Bidding war between networks, sports leagues will increase price of cable TV
Bidding war between networks, sports leagues will
increase price of cable TV
By Cecilia Kang January 23 at 8:38 PM
Cable TV is about to get more expensive for millions of
consumers because of a bidding war between networks and the country’s most
powerful sports leagues.
Time Warner Cable, Cablevision and scores of rural cable
providers are tacking on sports surcharges each month, the direct result of
higher fees they are paying to ESPN and other sports networks to carry their
channels. Beginning Feb. 5, DirecTV will raise fees by 5.7 percent.
The rise in cable prices is likely to test the patience
of customers, who may already be tempted to cut their cords in exchange for
streaming options that will soon be available to them. For providers and
customers, the creeping prices amount to a test — at what point will viewers
decide it isn’t worth paying for cable anymore?
A flood of new options for watching TV are about to
arrive this year, from HBO’s standalone service, set to launch this spring, to
SlingTV, the new streaming option that will include ESPN, CNN and other popular
channels.
The catalyst for the price increases is a slew of
dealmaking between ESPN and the biggest professional sports leagues. Based on a
recent deal, ESPN is estimated to pay $1.9 billion each year just for National
Football League games. ESPN and TNT have signed a new $2.6 billion annual
contract to carry National Basketball Association games. Analysts say these
costs will get passed on to customers — slowly and steadily over the next
decade.
“How far will consumers go with how much they are willing
to pay for sports on cable, even if wildly popular?” said Matt Polka, president
of the small cable trade group the American Cable Association. He noted that
cable and satellite firms have long seen a decline in subscribers, down 150,000
subscribers in the last quarter alone.
“In a weird way, the sports programmers are going to harm
themselves if they keep going this way,” Polka said.
The monthly increase is small — from $2 to $5 a month for
customers of Time Warner Cable, Cablevision and other smaller providers. But
analysts say the trend will last for years.
The most powerful force behind the price changes is ESPN,
which is by far the most popular and expensive network in cable. Cable
subscribers are paying about $6 per month out of their total cable bills to
watch ESPN, the most of any non-premium cable channel because of its massive
reach into audiences only the big broadcast networks enjoy.
“ESPN is hugely popular and delivers the most value of
any programming network in America,” said Katina Arnold, a spokeswoman for
ESPN.
It drew the biggest audiences ever for cable television
with the college football championship game between Oregon and Ohio State this
month. Its multibillion deals with the NFL and NBA keep viewers subscribing to
cable, even if sports fans watch only a few other channels on TV. And ESPN’s
dominance is set to last for years.
“ESPN has locked down an extraordinary portfolio of
sports rights well into the next decade,” said Disney chief executive Bob Iger
in the company’s latest earnings call.
Other networks such as CBS and Fox have also paid
sky-high rights for sports broadcast deals, which they then pass on to cable
operators in the form of massive retransmission fees.
The audiences for broadcast networks are also enormous.
Saturday’s NFC championship game between the Seattle Seahawks and the Green Bay
Packers drew 55.9 million viewers in the United States. Sports have so reliably
delivered huge advertising revenues and retransmission fees, CBS last week
renewed its contract for NFL games on Thursday night for $300 million.
But by driving prices higher for all cable customers,
ESPN and other networks could be undermining their main profit engine.
Cable operators are openly airing their frustration with
sports networks and unveiling details of negotiations that are normally
undisclosed in private deals. Time Warner Cable has a “sports programming
surcharge” on customer bills for the first time. “We introduced the sports
programming surcharge to make it even more clear to customers what exactly is
driving the cost of TV higher,” said Rich Ruggiero, a Time Warner Cable
spokesman.
He said the cost of carrying broadcast networks such as
ABC, CBS, NBC and Fox has increased 60 percent. Ruggiero said that the amount
of money Time Warner Cable must pay to continue running sports programming has
increased 91 percent since 2008.
“It’s not just one sports network, it’s the overall
increase of sports programming that’s been happening for some time now,”
Ruggiero said.
Indeed, one of the factors driving up prices is the
growing number of sports channels all bidding for the right to air popular
events.
“There have been an increasing number of bidders in
recent years for large sports rights deals as cable networks have become more
and more profitable,” SNL Kagan analysts Derek Baine and John Fletcher wrote in
a report this week. “With FOX Sports 1 and FOX Sports 2, NBC Sports and the
Turner Networks now in the market bidding on sports rights along with ESPN and
the broadcast networks, the market has gotten fiercer than ever.”
Small cable operators are venting in blog posts and in
letters to consumers that sports programming fees at ESPN are out of control.
They’ve complained that the sports network forces them to take all-or-nothing
bundles of ESPN channels, even if their customers aren’t interested in them.
In Northern Iowa, CLTel was required to carry the ESPN’s
SEC Network, which covers college football’s Southeastern Conference.
“We don’t have those teams here, and maybe some of
customers care, but we are required to carry SEC in order to get ESPN and it
all adds up,” said Tom Lovell, general manager of CLTel.
Hargray Communications, which serves about 40,000
customers in Hilton Head, S.C., paid a much higher contract fee in its deal
with Disney last summer. It broke out in consumer bills a “broadcast TV
surcharge” that Hargray explained to customers was mainly because of higher
sports programming fees, said Gerrit Delbert, vice president of sales at
Hargray.
Two years ago, Hargray pulled Fox Sports because the
network was demanding too much money for a channel few of its customers were
watching.
Hargray is preparing for even higher demands when it
renegotiates in a few years for a new contract with ESPN.
“Costs have exploded in the past four years, and we share
the view of others in the industry that those costs are only going to go
higher,” Delbert said.
Disney, which owns ESPN, has defended its lavish spending
on exclusive sports contracts as key to ESPN’s future. The network has touted
its ability to bring new customers online and continue to grow its cable audience.
Later this month, ESPN and ESPN2 will be available to online customers through
Dish Network’s SlingTV — a service that doesn’t require a cable subscription.
It’s a high-stakes bet that ESPN’s online service won’t
lure too many of its cable customers away from the TV bundle.
Indeed, ESPN has put some limits to how many subscribers
it will take for Dish’s Sling TV service, but the sports network is putting
great faith in the survival of the cable model.
Costs are going up and always will. Be there in person. Hope you lile my post.
ReplyDeletePrivate Jet Hire to the Super Bowl
SUPERBOWL, PHOENIX, USA. February 1. 2015
The 49th Super Bowl is taking place on the 1st February at the University of Phoenix Stadium, Arizona.
The Super Bowl is one of the biggest annual sporting events, watched by over 110m people, and is the jewel in the crown of the NFL calendar.
The culmination of the NFL season and a major worldwide sporting event, the Super Bowl will be played at the University of Phoenix Stadium, in Glendale, Arizona in 2015.
Take a jet and be part of the fun.
Consider the ease and convenience private jet charter offers.
As commercial air travel gets more regulated and troublesome, chartering a private jet to sporting events becomes a viable option.
Sports fans are choosing to rent an entire aircraft instead of individual seats rather than dealing with traditional airlines and the security gauntlet at most airports.
Private aviation means you can travel on your own schedule, use smaller airports for easier departure and landing as well as be closer to your final destination.
This gives you a faster turnaround time and less congestion saving you hours of waiting. You can 'jetpool' or travel in a group so cost per head can be surprisingly cost-effective.
Go to the Super Bowl in style. Our global network of agents will save you time and money by finding the best private jet charter from across the market in one simple step. Get instant pricing and availability. Click HERE: http://goo.gl/21fF5B