The Soaring Cost Of Sports Programming Is Simply Not Sustainable

from the something-has-to-give dept

One of the biggest reasons for soaring cable rates is the bloated and soaring cost of sports programming. Similarly, one of the biggest causes for the unprecedented rise in cord cutting (ditching cable and going with a streaming alternative) is the cost of sports programming. Surveys have shown that 56% of ESPN viewers would dump the channel just to save the $8 per month it costs each subscriber. Once streaming alternatives emerged for the sports-bloated traditional cable bundles that let them do just that, users began flooding to the exits at a historic rate.

The reality is millions upon millions of customers don’t give a shit about sports, yet are forced to pay $120 or more per month for cable bundles filled with content they don’t watch, and didn’t want. And when some cable companies initially tried to offer “skinny bundles” without ESPN or other sports networks, they were sued by ESPN for trying to give consumers what they wanted. And while that has slowly started to change with the rise of live TV streaming alternatives, for traditional cable providers something in this cycle of dysfunction needs to change. Quickly.

Case in point: Axios points to Magna’s latest Media Sports Report that highlights how cable companies are now paying significantly more money for sports programming than they make off advertising during the games. For example, cable operators now pay the NBA $2.6 billion annually in licensing fees, but “only” make $1.3 billion from the ads run during sports events. The associated graphic highlights how it’s the same for most leagues:

Of course cable companies make up for the difference by not only imposing endless cable TV rate hikes, but via the bevy of misleading fees they’ve long used to jack up the advertised rate of service post sale. But their ability to do this has been dramatically compromised by the mass exodus of users fleeing traditional cable. And the problem is notably worse for broadcast networks:

This (sic) economics are especially problematic for broadcast networks that carry live sports games, because they don’t have access to subscription revenues to subsidize the high cost of programming, like cable networks do. Broadcasters rely on ratings, driven by viewership ? which is getting increasingly older and aging out of the coveted 25-54 marketing demographic, as well as retransmission fees.

As a result, more sports distribution rights have migrated to cable networks ? think TNT and TBS carrying the NBA and MLB, respectively. But there are problems there, too. Cable channels are losing subscribers to digital streaming options at the fastest rate ever. It’s worth noting that both cable and broadcast networks make a substantial amount of money from retransmission fees (charging cable and satellite providers to carry their content), but collectively it’s still not enough to completely offset the rate of increases to programming costs.

The report proceeds to state the obvious by proclaiming that analysts “don’t see the ever-increasing gap between ad revenues and rights fees as sustainable in the long term,” something cable subscribers could have told them years ago. Wall Street analysts have similarly been discussing how retransmission fee hikes and the soaring cost of programming simply isn’t sustainable for the better part of the last decade, not that it appears to have changed the landscape — or the executive quest to milk the traditional cable TV cash cow to death — in any meaningful fashion.

This will likely most harm small cable TV operators, who have said they may just stop selling cable TV as margins get tighter. Don’t feel too badly for larger cable providers like Comcast, however. As their TV margins get squeezed, they are simply using their monopoly over broadband to jack up the cost of broadband via unnecessary and confusing caps or overage fees. The end result: cable companies get their pound of flesh one way or the other, as users are punished for fleeing the cable and broadcast sectors’ walled gardens and the seemingly endless TV rate hikes therein.

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Comments on “The Soaring Cost Of Sports Programming Is Simply Not Sustainable”

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That Anonymous Coward (profile) says:

It’s almost like watching Ike & Tina.
Pretending nothing has changed, while one delivers beatings to the other telling them they deserve it.

Somehow I can’t find any fscks to give to these billion dollar babies having tantrums.

We need tax breaks and public money for our stadiums or we’ll leave! It rarely delivers any of the promised benefits to the community & often leads to black outs on the channels because the stadium isn’t full because $15 beer isn’t a good way to draw fans in.

Perhaps its time to admit that the model they’ve used forever and pushed to the limit is broken.

Millions of consumers are forced to pay for content they don’t want & don’t use.

Perhaps its time someone suggest they stop treating consumers like cows to be milked, & consider they might just be slightly important. This broken model is only going to get worse & eventually the public will hit a point where they will demand that Congress stop pretending its a free market & we deserve better options.

The last few olympics have been complete clusterfooks because they air them at stupid times & pretend we couldn’t see online the results from 8 hours earlier in the day.

All of this money is being pulled from consumers who just want to pick and chose what channels they want. When you drive the consumers away, do you think that lost money will some how just keep appearing?

Leagues keep making stupid rules about social media & grab more control in an attempt to keep their kingdom rich… ignoring that even dire hard fans are walking away now because $150 for a partially obstructed view seat isn’t a draw.

JoeCool (profile) says:

Re: Re:

Leagues keep making stupid rules about social media & grab more control in an attempt to keep their kingdom rich… ignoring that even dire hard fans are walking away now because $150 for a partially obstructed view seat isn’t a draw.

I was in Houston when they renovated the Astrodome, and many of the new seats were behind very large support pillars. The backlash from that was bad. I never cared to check at the time (was busy in college), but I imagine there were quite a few lawsuits.

Anonymous Coward says:

This whole situation is like a mobius strip of suck for consumers.

More cable customers would be likely to cut the cord if live sports streaming were more readily available. But it isn’t because the content providers get the Brink truck filled with cash backed up to them from network like ESPN, NBC and FOX.

BUT, those networks can’t really afford the content they pay for, but need to keep the price as artificially high as possible so I real competitor can’t swoop in and offer live sports programming at market rates.

So in turn, these same networks need to keep charging higher carriage fees, which in turn makes more consumers want to cut the cord.


Re: no mystery

… solution is: Get-Government-Out-of- CableTV-Market !

we’ve beat this topic endlessly here— cableTV is a mess because the government heavily intervened in the normal buyer/seller realtionship… preventing real competition… and establishing seller cartels.

We KNOW what the problem is. The discussion here should ONLY address the best ways to amputate the government tentacles in cableTV markets.

Anonymous Coward says:

We're likely cutting the cord

We watch some sports, but have no way to just receive and pay for those: we’re stuck with everything. To explain via example, we watch:

local MLB (and sometimes others)
local NFL (and sometimes others)
local/regional college football and men’s/women’s basketball

We do NOT watch:

NBA, NHL, car/motorcycle racing, golf, poker, soccer, tennis, UFC/boxing, or most of the rest.

We’d probably pay for a season subscription to our local MLB, NFL, and college teams, then go a la carte for other games we’d like to watch. But we can’t, because neither Comcast nor Verizon offers any such thing.

So at the moment we’re Comcast subscribers who pay for and ignore 95% of their programming, consume the other 5%, and pirate everything else. But we’re getting damn close to cutting the cord and just figuring it out on the other side.

Anonymous Coward says:

These guys are so disingenuous. They offered me cable TV for 8 bucks a month if I bundled it with my internet. I told them I don’t watch TV, and that I had no use for it. They then offered it for free (not counting fee’s and taxes). The only reason I can imagine they offered free cable to someone who said they would not use it is so they can say they have me as a subscriber. I’m assuming that’s so they can defraud advertiser with fake subscriber numbers.

Looks to me like a death spiral…

Anonymous Coward says:

Re: Re:

I pay for and get BasicTV with Showtime that I didn’t want because it was cheaper to get the bundle then Internet Only!! I have a basic cable box I don’t use at all. I don’t have a cable run into any rooms for Cabletv. I do for a Antenna that I installed and I get my basic TV channels that way and recorded to a Tivo. No point in the basic cable box as it doesn’t record. Antenna is better picture wise anyway.

Showtime, I don’t watch. I can’t seem to get the app to work for it. Not that I care much. I had wanted HBO, but somehow ended up with Showtime.

Comcast sucks. It’s the Local and State along with the Federal Government who created these Monopolies. Then give them anything and everything they want, screwing all of us.

MyNameHere (profile) says:

The real issue here is that television contracts are often signed for extended periods of time, and cannot and will not adjust with the actual viewership, until there is a major correction.

As an example, NASCAR signed their latest TV agreements in late 2012 and early 2013 for 8 and 10 years respectively. Those deals were signed when NASCAR still had reasonably high ratings – which have fallen significantly in the last 5 years. Attendance is down, viewership is down, and the “halo” effect of having NASCAR on your channel isn’t that significant at this point. The sport itself is undergoing major transitions as a lack of sponsorship is driving some teams out of the sport and lowering the salaries and such all around. The latest series sponsor, Monster, is in there at a price that is reportedly about 25% of what the previous sponsor was paying, and on a much more short term basis.

Now, this gap between direct advertising and the cost of the boardcast rights is made up in no small part by subscription fees, but it is also made up by going “wall to wall” on certain sports. The latest NBA deal comes with a significant increase in NBA related programming, including preview and review shows, NBA themed interview shows, and the like. Those are relatively cheap to produce (done in house) and the ad revenue there goes to pay towards the broadcast rights. So the report you point to, while reasonable accurate in a direct way, does not consider all the ways that the content is marketed and monetized.

Since most of the sports have TV contracts that run well past 2020, it’s doubtful that much will change, except perhaps what people pay for. Instead of paying for ESPN on cable, people may end up paying for the streaming version.

The money will be made and the bills will get paid, at least for another 5 to 10 years.

madasahatter (profile) says:

Re: Re:

Yes there are ways to partially offset the losses. But when the scale of the losses are as big as they are some sports these methods are rounding errors. Direct lose of ~25M on the NHL is not fun but the amount is small enough that other income might offset the loses enough to eke out a small profit. However, losing 1+B on the NBA or NFL contract is hard to make up no matter how creative you are.

MyNameHere (profile) says:

Re: Re: Re:

My point is that the channels will be paying the various sports leagues for however long the contracts run. They signed on the bottom line, so they will find the money some how and pay for it – unless they go tits up. But the change in viewing habits and income levels is a really big deal and will have serious knock on effects through the sports.

NASCAR is facing that very problem. The TV deals are nice, and they are filling in the coffers for now. But the teams are having a hard time finding sponsors, the races are rapidly losing attendance, and the elephant in the room is that the TV ratings have declined significantly. While their TV deals do run for a few more years, it’s very likely that when it comes time to renegotiate, they will find themselves backing into a corner, and forced to accept a very reduced deal.

The trickle down of course is that the teams can’t afford as much staff and goodies, the driver are getting paid less, and experienced drivers are coming out of contract and not getting rehired. It’s a potential death spiral.

Yet, on the other side, the public loves sports. The Superbowl is one of the most watched events every year. Where is the tipping point? How much sports can we live without before we need it bad enough again?

Anonymous Coward says:

Re: Re: Re:2 Re:

No, sports is what passes for legitimate activity, given to hormone-driven hotheads – who believe that college scholarships to toss a stuffed geometric shape around is license to pick on number crunchers and sexually violate anyone they please without consequence.

The thing about the content and copyright holders that MyNameHere supports is that they all operate under the belief that people are ridiculously, hopelessly, irreparably addicted to their content. Reality indicates that’s often not the case. Cut off one arm of content, make it inaccessible or a bitch to find, and people move on. Maybe even make content of their own. It’s why fair use is such a thorn in MyNameHere’s side.

Grey says:

Cut the cord on Wednesday.

When I returned the equipment earlier they hurried me out of the physical store without changing my account, had to call back and force the issue. Nothing like walking in with 5 boxes to return. They wanted me GONE before I scared other customers I suppose.

Comcast customer since 1991, $270 a month before fees. They tried to warn us we’d lose our home phone number. ( Only ever used to make a misplaced Cell phone ring) Had to check if we were under contract…(hahahahaha).

Could we have absorbed the broadcast and ESPN fees? Sure! But when you hit the Popeye limit, (Alls I can stands, and I can’t stands no more!) You lose us. All we wanted was Cartoon Network for Rick and Morty, SciFi, and TV Japan.

Comcast wants my money again, I want A la carte. No broadcast fees, no ESPN.

$85 fiber now. 940mb down, 899mb upstream.

Even my stroked out mother in law knows how to stream on her own now. That’s how much Comcast annoyed us, and she can barely walk and talk. Inconvenience means nothing compared to not playing Comcast’s game.

Anonymous Coward says:

I’m on my second year of cord-cutting and I have more TV than I can watch. I have a mini-antenna that gets me the major networks and a half-dozen PBS stations, plus some retro stations for my Columbo and Murder She Wrote fix. I subscribe to Netflix through my Tivo, plus Plex (which is free) so I can watch all the stuff on my computer on the big screen. I can also get Youtube through Tivo and have watched several movies and TV shows that way. I could easily subscribe to Amazon and Hulu through the Tivo as well, but don’t want to. Seriously, how much programming can you watch in 24 hours?

Anonymous Coward says:

Re: Re:

Ya, I cut the cord a number of years ago and never looked back. I also have more TV then time to watch. I have a Tivo Roamio which I use to record all my content. The great thing is there’s a bunch of options for recording with a Antenna. There’s Tivo, Tablo, SimpleTV, ChanelMaster DVR+, Even HDHomerun Tuner and using either PLEX or EMBY or other software to record. I have a HDHomerun and record with PLEX on my NAS as a extra way to cord a couple more shows. New Season for New shows and old shows and some days there could be more then 4 shows I want to record at once to see what I like.

Besides getting all the broadcast channels of ABC, CBS, NBC, Fox, CW, PBS, I’m getting MeTV, and AntennaTV and others and can watch a lot of older TV series, which is great. If you haven’t seen them in years or maybe never, then it’s new to you. With a Antenna and say Netflix, which Netflix has a ton of Original content now, and have a lot of Kids programming, that should be more then enough. What shows you may miss out on, what you don’t see/watch you won’t miss and at some point may come to Netflix anyway. I see no point in HULU or CBS All access. If want like Sports, maybe SlingTV is for you.

Anonymous Coward says:

Re: Somehow the cable industry seems ass backwards

Buying broadcast rights to a sport or drama or comedy event/show means that your competitor can’t make money from it, thereby depriving them of an income from advertisers paying to be associated with the show’s eyeballs.

As it is all about revenue from advertisers willing to spend up bigger with more eyeballs watching your pay TV broadcasts when eyeball numbers go down so do the advertising rates and profits as the article points out.

Anondson says:

Then there’s those who live in cities captive to crybaby sports fans

Living in a city with sports fans who have cyclic meltdowns when their teams threaten to leave unless a stadium is built for them by all the taxpayers. Just enough to make politicians tremble, but never enough to pay for their hobby with a crony subsidy by non sports fans.


Stande (profile) says:

There's a simple fix...

There’s a simple fix for this. Just pay the damn athletes less. If you don’t pay some baseball player a million dollars every time he touches the ball, then you don’t have to charge ABC a gazillion dollars for the broadcast rights…and ABC doesn’t have to charge every viewer $150/month for the privilege of watching sports whether they want to or not.

Anonymous Coward says:

Re: There's a simple fix...

ok, let’s say they did that … the prices would still go up.

You are correct in that they do not have to do that … but they have and will continue to do so. The time prices are reduced is in a competitive market. Most major league sports are exempt from anti-trust laws … why? … idk, because there is money to be made I suppose.

Anonymous Coward says:

Are Americans seriously playing 120$/month for cable TV?

I’m Dutch. If I upgrade my DSL internet subscribtion (40 Euro/month for up to 40Mbit down, 4 up) to include TV, I would pay only 17.50 Euro more (70 channels, 33 of them HD and including almost all of the best known international channels) And I’m using one of the more expensive providers (XS4ALL)

Anonymous Coward says:

Re: Re:

I’m offended at these people kneeling. They can do that crap on their own time. But it’s hypocritical for protesting like this while getting paid MILLIONS to play a sport game!!! They should be thanking the country they live in for that kind of life.

Since they starting doing that, I haven’t turned on a Football game. I already don’t watch award shows as I know what those will end up being.

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