Pay TV subscribers who don’t watch sports likely will have to cut the cord if they want to escape the rocketing costs for programming rights and new channels. At least that’s one of the conclusions I take away from RBC Capital Markets’ David Bank’s smart, 91-page report this morning about the state of sports media. He notes that programmers have a powerful incentive to engage in an arms race for sports: The rewards for airing games — from rising ad sales and pay TV affiliate fees — still outweigh the rising amounts that football, baseball, and other sports rights holders are charging. As a result, channels offering sports “should be able to expand [profit] margins,” Bank says. Won’t that lead to a war with distributors such as DirecTV and Time Warner Cable, who say that subscribers will bolt if monthly bills continue to rise? Not necessarily, because their hands aren’t clean. “How can these distributors complain about unfair pricing when they are in turn asking for the same kind of pricing on the same kind of content?” Bank asks. DirecTV owns three major regional sports networks (ROOT Sports in Pittsburgh, Rocky Mountain states, and the Northwest) while Time Warner Cable has a new channel for the Los Angeles Lakers. Bank acknowledges that “we must ask ourselves whether the [growing number of regional sports networks] risk damaging the ecosystem.”
Still, Bank’s a fan of News Corp‘s unannounced, but widely expected, plan to convert Speed into a national multi-sports network likely to be called Fox Sports 1. It would be a financial success, he says, if Rupert Murdoch’s company can raise the pay TV fee to $1 per subscriber per month from Speed’s current 22 cents, and increase distribution to 90M homes from 81.4M. Although it won’t initially threaten Disney’s ESPN, “Fox has succeeded as the insurgent in two other significant cases: broadcast (with the launch of Fox in the mid-80s) and cable news (with the launch of Fox News Channel in the mid-90s).”
One of Bank’s most interesting charts shows that sports services account for nine of the 10 most expensive pay TV channels if you compare the amount operators pay for each viewer the network attracts. ESPN is No. 1 at $500 per viewer per month. It’s followed by NFL Network ($424), MLB Network ($307), Fox Soccer ($265), Current ($259), FUEL TV ($257), NBA TV ($247), Golf Channel ($251), ESPN2 ($229), and NBC Sports Network ($238).
- Sports & Recreation
- Time Warner Cable