& 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
NFV feels like it's going nowhere fast, suggests Napatech's Dan Joe Barry.
The NG-PON2 standard is the key to the future of ultra-broadband, believes Calix's Alan DiCicco.
Amazing new 5G innovations are coming below 6GHz -- it's not just about mmWave.
5G is about more than just faster mobile broadband, notes Tom Sawanobori, SVP and chief technology officer at the CTIA.
What companies should glean from network traffic patterns during the Olympic Games in Rio.
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 28, 1:00PM EDT
Gigabit 101
Will Barkis, Senior Technology Analyst, Orange
UPCOMING COURSE SCHEDULE
Friday, September 30, 1:00PM EDT
Gigabit & the Great Migration
Robert Howald, Vice President, Network Architecture, Comcast
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
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
Introducing IoT World News

9|27|16   |   01:43   |   (0) comments


Self-driving cars, medical sensors, smart cities... and refrigerators. In order to address the huge scope of IoT, KNect365 has created a unique online community that will help businesses to understand and monetize the opportunities that live within the IoT market. We look forward to welcoming you to IoT World News -- your gateway to a better connected future.
LRTV Interviews
AT&T: Re-usable Functions Next NFV Key

9|27|16   |   06:03   |   (0) comments


The next generation of NFV has to break functions down into re-usable software chunks, making everything much more cloud-like.
LRTV Interviews
Masergy on Security: Attackers Gaining Upper Hand

9|27|16   |   5:10   |   (1) comment


At Light Reading's NFV & Carrier SDN event in Denver, Ray Watson, vice president of Global Technology at Masergy, says that because of the growth in virtualization, the threat landscape is shifting in favor of the attackers. As a result, service providers need to think beyond just defending the perimeter and take a more holistic approach to security.
LRTV Interviews
Verizon Takes Next Step on Biz Virtualization Journey

9|26|16   |   4:38   |   (2) comments


At September's NFV & Carrier SDN event in Denver, Light Reading sat down with Victoria Lonker, director of Product and New Business Innovation at Verizon, to chat about where the carrier is with delivering virtualized services to business customers.
LRTV Interviews
Global Services: The $40B Face-Off

9|26|16   |   05:53   |   (1) comment


More service providers than ever before are battling it out to win a slice of what is now a $40 billion global communications services pie, explains Ovum Principal Analyst David Molony.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Wagner’s Ring
Time to Shut Up About 'Dumb Pipes'

9|22|16   |     |   (12) comments


Service providers can't compete with OTT players. It just isn't in their DNA. Instead, service providers need to embrace what they're good at -- providing reliable, secure connectivity.
Wagner’s Ring
Keeping Your Tech Career Going After 50

9|21|16   |     |   (13) comments


How do you keep your career moving forward when you're past the half-century mark?
LRTV Interviews
Peering Into the Digital Future

9|20|16   |   04:25   |   (0) comments


Nick Thomas, practice leader of digital media at Ovum, talks about how digital transformation in the technology, media and telecom sectors will enable the development of a new range of applications and services for enterprises and consumers and how the upcoming Digital Futures event in London will examine ...
LRTV Custom TV
Napatech Tackles NFV's Major Challenge

9|7|16   |   08:42   |   (0) comments


One of the main challenges for network operators introducing NFV is to combine performance and flexibility in a cost-effective way, but there is a solution, explains Napatech's Dan Joe Barry.
LRTV Custom TV
Huawei Optical Innovation 2016

9|6|16   |     |   (0) comments


Highlights of the 2016 Huawei Optical Innovation forum.
LRTV Huawei Video Resource Center
Are You Ready for Huawei Connect 2016?

8|31|16   |     |   (0) comments


Join us for an exclusive sneak peak of Huawei Connect, an integrated conference for the global ICT ecosystem taking place in Shanghai.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Keeping Your Tech Career Going After 50
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/21/2016
Time to Shut Up About 'Dumb Pipes'
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/22/2016
Verizon CFO: Eat Our (Fixed) 5G Dust!
Dan Jones, Mobile Editor, 9/22/2016
Eurobites: Telefónica Taps Juniper for Network Security
Paul Rainford, Assistant Editor, Europe, 9/26/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
There's Nothing Like Missing a Full Minute of Pokémon Go Click Here
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.