Tuesday, February 26, 2013

Battle for Sports Rights Hits Home (Hard)

  While ESPN remains the 800-pound gorilla in sports networks, it's been challenged by major pushes over the last year by NBC, CBS, Fox, and Turner to build up their branded sports networks.  Last week, News Corp. joined the fray, announcing plans to build a major national sports network.  (Not to mention 50+ regional sports channels all looking for content.) The bidding wars have pushed sports rights fees to even more astronomical levels, and someone ends up paying.
  The other primary factor pushing the bidding wars is the fact that sports is one of the few remaining TV programming sources reliably delivering live audiences.
Simply put, sports ratings not only remain robust in the face of declining tune-in for almost everything else, but they are one of the few commodities TV viewers insist on watching live, which removes (or seriously diminishes) the impact of delayed DVR viewing.
As a result, sports is widely seen as the one thing you've got to have - as a network and as a multichannel provider.  Combine absolute demand with growing competition and the price keeps rising.
  The result? The NFL will get $2 billion a year out of its multi-network deals (a figure up 70% from the last round of deals). The Los Angeles Dodgers signed a $7 billion deal with Fox, while the Lakers got $2 billion in its latest deal. ESPN will be paying $470 million a year to air the new college football playoff games, on top of the billions it's paying for the top Bowl games. Major League Baseball's latest deal will generate $12.4 billion from three sports networks. NBC paid $1.8 billion for the London Olympics, and $4.38 billion for the US rights for the next four biennial events.  The rising cost of sports broadcasting rights is felt internationally, particularly for big events.  Telco BT (British Telecom) is making headlines with its recent deals to air matches from top soccer leagues across Europe and its purchase of ESPN's UK and Ireland channels (BT's building a telco cable service, supplemented by broadband net access, in competition with satellite service BSkyB).

  The networks push the costs down to the multichannel video providers (cable, DBS, telco cable), and they're pushing the cost through to their subscribers.  Until recently, these have been buried in the basic subscription fees along with the other programming costs.  The cost of sports channels can reach 50% of all programming costs to multichannel providers. However, recently, major providers like Cablevision, Time Warner cable, DirectTV, and Verizon FiOs are adding monthly surcharges for sports.

  Of course, skyrocketing sports rights aren't the only thing driving multichannel subscription prices higher.  A SNL Kagan study identified two other factors - the fact that broadcast stations are now getting real money for retransmission fees, and the explosion of channels now carried by digital providers.
  The surcharges and rising fees are driving another round of calls for mandating "a la carte" pricing from multichannels.  Which, while it sounds good, is actually very bad economics for subscribers as well as networks and multichannel providers (discussed briefly in this post).

Sources -  Cablevision to Inplement $2.98 Sports Surcharge, Multichannel
Rising fees for sports rights 'indispensable' and 'unsustainable', Sports Business News
BT ups ante against BSkyB with ESPN deal, The Telegraph
Kagan study outlines program cost drivers for MVPDsRBR.com
Changing the game: Outlook for the global sports market to 2015, Price Waterhouse Cooper white paper

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