& 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
New and exciting methods of automation – whether virtualization, the cloud, IoT or even best practices like network segmentation – tend to emphasize innovation over visibility. As such, networks develop blind spots that mask network problems and even faulty devices.
Unlicensed spectrum will help the 3GPP's 5G specification proliferate.
Outages are inevitable, but how can we deal with them better?
The arrival of NFV and IoT is driving a greater need for Service Quality Management (SQM) capabilities, argues Sandeep Raina.
An updated architecture, new approach to software and the ability to launch new services will give telcos a successful path to 5G within the next few years.
From The Founder
Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
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 Interviews
CenturyLink: Are We All Security Service Providers Now?

5|29|17   |   3:40   |   (2) comments


As the security environment gets more threatening, in the wake of WannaCry and other attacks, service providers need to shoulder more responsibility for securing networks, says Tim Kelleher, vice president for IT security services at CenturyLink, in an interview at the Light Reading Big Communications ...
LRTV Documentaries
Verizon's Ed Chan on the New World for Networks

5|29|17   |   19:08   |   (0) comments


In this 2017 Big Communications Event keynote, Ed Chan Senior Vice President, Technology, Strategy and Planning, Corporate Networking and Technology, Verizon, discusses the coming world of sensors and the smart edge, powered by new spectrum and faster fiber uploads. For more BCE coverage and videos,
LRTV Interviews
Zayo's CTO: Respect the Infrastructure!

5|29|17   |   3:04   |   (0) comments


At Light Reading's Big Communications Event in Austin, Texas, Zayo's CTO Jack Waters talked about infrastructure and the changing customer landscape for network providers. While everyone else is chatting up applications and services, Waters urges the industry not to downplay the role that ...
LRTV Interviews
AT&T: Creating Dynamic Networks to Meet Business Needs

5|26|17   |   4:24   |   (0) comments


As enterprises need more dynamic networks, service providers need to deliver on-demand, virtual services to meet those needs. AT&T is creating a networking fabric to mix-and-match SDN technologies for enterprise customers, says Roman Pacewicz, AT&T senior vice president for offer management and service integration, in an interview at Light Reading's
LRTV Interviews
EdgeConneX on Industry Headwinds & Tailwinds

5|26|17   |   2:41   |   (0) comments


At Light Reading's Big Communications Event 2017, EdgeConneX CTO Don MacNeil discussed the value of partnerships in the digital world.
LRTV Documentaries
4 Steps Toward a Higher Network IQ

5|26|17   |     |   (0) comments


At the Big Communications Event in Austin, Texas, EXFO CEO Philippe Morin explains how sensors and analytics can boost a network's intelligence and enable on-demand customer experiences. Find more BCE 2017 coverage here.
LRTV Interviews
BT's McRae Sheds Light on 4K Strategy

5|25|17   |   4:45   |   (0) comments


At Light Reading's Big Communications Event 2017 in Austin, Texas, BT Group's Chief Network Architect Neil McRae talks about what it took for BT to broadcast live sports in 4K. Catch up with all our BCE coverage at http://www.lightreading.com/bce.asp.
From the Founder
How the NIA Aims to Advance NFV

5|25|17   |   08:07   |   (1) comment


Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
LRTV Custom TV
Better Solutions That Address Growing Scale

5|25|17   |     |   (0) comments


For Comcast, the X1 rollout and 17-fold increases in broadband speeds in the past 16 years are among factors driving the need for Energy 2020 solutions that reduce cost and consumption, says Mark Hess.
LRTV Custom TV
Ethernity Network Delivers Instant Offloading of Network Functions With All-Programmable Intelligent NIC

5|25|17   |     |   (0) comments


David Levi, CEO of Ethernity Networks, explains that programmability of the hardware makes the company's All-Programmable Intelligent NIC uniquely beneficial for communications service providers that need advanced data appliances with agile support of virtualization. Utilizing the company's patented network processing technology, Ethernity offers data path ...
LRTV Documentaries
BCE 2017: Vodafone Gets Obsessed With Cloud-Native

5|25|17   |     |   (0) comments


Vodafone's Matt Beal updates us on Project Ocean and explains why simple virtualization isn't enough of a goal for network transformation. Catch up with other BCE 2017 keynotes and news at http://www.lightreading.com/bce.asp.
LRTV Documentaries
BCE 2017: Intel's Take on Network Transformation

5|24|17   |     |   (0) comments


In this BCE 2017 keynote, Lynn Comp discusses Intel's vision for areas such as analytics, automation and service assurance. For more videos and BCE coverage, see http://www.lightreading.com/bce.asp.
Upcoming Live Events
June 6, 2017, The Joule Hotel, Dallas, TX
October 18, 2017, Colorado Convention Center - Denver, CO
November 1, 2017, The Montcalm Marble Arch
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Cities Clamor for More Clout at FCC
Mari Silbey, Senior Editor, Cable/Video, 5/23/2017
Sonus & Genband Finally Combine to Form $745M Company
Dan Jones, Mobile Editor, 5/23/2017
NB-IoT? Not at Those Prices, Say DT Customers
Iain Morris, News Editor, 5/26/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
Animals with Phones
What Brogrammers Look Like to the Rest of Us Click Here
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.