for episodes that are on DVD. For current episodes, you either need to subscribe to HBO (for which you need cable) … or listen to the devil on your shoulder.

  32. Must we have this week’s Game of Thrones???? Have people forgotten about waiting?? Oh, right, yes they have.

    Further to your point on “usage” Neil, it will become a huge dilemma for sports leagues and tv networks in future. It’s all well and good to fleece the punters who grew up on “free” sports on “free” tv… they will likely continue to pay increasing amounts with no apparent limit.

    However, who replaces those “lifetime” viewers when they die (or just finally give up on paying to watch athletes who make more in a month than the paying viewer will make in a lifetime)? Certainly not the children/youth of today, who tend not to watch entire games and may never have grown accustomed to having sports available on TV.

    It seems likely that model for RSNs and sports leagues going forward will be to extract the absolute maximum from a declining number of customers (as someone noted above, we aren’t over the peak yet… Pay TV #s have never been higher). If that happens, it may be profitable for a short time, but it is a model ultimately doomed to failure.

    Interesting times

  33. “One thing that I didn’t hear discussed is bandwidth cost. If people want to go illegal and/or OTT to avoid cable charges, Comcast & TWC will just make up for it by charging you for usage.”

    In which case there will be massive population shifts to Kansas City and Austin as people will flock to Google Fiber. Only half kidding. Our ISP/telcos have do poo in terms of investment into infrastructure. We pay a lot for very little relative to parts of SE Asia and Eastern Europe.

  34. “Have done poo” not “have do poo”… although I quite like how the latter sounds.

  35. “The whole point of the creative process is to see your creations *used*. Hence the essential dilemma around distribution: More distribution is good because it means more people are paying attention, but if it doesn’t put money in your pocket (or your employer’s pocket, so they can keep paying you), it’s a mixed blessing.”

    Sure. But you or I, as the creators, should be the ones who decide what forms of distribution are okay. That was really my point. Convince me that I should go along with whatever business model you prefer, don’t just steal my stuff and then tell me it’s okay because I’m better off this way.