[opendtv] Bloomberg Businessweek: The Longshot Dream of a Cable-TV 'Mini Bundle' Devoted to Sports
- From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 19 Nov 2014 03:17:56 +0000
This article sounds a bit like Craig to me. Telling quotes:
"It's a change of tune for the industry. For years, the makers and sellers of
cable-TV bundles have scoffed at the notion of a subscriber peak-and some still
do. But the numbers show a trend line that looked suspiciously peak-like back
in 2011"
"For now, the cable companies have been able to replace the lost revenue by
signing up more customers for Internet service and raising prices on their
remaining video subscribers."
"For [sports] programmers, this means billions in extra revenue from the
non-sports fans carried along for the ride."
The article downplays the likelihood of smaller bundles, dedicated more to
sports channels, because they think that the $50 such a mini bundle would have
to charge would not be all that attractive.
Nothing really new here, although the article makes a good case that this is a
death spiral. Surely, what the article describes is not a self-correcting
system, right? Quoting again,
"But the breaking point for escalating rights fees may not be far off,
especially if the network distribution numbers drop."
So, no one is explaining the fix. Just keep increasing the prices, in spite of
the two graphs they showed, in spite of the reason why people are cutting and
shaving the cord. It's almost humorous.
Bert
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http://www.businessweek.com/articles/2014-11-12/why-cable-tv-mini-bundle-for-sports-would-be-expensive-and-unlikely
The Longshot Dream of a Cable-TV 'Mini Bundle' Devoted to Sports
By Ira Boudway November 12, 2014
Television executives have concluded that ever-expanding channel lineups are
incompatible with cable-TV subscriber growth. A panel discussion in New York
last week hosted by Sports Business Journal neatly captured the new consensus
around what Fox Networks President Randy Freer termed the "fraying bundle."
It's a change of tune for the industry. For years, the makers and sellers of
cable-TV bundles have scoffed at the notion of a subscriber peak-and some still
do. But the numbers show a trend line that looked suspiciously peak-like back
in 2011:
[Two graphs, both negative-trending, but cord shavers far more negative than
cord cutters.]
For now, the cable companies have been able to replace the lost revenue by
signing up more customers for Internet service and raising prices on their
remaining video subscribers. No one seems to know exactly what comes next, but
one candidate is the miniature bundle: fewer channels at a lower price.
"Mini-packs are key to bringing in a viewer that never was going to buy cable,"
Turner Broadcasting (TWX) President David Levy said at the Sports Business
Journal panel. "We're making sure that we are in those mini-packs. Sports
certainly helps drive that."
The conventional wisdom is that sports are the glue holding together more than
100 channels in the traditional cable-TV big bundle. A recent Harris
Interactive Poll found 43 percent of U.S. adults naming live sports as the
reason they won't cancel cable. The business model now is to use those
consumers to make sure carriers keep sports in their bundles. For programmers,
this means billions in extra revenue from the non-sports fans carried along for
the ride.
But what if it worked the other way round? Sports bundles for sports fans and
everything-else bundles for everybody else. What would a sports mini-bundle
look like? And what might it cost?
Let's say that the average U.S. sports fan would be satisfied with the four
major networks (ABC, CBS, Fox, and NBC) plus these 13 sports-oriented cable
channels: ESPN, ESPN2, Fox Sports 1, TNT, TBS, NFL Network, MLB Network, NBA
TV, NBCSN, NHL Network, Big Ten Network, Pac-12 Network, and the SEC Network.
In the current media rights landscape, that would supply most national
broadcasts of the four major U.S. sports leagues, plus plenty of soccer and
college sports.
According to data from SNL Kagan, those 13 channels charge cable carriers a
combined $12.91 per subscriber per month in affiliate fees. The fees range from
$6.04 for ESPN to 25¢ or less for MLB Network and the Pac-12 Network. Throw in
the four networks at roughly $2 per month in retransmission fees, and you have
a bundle that supplies $20.91 in monthly fees. Given the current cable industry
average of $88.20 in monthly revenue per video subscriber, $20.91 per month
would seem an attractive option for the 43 percent of consumers who are keeping
their cable only for sports.
If 43 percent of the 99.4 million cable-TV subscribers in the U.S. bought such
a package, that would be 42.7 million subscribers-a big drop in distribution
for the sports networks, most of which are in more than 80 million homes. To
make up for the lost revenue, programmers would need to at least double the per
subscriber cost, and that doesn't account for labor and other expenses for the
carriers. To keep the current margins, the dream cable sports bundle would
probably have to cost closer to $50 per month, a much less attractive
proposition.
And then there's the problem of advertising revenue. Decreased distribution
doesn't necessarily mean decreased viewership, but programmers would probably
lose at least some of the premium they now get from advertisers for sports
content. According to data from Kantar Media, a 30-second spot during a prime
time NBA game broadcast nationwide costs three times as much per viewer as the
same slot on a nonsports program. Even with that premium, many programmers are
not recouping the money they pay to secure sports media rights.
Programmers put up with these losses, in part, because the reliably large
audiences for sports allow them to promote their networks and other shows.
(Hey, look, it's the star of our new sitcom sitting in the crowd.) But the
breaking point for escalating rights fees may not be far off, especially if the
network distribution numbers drop. While the honchos at the Sports Business
Journal panel expressed confidence that the fraying bundle won't cost them,
it's hard to see how somebody-leagues, programmers, or carriers-doesn't lose
out on mini-bundles, unless they can persuade customers to pay fat bundle
prices.
That's why details are in much shorter supply than confidence.
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