NBA gets even more money from cable fees, setting selves up to seek even more money from everything else

So yeah, the NBA has a new cable deal that will pay them all the moneys starting in 2016, and people are already asking me what I think of it. Deadspin has already provided a good answer, but for those who are too busy to read an entire explainer, let’s boil it down to its most important sentence:

Your cable bill will increase a couple of dollars a month solely because of the NBA.

Also, a lot of NBA players and owners will become even richer. Capitalism!

I’ve also gotten questions (tongue in cheek, I hope) about whether this will mean that NBA owners will now have so much of the moneys that they won’t be demanding new arenas anymore, to which I say: If anyone thinks that the reason that owners are asking for subsidies is because they’re running too low on cash, and if they have bigger piles of cash then they’ll be happy and won’t need any more, then they probably haven’t been paying attention. In America, there is no such thing as “enough cash.”


21 comments on “NBA gets even more money from cable fees, setting selves up to seek even more money from everything else

  1. Because it’s never too early to look far ahead: The deal ends after the 2024-25 season, at which point most of the current arenas in the NBA will have been standing for 25-30 years. Given the shrinking life expectancy of sports venues, it’s not outlandish to assume to that the owners will not only ask for the public to build them a new arena, but will cry poverty and claim to be “falling behind the competition” while doing so.

  2. People are now shedding cable at ever-increasing rates. You’d think that in order to make this all work, the price increases will have to be more than one or two dollars, but the faster those prices increase, the faster people will shed cable.

    “Don’t look now but there’s something funny going on over there at the bank George. I’ve never really seen one but that’s got all the earmarks of being a run.”

  3. Netflix is a lot better than cable, and cheaper. Just have to have some ability to delay gratification.

  4. All of which is why the new NBA deal includes a plan to sell subscriptions to games online instead of via cable. It’s a big step, but either way, ESPN will still get your money.

  5. The collective you that watches basketball. True, they would no longer get money from cable viewers who only want to watch Big Bang Theory reruns or whatever it is cable shows all day otherwise.

  6. I believe the tipping point is near. The internet is a disruptive technology that keeps getting better. Pro sports will not be immune.

  7. The same people are going to own the internet rights as the cable rights, though. Streaming video is only going to be “disruptive” in terms of which middlemen viewers’ money goes through.

    (Unless someone figures out how to reliably pirate video streams, that is. At that point, things get interesting.)

  8. The ‘on demand streaming’ world has the ability to do what sports fans (and, I suppose drama fans and real crime stories fans and…) have always craved: Provide each fan with the ability to watch only what they want and when they want.

    The shameless gougers in the middle (service providers) have always claimed this would raise costs to the consumer. I think we’ll know whether there was any truth to that within a decade. Of course, since one of the cost savings is and should be the elimination of the middlemen (cable and satellite companies), it’s hard to see how costs would go up… unless the middlemen see their market quietly and quickly disappearing and decide to get in on the party by VASTLY OVERPAYING for sports rights and then trying to pass those costs along to the consumer. Which, I would argue, is where we are now. Most broadcasters will tell you they cannot turn a profit on the premier properties they air… and looking at what they pay I’m not surprised.

    All the major sports leagues are now in a position to run their own digital media empires. Only one appears to have done so (MLB) with any success thus far. The rest rely on third party providers that overcharge and under deliver… just like the cable and comm companies have been doing for years, or have bundled their digital rights with their TV rights (which MLB would tell you is a huge mistake).

    I don’t think many of us have a problem paying a rights fee to a broadcaster or sports leagues for the content we actually want. What we object to is being forced to pay for things we don’t want in an artificial marketplace in which there is no legitimate competition. Even the process of selling rights to a sole provider corrupts that marketplace (you can’t truly have a marketplace if you have just one service provider carrying any given content). If you want to watch the Dodgers or Packers or Red Sox, why are you forced to use a single “partner” service to do so? In the ‘real world’, multiple service providers would be competing to bring you your team in the style and manner which you prefer.

    Would anyone accept a marketplace in which only one hardware store sold hammers and another one sold nails exclusively, yet each store only sold to member customers who paid an annual fee for the privilege of doing business with them? How about a restaurant chain that bought the national rights to steak and are the only ones licensed to serve same? What if Ford, GM and Chrysler agreed not to compete and assigned each market segment amongst themselves for your discretionary automotive dollars?

    Citizens would not accept that level of collusion in any other form of private business but sports/broadcasting.

    For those who would say “you can watch other leagues”, it’s true… but try to find anything close to MLB or the NBA available on any carrier in North America. Can’t be done… and crucially, the agreements these leagues have with both tv networks and the stadium operators/owners all but preclude the possibility of any other league coming into existence… something the Supreme Court of the United States would clamp down on if it occurred in any other field.

  9. • “watch only what they want and when they want”

    I assume you mean “pay only for what they want and when they want it.”

    • “unless the middlemen see their market quietly and quickly disappearing and decide to get in on the party by VASTLY OVERPAYING for sports rights and then trying to pass those costs along to the consumer. Which, I would argue, is where we are now.”

    Precisely.

    • “I don’t think many of us have a problem paying a rights fee to a broadcaster or sports leagues for the content we actually want.”

    Well, except when they have monopoly control over the content. As you note, if we don’t like the prices at one hardware store, there’s always another. If we don’t like the price for watching baseball games on TV, we are free to … go to the park and watch people playing softball, I guess?

    Right now the cable TV industry is about to undergo massive upheaval, but I’m starting to suspect that it will be more about the delivery methods than how customers pay for it. Just look at the MLB playoffs: You can watch them on your computer, but only so long as you key in your cable account name and password first. I can easily foresee a time real soon now when what once were cable subscriptions have morphed into “channel memberships,” where you have to buy packages of channels from Comcast or whoever, and then can watch them on whatever device you want. This would be not so much of an improvement, imho.

  10. I just hope these people don’t figure out a way to tax my cell phone and internet bills to pay sports team owners and college leagues.

    The headline had me worried.

  11. “What we object to is being forced to pay for things we don’t want in an artificial marketplace in which there is no legitimate competition.”

    It’s all discretionary. Nobody has ever been forced to watch baseball. Or television.

    “Would anyone accept a marketplace in which only one hardware store sold hammers and another one sold nails exclusively,…”

    You’ve traveled far into apples-and-oranges territory. Performances, including sporting events, aren’t commodities.

    Sorry, I just don’t buy into the idea that there’s something inherently wrong in choosing how you want to sell something you own. The current model may not make the most business sense for the leagues and it probably doesn’t give the product to customers in the cheapest way, but that’s up to the leagues to decide.

    But I think you’re right that things will change significantly in the not-too-distant future. The real losers will be the hundreds of cable channels that have a (relative) handful of viewers. Those are the channels that are being subsidized under the current system. There will be plenty of demand for streaming sports packages, but you’ve got to wonder how many others will survive in an a la carte world. Would scaled down versions of the current delivery systems be able to survive without their most popular content?

  12. “The real losers will be the hundreds of cable channels that have a (relative) handful of viewers.”

    They will lose in that they cease to exist, but current sports consumers will lose out as well because those hundreds of thousands of people who watch E! or Lifetime and don’t care about sports but have to pay for the same tier that most sports channels are on will no longer be subsidizing the cost of ESPN.

    ESPN, though, will still need to recoup the $476 trillion they are paying for the NBA (seriously, are that many people watching basketball?). We all might want a la carte, but given that the current climate has pushed rights fees to somewhat ridiculous levels there might be some sticker shock on the actual cost if and when it starts to happen.

  13. Espn deal MLS also includes subscription service. Young people hate cable and the writing is on the wall.

  14. Steven: Is it the same type of over-the-top deal? I haven’t seen anything confirmed, just speculation that ESPN might experiment with that model for MLS.

  15. “We all might want a la carte, but given that the current climate has pushed rights fees to somewhat ridiculous levels there might be some sticker shock on the actual cost if and when it starts to happen.”

    A full-blown streaming sports package (ESPN plus clones plus local RSN) at $20 or $30 a month would still look pretty nice combined with OTA networks. Some of the problem is that we’re at a time when everything is devalued and everybody seems to think everything should be free. Any price at all is going to be too much for folks who have no qualms about stealing content. A la carte would be nice, but $2 or $3 a day for access to hundreds of channels isn’t an outrageous price.

  16. I’m not sure it’s a function of piracy. My guess is that many folks would think, “Well, my current $125 cable bill gets me 200 channels, that’s less than a $1 per channel. So why now is the one channel/service I want $30?”

    I also don’t think you’ll get all of it that cheap. MLB.tv is about $20/month by itself. Think you can actually pay by the month and it’s $30, or if you buy the whole season it’s closer to $20-per. And MLB is the sport whose audience is shrinking (and growing older). Imagine what an cable-liberated similar NFL service might go for (I realize on a per-game basis MLB is still super cheap, but if consumer willingness to pay is that much for MLB, I bet the NFL could charge closer $500+ for a season… Isn’t Sunday Ticket already around $300?)

    I’d be interested to know what percentage of sports consumers know that EPSN makes up close to $6 of their bill by itself. I’m pretty sure a lot of women have no idea. I don’t mean that to come across as sexist, but I have a fair number of female friends who don’t give a crap about sports, and they are all surprised to learn they are paying about $70 a year for something they don’t watch a single second of (one of them dropped cable the week after I told her that). They know their cable bill is going up, but they don’t know what’s driving it.

    Anyway, tldr; version: Sports consumers might soon realize how good they have it with their sports being subsidized by people who aren’t watching it.

  17. Keith: The issue isn’t controlling how someone sells their content. The point I was trying to make is that it’s odd that people will accept certain things sold in “this” way when they would never accept it from other vendors.

    Michael: I wouldn’t call that a loss for sports viewers really. While fans of other programs do subsidize the sports viewer, the reverse can also be true. If I want to watch MLB or the NFL or whatever, I shouldn’t have to buy E! (nor should E! fans have to pay for sports) to do it. If my cost (or theirs, given the fact that there are a much larger number of bundled reality/hollywood life channels than there are sports channels) goes up as a result, this puts into place a more level and fair marketplace. There are plenty of things that we subsidize in order to live in a functioning society. Entertainment options – by their very nature discretionary – should not be one of them.

    If watching the NBA on ESPN is your thing, why shouldn’t you pay the full cost of that choice? Part of having true choice is knowing the true cost and basing your decision on as complete information as you can.

    As I’ve said before, if Bentleys were the same price as Honda Civics and you could get a tax credit from the gov’t for the added cost of fuel and insurance, why would anyone drive a Civic?

  18. The problem with this model is that MLB/NBA, and especially college sports conferences now have the right to impose a “sports tax” on your cable bill just by where you live geographically. There’s only a marginal difference in a state charging every resident $2 a month for the “right” to have a local sports team with the revenues going to the team versus your cable company charging $2 a month for the “right” to get Fox Sports Whateverregion with the revenues going to the team.

    This is particularly egregious in the college sports industry, where you have the Big Ten (as one example) setting up the long awaited Rutgers-Nebraska football rivalry just so that the Big Ten Network can have a huge subscriber/revenue increase on New York and DC metropolitan cable systems.

    Unbundling may not end up “saving” money for customers (depending how you look at it), but it would largely end the current practice of directly diverting revenues to private businesses from “customers” who have no interest in the product. I have no problem subscribing to MLB.com, but make them do the marketing.