& cplSiteName &

The Greening of the US Sports Ecosystem

John Mansell
8/30/2013
50%
50%

As a college student in the summer of 1974, during cable TV's truck-chasing era, I sold cable TV. When students returned to Ann Arbor in September, going door-to-door selling 12 channels of cable TV for $5 per month was a breeze. Even the blind and deaf were buyers.

I would meet objections by pointing out that cable costs less than taking your family to a movie or a baseball game, especially when factoring in food, drinks, and babysitter fees.

It was true then. It's true now. At that time, however, we were hungry for more entertainment options. Now, we are quite sated.

Casual sports fans complain about high fees and unwanted channels, while Netflix, Hulu, Apple, Amazon, Google, and Roku provide only limited choices.

We have arrived at an inflection point that is complicated by retransmission consent and lack of pricing discipline in the sports ecosystem supply chain.

Competing cable, satellite, and telco distributors (MVPDs) have little leverage in the face of sports programmers. Balking at the affiliate fees sought by a popular sports network and dropping the channel translate into subscriber defections.

Sports networks, armed with pricing power, have little incentive to bid judiciously for programming. Soaring rights fees can be passed through to MVPDs via higher affiliate fees.

Teams and leagues use windows, geographic limitations, and an auction atmosphere to effectively force "winning" bidders to rationalize their investments via higher affiliate fees.

And programmers are becoming middlemen. Their suppliers -- teams, leagues, college conferences, and sanctioning bodies -- have their own networks or demand equity.

We could put a caption here but we think you get the drift.
We could put a caption here but we think you get the drift.

Sports interests have challenges, too. In 2012, the average NBA player made $5.2 million, according to Forbes. The average MLB player salary was $3.2 million, followed by $2.4 million for NHL players and $1.9 million for NFL players.

Chicago White Sox owner Eddie Einhorn put it best: "The money goes in one pocket and out the other."

It's not so much that individual sports networks have hiked prices dramatically, it's the rising number of sports networks.

Instead of the handful of services a decade ago, there are now more than two dozen national and three dozen regional sports networks in the US, not counting Fox Sports 1 and the planned SEC Network.

Cross-ownership, vertical integration, and over-the-top competition exacerbate the challenge of developing some sort of pricing discipline.

RSNs once carried a limited number of MLB, NBA, and NHL home games. Now they distribute more than 80 percent of all games. National networks carry most of the rest.

The wholesale cost of sports programming to MVPDs is about $15 to $17 a month, which works out at 40 percent to 50 percent of total MVPD programming costs. Yet sports accounts for only about 20 percent of viewership.

It is heaven for avid sports aficionados. For a shrinking middle class of casual- and non-fans, however, the cost-benefit calculus is tenuous. The perceived value has declined.

Breaking the cycle of exorbitant player salaries, soaring rights fees, surging sports programming costs, and rising consumer prices is no small feat. But it's high time for a comprehensive examination of the sports universe.

Unfortunately, many industry solutions and potential public policy initiatives are fraught with unintended consequences. MVPD consolidation, for example, would cut into the leverage of sports interests, but might adversely affect innovation and competition for subscribers.

Suppose programmers were prohibited from imposing minimum-tier subscriber percentages and MVPDs were free to market high-cost programming à la carte or on a sports tier. Sounds good, right?

Tinkering with tiering, most-favored nation clauses, and retransmission consent bundling, however, might lead to stringent regulatory oversight and regulation of wholesale prices.

What if sports leagues and college conferences were barred from sharing revenue and each team/university was responsible for distributing its own games without geographical limitation?

This might lead to higher rights fees for the most popular large market teams and lower fees for poor-performing small-market teams. How would this affect the competitive balance that leagues have achieved via salary caps and revenue sharing?

How about a closer look at the billions of dollars in public subsidies that have facilitated the massive new stadium/arena construction binge over the past 20 years?

These are complicated issues rife with First Amendment, antitrust, copyright, and contractual implications.

Shed no tears. Most MVPDs, sports networks, and sports team owners have had superior returns on their investments.

As for the consumer, MVPD service remains an incredible bargain, provided, of course, that you're an avid sports fan.

— John Mansell, President, John Mansell Associates Inc.

(11)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
albreznick
50%
50%
albreznick,
User Rank: Blogger
9/6/2013 | 5:45:13 PM
Re: Global reach
Perhaps, John. Such an evolution could make a lot of sense. But who would do the subsidizing? Broadcasters? Pay TV providers? Other viewers? The feds? It's hard to imagine paying folks to take pay TV.  
jman3136
50%
50%
jman3136,
User Rank: Light Beer
9/3/2013 | 3:41:52 PM
Re: Global reach
I think a variety of options will be available at different price points for different levels of service enhancements.  There have been no riots as more and more top-flight post-season sports events have migrated to cable.

The day may come when there is little or no broadcasting, since the spectrum is more valuable for wireless.  Anyway, only about 10-15% of the public still relies exclusively on over-the-air.  As economist Tom Hazlett has noted, it would be cheaper and more efficient to subsidize those households to take some sort of multi-channel service.  The system doesn't collapse.  It evolves.
albreznick
50%
50%
albreznick,
User Rank: Blogger
9/3/2013 | 2:36:29 PM
Re: Global reach
Thanks, John. Do you ever see the really big sports events, like the Super Bowl or World Series, going totally OTT or exclusively on pay TV tiers? Or would that cause too big a riot? What sporting events will be left on (free) broadcast TV? At what point does the entire system finally collapse under its own weight?   
jman3136
50%
50%
jman3136,
User Rank: Light Beer
8/30/2013 | 2:41:04 PM
Re: Global reach
Alan, wouldn't be surprised to see some collaboration between OTT and MVPDs, but remember MVPDs are also doing their own form of OTT with TV Everywhere.  Smaller schools, leagues and even high schools have their own websites.  More and more games are widely available.  I think it was Universal Sports that migrated from the Internet to RSN syndication to NBC Sports.
albreznick
50%
50%
albreznick,
User Rank: Blogger
8/30/2013 | 1:51:46 PM
Re: Global reach
John, do you think the MVPDs and OTT players will eventually team up to do a la carte offerings or at least smaller bundles of sports or other programming? Coulfd the smaller schools, conferences and lagues put together their own OTT offerings to go around the big TV networks?  
jman3136
50%
50%
jman3136,
User Rank: Light Beer
8/30/2013 | 1:39:01 PM
Re: Global reach
I agree. OTT will be the driver for a la carte and MVPDs will likely offer customers more individualized options--perhaps tiers where customers can choose from a basket of channels.  As video margins erode, there's always broadband, small-medium business and no doubt other offerings down the road.  As my boss Paul Kagan once said, "Cable is a forever business."
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
8/30/2013 | 1:27:38 PM
Re: Global reach
Despite John McCain, a la carte is far more likely to emerge in OTT rather than in conventional video services. There's still a lot of mileage left in the standard model -- although value will continue to erode slowly over time. Do you think that's something video service providers can live with?
jman3136
50%
50%
jman3136,
User Rank: Light Beer
8/30/2013 | 1:12:53 PM
Re: Global reach
I agree, Fox, Viacom, CBS, Comcast/NBC Universal and ABC/Disney would be losers in an a la carte world, but smaller programmers without retransmission consent options would be bigger losers.  A MVPD CEO once told me that a la carte is inevitable, but "it won't happen until we're ready for it to happen." 
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
8/30/2013 | 12:25:09 PM
Re: Global reach
The biggest push for maintaining status quo may in fact come from content distributors like Disney/ESPN. The noise they are making with their various OTT experiments is just that -- noise. Dis/E and others like it have the most to lose if a la carte (or OTT, or some Babel-like combination) becomes the norm.
jman3136
50%
50%
jman3136,
User Rank: Light Beer
8/30/2013 | 12:15:32 PM
Re: Global reach
There are no easy solutions.  Multichannel video program distributors (MVPDs) should have the ability to tier as they wish and offer expensive programming a la carte without programmers dictating the tier.  Of course, sports programmers can adjust by raising their wholesale fees, but their ad revenue would be be negatively impacted and with less revenue sports nets might be less willing to pay higher rights fees to teams and leagues.  In addition, fewer sports teams, leagues and colleges would find it attractive to establish their own networks.

Consolidation of MVPDs would translate into less leverage for the sports nets, since it would be more difficult for subscribers to switch MVPDs in the event of a pricing dispute.  That, too, is an imperfect solution, because there might be less consumer choice.  Also, vertical integration comes into play.  Comcast, Time Warner Cable and other MVPDs have significant interests in RSNs and some national sports programmers.

An FCC report, Congressional oversight, and the threat of rate regulation--a raised eyebrow--might lead to a bit of downward pressure, too, but any type of rate regulation would be ill-advised and lead to other unintended consequences.
Page 1 / 2   >   >>
More Blogs from Column
In the second of a three-part series, OpenCloud's Jeff Gordon delves deeper into the driving forces for adopting a converged service layer.
Edge computing is a compelling option for telcos looking to balance tightening finances with increasing demands for bandwidth and processing speed. 
The conclusions of a new survey, commissioned by OpenCloud and conducted by Heavy Reading, suggests that the move towards converged service layers is now well underway.
WiFi is offering a challenge to the network-centric cellular status quo and that's something that mobile network operator CEOs recognize, believes Devicescape CEO Dave Fraser.
NFV can bring operational headaches as well as operational gains, argues Andy Huckridge.
From The Founder
The independent evaluation of Nokia's key virtual network functions (VNFs) was a defining moment for the Finnish giant.
Flash Poll
Live Streaming Video
Charting the CSP’s Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it’s going from two industry veterans.
LRTV Custom TV
Cisco's Innovations in Cable

5|26|16   |   03:18   |   (0) comments


Marc Aldrich from Cisco discusses the latest in security, the evolution and momentum for CCAP and what the industry will be seeing next from Cisco.
LRTV Documentaries
Leading Lights 2016 Highlights

5|25|16   |   02:26   |   (1) comment


Some of the high points from this year's Leading Lights awards dinner at the Hotel Ella in Austin, Texas.
LRTV Documentaries
Light Reading Hall of Fame 2016

5|23|16   |   05:43   |   (0) comments


Find out who has been welcomed into Light Reading's Hall of Fame this year.
LRTV Custom TV
ZTE TM Forum Highlights

5|23|16   |     |   (0) comments


ZTE showcased its new ICT solutions at TM Forum in Nice.
LRTV Interviews
Gamma's MD on the Emergence of UC2

5|20|16   |     |   (0) comments


Gamma Communications Managing Director David Macfarlane believes the unified communications (UC) market has reached a tipping point.
LRTV Custom TV
The Ultimate 5-Minute Guide to Digital Customer Engagement

5|20|16   |     |   (0) comments


In this short video, you will hear all about how Digital Customer Engagement is the key to meeting customer expectations, keeping them happy, and maximizing revenue. VP Product & Marketing at Pontis, Ofer Razon, breaks down for us the five essential capabilities for successful Digital Customer Engagement. Don’t miss!
LRTV Custom TV
NFV in 2016: Part 1 – NFV Use Cases Get Real

5|19|16   |   05:57   |   (0) comments


Consensus is building around the key use cases for NFV, including managed IP services at the network edge and on customer premises, which can generate new revenues from enterprises/SMBs and consumers; Evolved Packet Core to support LTE migration; and adjacent technologies, such as TAS and IMS, to support VoLTE and next-generation charging and policy control ...
LRTV Custom TV
Nokia's Steve Vogelsang on NFV – Part 3

5|19|16   |     |   (0) comments


Steve Vogelsang discusses the challenges of operational transformation and how Nokia helps its customers. Join Steve at the Big Communications Event in Austin the morning of May 24, on his keynote and optical networking panel.
LRTV Interviews
Level 3: Why UC Is In Demand

5|17|16   |   04:12   |   (1) comment


Andrew Edison, Level 3's senior VP of sales, EMEA region, talks about the drivers of growth in the unified communications services market.
LRTV Custom TV
ARM's OPNFV Action

5|17|16   |     |   (0) comments


At the ARM booth at MWC 2016, Joe Kidder and Bob Monkman speak to Light Reading about OPNFV and their upcoming action.
LRTV Custom TV
Nokia's Steve Vogelsang on NFV – Part 2

5|16|16   |     |   (0) comments


Steve Vogelsang gives advice to service providers on how to move to NFV. Join Steve at the Big Communications Event in Austin the morning of May 24, on his keynote and optical networking panel.
LRTV Interviews
Interoute CTO on NFV's Maturity

5|13|16   |   06:46   |   (1) comment


Matt Finnie, CTO at international operator Interoute, explains how NFV has made life easier in terms of logistics and how Interoute can now enable a 'software-defined moment' for its customers.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
December 6-8, 2016,
June 16-18, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
Hot Topics
DT: Telcos Must Escape Vendor Prison
Iain Morris, News Editor, 5/24/2016
AT&T to Start 5G 'Friendly' Trial by 2016 End
Dan Jones, Mobile Editor, 5/24/2016
Cisco's Patel Hails 'Microculture' Successes
Iain Morris, News Editor, 5/26/2016
Cable Is Eyeing Its Retail Options
Mari Silbey, Senior Editor, Cable/Video, 5/25/2016
AT&T's Margaret Chiosi Retires
Ray Le Maistre, Editor-in-chief, 5/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.