Tuesday, February 9, 2016

Will huge pro sports fee hikes wreck cable TV?

A "vicious cycle" as NFL, MLB, NBA rates rocket

Will huge pro sports fee hikes wreck cable TV?

An NFL Network television crew films as New York Giants huddle. (Charles Rex Arbogast/AP)
An NFL Network television crew films as New York Giants huddle. (Charles Rex Arbogast/AP)

Pro sports leagues will collect more than $7 billion this year from TV networks; the total will jump to $9.5 billion next year, with the NFL collecting more than half the total, writes analyst Tony Wible, in a report for Janney Capital Markets.

That works out to $13.38/month per cable TV subscriber, up from $10.10 a month -- or more if you count the inflationary effect of sports programming increases on other networks, Wible adds. Indeed, the sports networks together collect about 50% more than what Disney, TimeWarner and Viacom collect for all their other cable networks -- combined.

Why so much? Up to 90% of Americans watch at least some sports, Wible writes, quoting a CBS/Vanity Fair poll. Advertisers see live sports events as one of the few mass audiences still worth going after with the fragmentation of audiences brought on by the Internet and smartphones. But, Wible warns, the more cable companies pass these costs along to consumers in the form of higher bills, the more viewers will quit buying cable -- "setting up a potential vicious cycle" and pressuring non-sports networks in particular. 

How long can rates go up before viewers say No or some rich, "disruptive" Internet company offers the leagues a better deal with less overhead for the middlemen?  Tennis and pro wrestling already have straight-to-Internet broadcasting, and ESPN may start doing that with some Major League Soccer games. But Wible doubts there will be big changes to the way Americans watch sports until the current round of billion-dollar major-league deals expires in 2022-23. 

Meanwhile, Google and other online companies are exploring ways to buy and retail sports programming directly to consumers -- as are the pro leagues -- though viewers could soon find that's even more expensive than paying cable, Wible concludes.

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About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, 215.854.5194, @PhillyJoeD. Read his blog posts at http://www.philly.com/PhillyDeals and his Inquirer columns at http://www.philly.com/philly/columnists/joseph-distefano/. Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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