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Sharing article on sports costs

Discussion in 'DIRECTV Programming' started by Satelliteracer, Jan 22, 2013.

  1. HinterXGames

    HinterXGames Godfather

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    Couldn't a problem with it be though if certain sports providers require a certain percentage of the providers customer base have it?
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    My understanding has been that's one of the biggest problems with ESPN, is they require a very high percentage of the customer base to have it (which means it would still have to be included in lower tier, lower cost packages, which still makes the costs of those packages higher than they otherwise would normally be).
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    I hope that makes sense.
     
  2. tonyd79

    tonyd79 Hall Of Fame

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    Yes. Espn does that not only for the revenue from the provider but also to claim households when they sell advertising. It even plays a part in the obtaining product from leagues, etc, who want maximum exposure for their brand.

    The drive to put a channel on the lowest tier possible is not trivial. And pushing it to a higher tier is not usually easy.
     
  3. Ira Lacher

    Ira Lacher Icon

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    Sports programming is a little like group insurance -- the more people in the risk pool, the cheaper the premiums for everyone. But when you start to cull out segments, the cost rises astronomically.

    To have sports programming only for those who want it, you'd be looking at triple-figure subscriber prices, easily.
     
  4. Justin23

    Justin23 Hall Of Fame

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    Dead. Horse. Beaten.
     
  5. mreposter

    mreposter Hall Of Fame

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    Yep, going some form of a la carte does have big risks. Imagine a niche channel that is currently getting 25 cents from all of Directv's subscribers because it's in the basic bundle. But separate it out and only 10% of the customers want it. To stay at the same revenue level they'd have to charge $2.50, which would cause even more people to drop it, further driving up the cost.

    Now do the math on a sports channel that's getting $3 or $4 a sub. Would 25-30% drop it? What if it's now $5-6 a month? What if 50-60% drop it?

    Don't get me wrong, I'm a proponent of some form of segmenting programming into smaller clusters or packages or limited a la carte, but any moves along this road would be highly disruptive.
     
  6. tonyd79

    tonyd79 Hall Of Fame

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    It is worse than that. If that channel is commercial driven, the money from advertising drops and they need to make that up.
     
  7. JoeTheDragon

    JoeTheDragon Hall Of Fame

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    what about stuff like Disney where they are dropping some ad's.

    D* and other should push back and say yet use sell disney as it's own channel or we will insert ad's with no hold backs other then adult ad's.
     
  8. lokar

    lokar Icon

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    That is just to maintain the current system, which is ridiculous and nearing a breaking point. Take TWC's $280 million a year channel for the Dodgers. If this channel and all RSNs were a la carte, there's no way they would spend that much money on the Dodgers because as you say they would have to charge triple digit subscriber fees and nobody would pay it. TWC would then have to charge whatever the market would bear for their Dodgers channel and their bid would be substantially lower, as would their competitors.

    End result: the Dodgers would have to get by on a lot less money and all LA non-sports subscribers would have more money. Sounds like a win-win.
     
  9. HGuardian

    HGuardian Godfather

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    Bingo. This current system is broke and we will see it in the next few years. This model can not and will not sustain itself.
     
  10. jmpfaff

    jmpfaff AllStar

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    Exactly. While I acknowledge the risks of a la carte, reality is that the RSN sports prices can only go up so much before people would dump them. (Also true of non-sports channels)

    And one happy story is unfolding here in Houston for those who want this to happen. With CSN-Houston only available on about 40% of TV households in Houston, they are seeing a major drop off in interest. Sports talk radio hears barely a mention of them. Simple fact is that the lack of TV coverage is costing them fan support.

    And I would encourage DirecTV to take a hard line with ALL content providers and refuse to let the content provider dictate the package selection. If they want to offer a discount for being in 80% of houses, for example, I have no issue with that. But they shouldn't be able to dictate that they are in the basic package vs the sports package vs premier.
     
  11. pdxBeav

    pdxBeav Godfather

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    I agree. One of the things that people completely miss here is that they assume if a programmer has only 20% of the viewers they previously had that they will charge 5x the previous cost in order to maintain the same revenue. This isn't how prices are set. The market determines how much the cost will be. Just because a company used to get XYZ in revenue doesn't mean they'll get XYZ in the future.

    I always side with cable/sat companies in carriage disputes.
     
  12. Cyber36

    Cyber36 Legend

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    Being the major sports fan I am, I'm still about to say enough's enough. In the grand scheme of life, it's just not that important anymore. Sure, these guys still need to make a living, but jeezus...........
     
  13. Mike Bertelson

    Mike Bertelson 6EQUJ5 WOW! Staff Member Super Moderator DBSTalk Club

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    All these networks want to be ESPN and I don’t think any service provider can afford to let that happen. There’s too many of them.

    It almost seems that RSNs are a completely different animal when it comes to programming. There are so many of them that it almost begs for an a la cart system because most people aren’t going to want to pay for channels outside their region. But, with a la cart the RSN may not make enough to keep the network afloat. Now you’re back to spreading the cost across all subs which almost nobody wants.

    I can see a situation where the whole dedicated sports network concept will collapse under its own weight.

    It’s even possible that Pac-12 or any other sports network may be the make or break negotiation for the future of league/conference/team based sports networks.

    Mike
     
  14. Satelliteracer

    Satelliteracer Hall Of Fame

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    The problem is, however, they have to back into their pricing so it's not a traditional model on what the market will bear.

    TWC goes out and agrees to pay the Doyers $7 billion for 25 years. They need to charge a price to the distributors that is going to (at the very least) cover that cost along with their own overhead costs associated with that deal (staff, production, etc, etc). So before a negotiation even starts, they know absolutely the price is going to be at least $5 (just using a number for illustrative purposes) even if that $5 is above what the market will bear...but they are tying that $5 to a minimum penetration which will yield the multiplier (like 3 million customers as an example).

    If they can't get that distribution, the math is pretty simple...the $5 becomes $10 if they get only 1.5 million distribution. It becomes $20 if the distribution is only 750K. So on and so forth. The problem is that these deals are done up front with teams, leagues, etc for really high numbers and they then go out and sell that back to the distributors and ultimately to you. They are reverse engineering what they need to get to based on what they promised up front and what the market will bear is seemingly an after thought. In my opinion.
     
  15. pdxBeav

    pdxBeav Godfather

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    I understand that, but at some point it won't work anymore. The price must be agreed on by the buyer and seller. At some point not enough people will pay for the channel and no matter how much they charge they won't break even.

    As an extreme example, let's say TWC payed the Dodgers 500 trillion dollars. How much would they need to charge the distributors to break even? I don't think there is any number that would work in this unrealistic scenario, but it shows that there is a limit to what works.

    And again, I'm not implying we are at that point yet, but there is a limit to how much they can charge.
     
  16. tonyd79

    tonyd79 Hall Of Fame

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    Deals like the Lakers and Dodgers deals are pushing us awfully close to the breaking point.

    What is odd is that Time Warner, as a cable company, should know better. There is no way they recoup their costs if they cannot sell the channels to systems outside their own. They saw how hard it was to sell the Lakers and, being on the other side, should know the economics better than, say, Fox Sports.

    This is a mad money grab. Get what we can while we still can. Don't worry about the next guy, screw him. Oh, the next guy might be us? Oh well. We got what we could.
     
  17. cforrest

    cforrest Icon

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    They'll be learning soon enough in NYC area when News Corp, now majority owner of YES Network, plays hardball with Time Warner for renewal. That deal reportedly expires in the 1st qtr of 2014 & you have to wonder if News Corp. uses Time Warner to set a new higher price point for the channel for future renewals with other MSOs.
     
  18. acostapimps

    acostapimps Hall Of Famer

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    It's funny how ESPN pokes fun about their own predictions of the Lakers before the season started, Saying that the Lakers would go to the NBA Finals and face Miami Heat, or going as far to say they'll win the championship, Fast forward to today of what they now think of the Lakers possibly not making the Playoffs, Point of the story if they can make wrong predictions who knows what else mistakes they made, Probably pricing and renegotiating, I just don't trust what's coming out of the horses mouth LOL.
     
  19. tonyd79

    tonyd79 Hall Of Fame

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    Very different parts of the company. The business side has made very few missteps.
     

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