July 28, 2013

Nary a Bubble in Rights Fees

Filed under: Media,Money,TV — Chas @ 9:30 am

If it wasn’t for live sports, I’d probably be a cord cutter. It isn’t that I dislike stuff on TV. Far from it. I watch plenty. It’s just that it is all time-shifted and when I get around to it. I’m not overly concerned about being at the water-cooler discussing last night’s Archer.There’s stuff over 2 years old on my DVR that I still haven’t gotten around to watching (no spoilers for the season/series finale of Awake, please). So between on-demand subscription services and the ever-dropping prices of series on DVDs, the wife and I could easily save money and drop DirecTV. But for sports.

People like me are the reason those rights fees keep rising. It is mostly immune to time-shifting which means sitting through ads, promos and everything else. In light of the recent spate of new rights deals for college sports programming. Along with the new FoxSports1 and their negotiations for carriage. Well it means cable/satellite TV rates keep going up.

It leads to those unwashed masses who don’t care about sports to fantasize about “a la carte” pricing for TV. Just picking and choosing the stations. Rather than helping to subsidize the overall cost for people like me, I’d have to foot the whole bill.

ESPN would “cost vastly more for sports fans, about $30 a month, if it was unbundled from the pay-TV package and sold separately only to those who wanted to watch it,” according to Bob Fernandez of the PHILADELPHIA INQUIRER. That would be “five times the $6 a month” that ESPN now costs as part of the “big TV bundles offered by cablecasters such as Comcast.”

CABLEFAX DAILY reports sports “accounts for about 50% of sub fees and accounts for less than 25% of total viewing.” Martin in her report wrote, “We can find no math where unbundling is the best economic answer” (CABLEFAX DAILY, 7/16).


Granted there would be large swaths of other TV I wouldn’t subscribe to, or redirect the money to on-demand subscriptions (and probably spend more on faster internet service). But realistically I wouldn’t see much of a difference to my overall expenses for TV media consumption.

Not that I’m really worried. Attempts to force “a la carte” pricing have gone no where legislatively. Comcast, Time-Warner, DirecTV, ESPN, Fox, etc. They all oppose and fight it. They lobby and spend plenty of money to prevent such things. They make the perverse claims of how the bundling is all about real freedom for the consumer, and what people want.

So that is never really taken seriously beyond some wishful, “If only…” discussions.

But what does get bandied about right now is that the sports rights fees are on a bubble that is getting closer to bursting. That the ridiculous sums being tossed around have to end sometime. That with more on the way with the SEC Network. An eventual ACC channel. The renegotiations with the Big 10. The next NBA deal. The other professional sports leagues always impending next round. Sooner or later there reaches a breaking point for the companies and what they can pass on to subscribers.

John Ourand at Sports Business Journal takes a pin to the talk of a bubble.

Throw in the sports channel carriage fights in Houston, Portland and San Diego, and talk of a sports bubble that’s about to burst becomes inevitable.

That talk is dead wrong, according to a super majority of my best sources. These executives believe the sports media industry is no closer to a bursting bubble than it was in 1993, when talk of a sports rights bubble first emerged. That was when Fox Sports outbid CBS by more than $100 million per year for the rights to the NFL’s NFC package. At the time, industry insiders thought the price was so outlandish that there was no way Fox would make money off that deal. Of course, the deal worked for Fox, and rights fees have risen ever since. For as long as I’ve covered the media business, people have been sounding an alarm about a sports rights bubble. Every five years or so, it gets louder…

It was loud in 1998, when distributors signed contracts that allowed ESPN to increase its affiliate fee by 20 percent a year. Such increases would surely price cable and satellite services too high for consumers.

They didn’t.

There was outcry around 2002, when the New York Yankees launched YES Network. Distributors would be priced out of the market if every team decided to launch its own network.

That didn’t happen, either.

The bubble talk got louder again around 2007, when the Big Ten Network launched. What if every conference — what if every school? — launched its own network? How could distributors afford that?

In ensuing years, distributors figured out ways to post record profits.

Now in 2013, talk of the sports bubble is back in vogue.

And why isn’t it different this time?

In fact, the networks and leagues have structured deals in such a way that if there is a bubble to burst, it won’t happen for another 10 years, at least.

The most recent media-rights deals run well into the next decade. The NFL signed deals through the 2022 season. MLB’s deals run through 2021. In college, deals run toward the end of the next decade.

The NBA, NASCAR and Big Ten are the next properties to go to market, and you can bet that they will cut deals that run into the next decade, too.

NASCAR just cut a $4.4 billion/10 year deal with NBC. Or about 50% more than what ESPN had been paying.

ESPN is pushing its stuff, but even that has protections for its broadcast side. A person can’t subscribe to it. It has to have a deal in place with your internet provider. Considering how many internet providers are also the cable or FIOS providers, it all comes back around.

As much as ESPN is the 800-pound gorilla in sports media, they aren’t bidding in a vacuum. They stay in that position by outbidding most of the time competition from Fox, NBC, CBS and Turner. Rights fees aren’t going anywhere but up. It will just be a few years before we once more notice it happening.

@Emel, I always liked Dutch Rennert’s strike calls. A called strike 3 you could probably hear in the next state.

Go Bucs! Maybe this is the year we have a football game (it would have to be Old Dominion on 10/19) conflict with a Pirates playoff game.

Comment by KeyboardKev 07.30.13 @ 7:06 am

EMael – the fact that Chapman and his lawyer felt it was necessary to barging down to an formal guilty plea and then STILL received 90 day sentence tells me that the details of what was reported may have been understated by quite a lot.

I also think PITT fans are missing one main point here in some ways. Chapman’s violence against a woman is bad enough but the judicial system puts a ton of importance in “unlawful restraint”. That is much more serious than it sounds – it means that Chapman held this girl against her will for some substantial period of time, I believe it was reported to be for hours. That isn’t just closing the door or something, it is holding her captive against her will.

I think that might have just as much to do with his harsh sentence as the violence did.

Comment by Reed 07.30.13 @ 8:22 am

@ Reed

Yea like I said I don’t know (or didn’t know by the link that was posted previously) all the particulars of his case.

Which is why I added that disclaimer. 🙂

Comment by EMel 07.30.13 @ 10:01 am

@ KeyboardKev

Yes it seems the umpires of old, were much more ‘showmen’ and most of them all had their own unique way of calling a game. It’s pretty generic today unless I’m not watching enough games.

Which sort of goes along with the current trend of blending in.

Comment by EMel 07.30.13 @ 10:03 am

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