If you haven’t noticed the migration of marquess sporting events moving over to cable, let me help you out. Over the past couple of years we’ve seen the Stanley Cup, Monday Night Football, BCS bowls, and now the NCAA Tournament all move over to cable television. The Final Four and Championship game will also make the move in 2016.
Johh Ourand has a great writeup on the trend over at SBD and the cliff notes version goes like this:
“But those deals come at a cost. Network and league executives say that cable channels still have to pay a healthy premium if they want to pick up the rights to bigger sports events. Leagues have not yet placed as much value on the broadband services and added shoulder programming that come with cable networks, as they do on the broadcast universe of 114 million homes. …
For the BCS, an expected 10 percent viewership decrease was worth about $25 million per year…..
ESPN makes more than $4 a subscriber a month. With 100 million pay-TV homes, that equals $4.8 billion a year, even before ad sales are factored in. Thanks largely to the NBA and MLB playoffs, TNT pulls in around $1 a subscriber a month. With the NCAA tournament spread across three Turner channels, Levy expects to get healthy increases from distributors that can’t afford to lose NCAA tournament games in March”
The summary is this. Premium events increase ratings. Those ratings allow the cable channels to renegotiate their carriage contracts with your cable or satellite provider as well as boost their ad sales. Network television primarily monetizes via advertising.
Every month you’re paying somewhere near $10 bucks if you have TBS, TNT, Versus, ESPN, ESPN 2, Big Ten Network, and a local sports regional network. As more events move over to those channels OR if more sports channels emerge, you’re goign to see that amount go substantially up. Suddenly we may be at $15 a month for all the good sports channels which would be $180 a year and for 100 million households, you’d be looking at a total of $18 billion a year. Again that number doesn’t even take into consideration advertising revenue.
A lot of that growth potential is up for grabs and we’re seeing the networks go to war to procure sports programming rights so their respective cable channel can grab a larger share of that money.
Here is where it gets ugly though. If you watch Storage Wars, you’ve seen how the bidders on auctioned off storage lockers often jack up the price on each other regardless if they have interest in the storage locker in question. The rationale is simple and is that of a cold blooded capitalist.
If I make him pay $1500 instead of $1000 on a storage locker, that may lead to him losing money on that locker or at least make a smaller margin. Next time around his wallet is ligther and he’ll have less resources to bid on something I actually want.
This is what we’re seeing now as its clear the major media companies are attempting to mount an offensive to make a true ESPN competitor.
Let’s start with CBS. While they haven’t been too noisy in regards to bidding on sports packages (they’re really the most set with college basketball, NFL, college football and golf), has actually opted to rename their former college sports channel to be a general sports channel. It’s clear the rebranding is in hopes that they can attract more programming to the channel in conjunction with CBS.
Then there is Fox who has made a big PR push in letting people know they’re aiming to put sports back on FX. Apparently there were sports on FX at one time. In regards to the linked article I tweeted “I would’ve titled this post “Fox Realizes Sports On Cable Is A Big Deal, Decides To Stop Sitting On Their Hands” which didn’t go over well with some contacts I have over there. Fox has also been trying to acquire college football rights and hockey rights which I’ll get into in just a minute.
Meanwhile the company with the most legitimate chance to take on ESPN, Comcast/NBC/Versus, is now on the defensive. If you’re unaware of the growing fleet of combined assets between Comcast and NBC, you should mozy on over here to get a taste of why people think they’re going to make some waves.
But its tough going for NBC/Comcast/Versus right now and mainly its because of timing. It came out this week that ESPN execs have traveled to Madrid to try to woo the IOC to get the Olympic television rights. The Olympics are really the staple of NBC broadcasting and if ESPN could steal them, that would really take away from the thunder that Comcast/NBC/Versus was going to make a run at ESPN.
But the Olympics have always lost money for NBC ($300 million last go around) and Comcast is known as a very profit focused company so maybe it could happen.
What’s more surprising though is that NBC/Versus haven’t signed an extension for NHL coverage. Their exclusive negotiating period lapsed and now there are reports that the NHL is talking to Fox and Turner. Frankly speaking, I think this is a blatant attempt to jack up the price to NBC/Comcast as I don’t see either network as a good fit for the NHL which could be its own blog topic.
The folks at Comcast are hot to trot and go on the offensive but until there is clarity around NHL and Olympics, they’re playing defense and that’s the way everyone else seems to like it.
Turner scored big with March Madness and holds the rights to MLB and NBA. Combined its pretty solid but spread across TNT, TBS, and now TRU, you don’t really think of any of them as true sports entities. It should be noted that CNNSI.com as actually ran by Turner as well. They’re looking to add more programming as well but its unclear if they want to push all in with one channel being a defined sports network with other programming here and there.
ESPN has been on the prowl trying to build the empire while they can. They outbid Fox for the ACC’s rights and it’s reported that the back and forth bidding raised the price from $120 million a year to $155 million a year. Over the 12 year lifespan of the deal, you’re looking at $455 million dollars of extra costs the back and forth competitive building created.
Fox struck back by procuring the Big Ten Championship game and the Pac 10 Championship game by outbidding ESPN.
ESPN got revenge by then outbidding Fox for the rights to Texas’ own cable network.
The NFL’s rights outside of Monday Night Football, the Pac 12’s television rights, in addition to the ongoing Olympics and NHL rights are just a taste of what is up for grabs in the near future. These are all very HOT properties and action is going to be very competitive.
I think the sad thing is that while the leagues ultimately win, the consumer loses. Yes, maybe we’ll get more coverage along the way, but in the end the higher prices will trickle back to consumers and in many cases the quality of the broadcasts will go down as leagues will make the better deal rather than picking the network that will do the best job covering the sport in question and building that sport’s audience.
Just like Storage Wars there is genuine interest in the properties that have rights that are going up for bidding. Still though making bids, going over your cap price, or even just feigning interest or going through the process of meeting with league folks when you know you’re not going to put in a bid, is now just part of the business. Anything to make sure your competitor shells out a fair price or probably even higher.
Nobody really knows what each media entity is thinking and what is going on behind the scenes (minus the good folks at SBJ/SBD it seems), but it’s becoming more clear that things are getting more cutthroat especially as ESPN’s “war chest” continues to grow.Until cutting the cable becomes a viable option or you’re willing to become a season ticket owner/ alcoholic at your local sports bar, there really isn’t much you can do. In the end you just hope that your favorite sport or league makes a deal that doesn’t sacrifice quality coverage and production for a more lucrative deal. Its hard to see anyone taking less money but hopefully they’ll have the wisdom to steer negotiations to a place where they can have their cake and it too.
As long as I don’t have to endure the BCS games or other college football games on Fox again, I should be okay. I’d love to hear your thoughts on your favorite sport from a national coverage perspective. Is ESPN ultimately the best option for most sports? Is Fox the worst? Should Turner consolidate?