How local sports may change all of television

[mr.MUskie]

By Jon Nathanson (c) 2014, Slate
   WASHINGTON — Whether or not you care passionately about baseball, you should care about the Los Angeles Dodgers.
   The future of television may depend on them, and on teams like them. Cable companies are betting that local sports will justify big price increases — and they may have overreached. Wars over the rights to local sports broadcasting are breaking out across the country, and their outcomes may bring the cable business model to its knees.
   Over the past 30 years, sports have driven the entire cable business model, and local sports have played a disproportionately big role. Landmark battles over the broadcasting rights to the Dodgers and other franchises
   — the Houston Astros and Rockets, the New York Knicks, and more — have created turmoil and increased service costs in the cable distribution model. Now cable providers are passing those costs onto you, the subscriber, whether you’re a sports fan or not.
   Cable television is expensive, and getting more expensive every year. The average monthly cable bill in the U.S. climbed from $40 in 2001 to $86 in 2012. Market research firm NPD Group says it could go as high as $123 by next year, and north of $200 by 2020.
   ESPN, the king of sports networks, has a lot to do with those costs. It charges Time Warner, Comcast, AT&T and other providers 20 times the licensing fee that most other cable networks do. As columnist Ravi Dev points out in Medium:
   The History Channel costs roughly 22 cents per month [per subscriber]. ESPN, you might be wondering? That comes out to $5.13 per month.... The ESPN subscriber fee is more than CNN, MTV, FX, TBS, CNBC, AMC, Nickelodeon, Comedy Central, the Food Network, and the Discovery Channel ... combined.
   ESPN is so pricey in part because it pays tens of billions of dollars to college and professional sports leagues for broadcasting rights. It recoups that investment by licensing to cable providers at a significant premium over the rates of most other networks. This model has proved extremely profitable for Disney, ESPN’s parent company. Cable providers have taken notice, searching for ways to create their own mini-ESPNs in the form of regional sports networks.
   Local sports have served that purpose. Regional cable providers — offshoots of the big nationals — have been paying billions for the exclusive broadcasting rights to local teams. Which brings us to the Dodgers. Recently, Time Warner signed a deal with the team valued at over $7 billion. The partnership resulted in the creation of SportsNet LA, a channel jointly owned by Time Warner Cable and the Dodgers, which launched in late February. At the time of this writing, SportsNet LA is the only means by which viewers in Los Angeles will be able to watch the team on TV. That’s because local cable providers refuse to pay Time Warner a licensing fee rumored to be $4 to $5, and possibly as high as $8 over time. Time Warner is holding out in the hopes that its competitors will come to the bargaining table. It won’t offer the Dodgers as a tiered or ala carte option for nonsubscribers either. So it’s locked in a stalemate with its peers.

[ChicosBailBonds]

I'm right in the middle of it.   This article, unlike so many of the others that are written by 22 year olds that have no idea how the world works, actually has some merit.

We told the Pac 12 to stick it.  We told Comcast Houston no thanks, same with Portland and Philly.  DISH told the Lakers to stick it.  This Dodgers deal is going to be interesting.  Time Warner is no the hook to pay the Dodgers no matter what, so the Dodgers come out smelling like a rose.  Time Warner, however, may have to foot the bill all by themselves if no one takes the Dodgers. So far Dish, Directv, AT&T, Fios have all said no.   Sucks to be in  the middle, and that's exactly where the distributors are.  If you don't carry it, some fans will leave because they don't care if their prices go up, they just want their Dodgers.  Others will be pissed because they hate the Dodgers or hate sports, and don't want a price increase.  Damned if you do and damned if you don't.  Ideally, you would carry it and offer it to only Dodger fans willing to pay for it, of course the Dodgers have said no to this as did the Lakers and every other team in the country.  So now you will continue to see distributors say "fine, then we aren't carrying you and we'll lose a few customers, but that's the deal".

Interesting times.

[ChicosBailBonds]

http://images.burrellesluce.com/image/3570XN/3570XN_29453

[Ari Gold]

Hulu+ is $8/mo
Netflix with DVDs is $16/mo
Even with an Xbox Live subscription to watch the above $5/mo or Apple TV
Total $252
Even with an internet cost, it's still much cheeper
With some finagling or a radio and twitter, I'll get the sports news I want/need.
Point is, I'll probably never buy cable again.

[ChicosBailBonds]

Hulu+ is $8/mo
Netflix with DVDs is $16/mo
Even with an Xbox Live subscription to watch the above $5/mo or Apple TV
Total $252
Even with an internet cost, it's still much cheeper
With some finagling or a radio and twitter, I'll get the sports news I want/need.
Point is, I'll probably never buy cable again.

All going to be changing very very soon.   

[Ari Gold]

All going to be changing very very soon.   

As long as I pay less. I've got no problems watching less TV shows, esp since HIMYM is ending in 2 weeks

[reinko]

As long as I pay less. I've got no problems watching less TV shows, esp since HIMYM is ending in 2 weeks

Of course you watch that show.

[The Lens]

I'm the perfect customer for Chicos and his competition.  I want my sports, especially my local teams, in big, bright, clear  HD .  And I would prefer top not steal anything. 

[Ari Gold]

Of course you watch that show.

And i'm gonna have to watch the spin off too. one of the male leads nick d'agosto is an MU grad from 2002

[ChicosBailBonds]

I'm the perfect customer for Chicos and his competition.  I want my sports, especially my local teams, in big, bright, clear  HD .  And I would prefer top not steal anything. 

You're still the norm Lens....very much in the majority in this country.

[Benny B]

You're still the norm Lens....very much in the majority in this country.

Until the boomers start dying off... then Lens will be in the smallest minority.  Unless he's a boomer, of course.

[brandx]

Over 5 million people have given up cable in the last 5 years. The huge increases by the cable companies will accelerate this exodus.

That is over a 10% drop and yet they keep asking for more money as if they don't realize that will cause an even bigger drop. The money is shifting from cable to other forms of digital media.

So whether the cable companies like it or not - and regardless of their outstanding contracts - they are going to have to make changes. I know Chicos thinks otherwise, and I respect his opinions on these matters as he knows much more than I ever will on this subject, but we are slowly getting to the point where their models won't matter any more. They will have the choice - change or things will get progressively worse.

Even though cable TV has just had its worst year ever, cable TV revenues are still rising because companies are charging the dwindling number of customers more in subscription fees. Those higher prices are "part of the problem" that pushes out poorer subscribers — losing the TV business even more eyeballs.

Interesting look:

http://www.businessinsider.com/cord-cutters-and-the-death-of-tv-2013-11

[ChicosBailBonds]

The key in your article is the word SLOWLY.


DIRECTV, net growth in 2013
DISH, net growth in 2013
UVERSE, net growth in 2013
FiOS, net growth in 2013

Cable....lost subs

In 2012, growth.  Two year total, NET GROWTH.

0.1% loss of tv subscribers in 2013.  Lots of threats, lots of articles, reality is that it is happening at such a slow pace.  Brand talks about 5 million people dropping, the part he doesn't talk about is the HH growth that offset most of those.

Article from yesterday....lots of threats, very few actions.

http://www.forbes.com/sites/markrogowsky/2014/03/18/cord-cutting-the-promise-tv-viewers-keep-on-breaking/

[🏀]

Uverse can suck it. Happy to be moving to an area where I will be forced to go with DirecTV.

[ChicosBailBonds]

Uverse can suck it. Happy to be moving to an area where I will be forced to go with DirecTV.

Happy to help if you need an employee deal

[Benny B]

Happy to help if you need an employee deal

Out of curiosity, what sort of deal do employees get?  I would imagine it would have to be pretty decent, because if there's anyone who knows how to "steal" DirecTV, it's their employees.

[Spotcheck Billy]

  I would imagine it would have to be pretty decent, because if there's anyone who knows how to "steal" DirecTV, it's their employees.

I remember when co-workers used to steal Directv by getting their cards programmed/re-programmed all the time

[Benny B]

I remember when co-workers used to steal Directv by getting their cards programmed/re-programmed all the time

Exactly... I have a cousin who had a "friend" that worked for DTV.  My cousin conveniently got a new card for his receiver every few weeks or so that descrambled (or whatever the digital term is) everything.

[brandx]

The key in your article is the word SLOWLY.


DIRECTV, net growth in 2013
DISH, net growth in 2013
UVERSE, net growth in 2013
FiOS, net growth in 2013

Cable....lost subs

In 2012, growth.  Two year total, NET GROWTH.

0.1% loss of tv subscribers in 2013.  Lots of threats, lots of articles, reality is that it is happening at such a slow pace.  Brand talks about 5 million people dropping, the part he doesn't talk about is the HH growth that offset most of those.

Article from yesterday....lots of threats, very few actions.

http://www.forbes.com/sites/markrogowsky/2014/03/18/cord-cutting-the-promise-tv-viewers-keep-on-breaking/

Good post - actually that was the next thing I was going to ask. As the cable companies lose customers and continue to do so to DirectTV, UVerse, etc., what are they going to do about it? Raising rates continually is not going to stem the tide. At what point will they have to take more drastic steps to stop the flow of customers leaving? And, then, what effect will those actions have on companies like yours? Does DirectTV try to predict their actions when looking at future income for your company?

[MU Fan in Connecticut]

I just switched to U-Verse from Cablevision simply to save money.  Cablevision offered me a deal after I called to cancel, but it was still more expensive than what I'll be paying U-verse.

Sorry Chicos, sateliite is not an option in my home because of too many tall trees.

[ChicosBailBonds]

Out of curiosity, what sort of deal do employees get?  I would imagine it would have to be pretty decent, because if there's anyone who knows how to "steal" DirecTV, it's their employees.

You mean, what do employees have to pay or what deals can employees get for consumers through VIP type offers?

If it is the former, it all depends.  Every employee receives the basic services as part of their compensation plan.  The philosophy has always been if you are trying to make the product better, answer consumer questions, sell services, etc, then you need to be a customer and understand everything about it....the good, the bad, etc. 

Depending on what you do within the company, you may receive other services gratis because they are products one manages directly or works on.  For example, the Adult team (yes, there is such a thing) gets all the adult content.  The team responsible for UFC or WWE or Boxing will receive those events for free.  So it depends, same goes with hardware setups.

If you are talking about the latter, its basically whatever the current national offer is with a few additional bells and whistles (discount, protection plan inclusion, etc are examples of what it could be...changes from time to time).

[ChicosBailBonds]

Good post - actually that was the next thing I was going to ask. As the cable companies lose customers and continue to do so to DirectTV, UVerse, etc., what are they going to do about it? Raising rates continually is not going to stem the tide. At what point will they have to take more drastic steps to stop the flow of customers leaving? And, then, what effect will those actions have on companies like yours? Does DirectTV try to predict their actions when looking at future income for your company?

Cable is more and more relying on their internet pipes. The margins there are huge, while the margins for pay tv get smaller and smaller because costs are going up faster than can be passed on to consumers.  Most pay tv operators passed on price increases of about 5% this year, while their programming costs went up 8% to 10%.  Something gives, margin is usually it.  The cable guys don't particularly care as much about you leaving them, especially if you sign up for their broadband stuff where they make 70% or 80% margins.  Pay them for their pipes, watch Neflix all the while they start to bilk Netflix to be carried without throttling and they do quite well. So I'm not sure cable entirely cares as long as they get you to fork over more dollars into another pocket.  For example, pay them $75 for tv a month and they might clear $35...or sign up for broadband and pay $50, but they clear $40.  Revenues may go down, margin goes up.  It's never that simple, but that is one of the areas they look at as a tradeoff.

We have people trying to predict this stuff all the time.  It changes it seems daily.  An incredibly fluid environment, but the one stabilizing item are the contracts on programming and how long they are out in the future. 

Ultimately comes down to the Disneys, NewsCorps, Viacoms, Turners of the world.  I don't see them in any hurry to give up their revenue streams and if people bail on one, they will charge accordingly to get the same revenue from a different sales vehicle.

[reinko]

You mean, what do employees have to pay or what deals can employees get for consumers through VIP type offers?

If it is the former, it all depends.  Every employee receives the basic services as part of their compensation plan.  The philosophy has always been if you are trying to make the product better, answer consumer questions, sell services, etc, then you need to be a customer and understand everything about it....the good, the bad, etc. 

Depending on what you do within the company, you may receive other services gratis because they are products one manages directly or works on.  For example, the Adult team (yes, there is such a thing) gets all the adult content.  The team responsible for UFC or WWE or Boxing will receive those events for free.  So it depends, same goes with hardware setups.

If you are talking about the latter, its basically whatever the current national offer is with a few additional bells and whistles (discount, protection plan inclusion, etc are examples of what it could be...changes from time to time).

Where can I send my resume?

[brandx]

Cable is more and more relying on their internet pipes. The margins there are huge, while the margins for pay tv get smaller and smaller because costs are going up faster than can be passed on to consumers.  Most pay tv operators passed on price increases of about 5% this year, while their programming costs went up 8% to 10%.  Something gives, margin is usually it.  The cable guys don't particularly care as much about you leaving them, especially if you sign up for their broadband stuff where they make 70% or 80% margins.  Pay them for their pipes, watch Neflix all the while they start to bilk Netflix to be carried without throttling and they do quite well. So I'm not sure cable entirely cares as long as they get you to fork over more dollars into another pocket.  For example, pay them $75 for tv a month and they might clear $35...or sign up for broadband and pay $50, but they clear $40.  Revenues may go down, margin goes up.  It's never that simple, but that is one of the areas they look at as a tradeoff.

We have people trying to predict this stuff all the time.  It changes it seems daily.  An incredibly fluid environment, but the one stabilizing item are the contracts on programming and how long they are out in the future. 

Yeah, I hated it when I had to work with Forecasting - I wanted something a little more stable instead of changing the goal posts every other day.

So, I would assume that the cable companies (through their lobbyists and "contributions") are the biggest impediment to communities going wireless, which would end people's reliance on said companies?

[Benny B]

Where can I send my resume?

I bet if you send it directly to Chicos, it ends up in the right hands without ever leaving his.