Don’t buy ESPN’s PR talk that its 7 million-household dip in subscribers is just a blip.
When ESPN was adding subscribers, the $6.50 per-month-per-subscriber it charges to every cable operator meant $78 of additional annual profit for each new subscriber.
7,000,000 * $78 = $546,000,000
Yeah, that's definitely not a blip.
The reason this affects sports leagues is because a huge chunk of their revenue comes from TV.
ESPN pays the NFL nearly $2B per year[1] just for Monday Night Football - or roughly 16 games a year. That's more than $100mm per game.
It's becoming pretty clear that ESPN isn't going to be able to afford TV rights deals like that for much longer. Which means the NFL is going to have to find someone else (there is no one else) or reduce its prices. When the sports league revenue drops, collective bargaining agreements will be disrupted and the result will be labor unrest and (potentially) team bankruptcy.
It's going to be entertaining to watch the entire industry implode before our eyes. When it's all over, we'll be able to enjoy sports as they should be - any game, streaming for a reasonable price, no blackout dates or other restrictions.
It's a shame an entire industry has to collapse to get a good user experience.
> Which means the NFL is going to have to find someone else (there is no one else)
Except NBC, CBS, FOX, Yahoo (hah), and the NFL itself via NFL Network, all of which already have contracts with the NFL which are worth more combined than ESPN's. For the NFL, having ESPN drop out would probably be a blip.
NBC, CBS, and FOX are all as reliant on cable subscription revenues to pay for their NFL contracts as ESPN.
ESPN isn't losing subs because people are calling their cable companies and saying "I don't want ESPN". They're losing subs because people are cutting the cord.
Without knowledge of NBC/CBS/Fox's internal balance sheets, this seems unlikely.
1. The sports networks these companies have launched are all fledgling and receive a miniscule subscriber fee relative to ESPN.
2. All 3 broadcast their games over the air. Cordcutters undercutting (ugh) ESPN's ability to bid too much on NFL rights might bring down the price for NFL games a little bit, but there's still going to be plenty of demand not tied to cable subscriptions.
Without knowledge of NBC/CBS/Fox's internal balance sheets, this seems unlikely.
I'll concede that I don't know them any better than anyone else speculating on the matter, but I know for sure that all three networks get a per subscriber fee from cable companies like any other channel on cable.
The NFL has 15-16 games per week. Of those, 4 or 5 are on the local broadcast (three or four on CBS and FOX, one on NBC in the evening). If you want to access the other 11 games, you're reliant on cable-based access.
And the NFL is a unique animal here. MLB, NBA, and NHL are all completely reliant on cable-based delivery methods.
The sports networks these companies have launched are all fledgling and receive a miniscule subscriber fee relative to ESPN.
Fox Sports is not fledgling. They've been number 2 to ESPN for most of their history, and a huge number of NBA and MLB games are broadcast on Fox Sports.
Sports as an industry clearly needs cable subscriptions to support its current business model. And those cable subscriptions are reliant on people that don't watch sports paying for them anyway.
Eventually the sports industry is going to be forced, one way or another, to deliver a better user experience, and it's highly questionable whether or not they'll be able to generate the same revenue without the support of non fans that cable brings.
The NFL has 15-16 games per week. Of those, 4 or 5 are on the local broadcast (three or four on CBS and FOX, one on NBC in the evening). If you want to access the other 11 games, you're reliant on cable-based access.
True, but you still have to pay the Sunday Ticket Premium of 300.00 or whatever it is now for the year. DirecTv paid 12b for it last time the contract was up, and my guess is they don't fully recoup in that in the Premium (part of the value is that it's DirecTv exlcusive). Whether the NFL can make as much selling the package (or a different one) a la carte is impossible to say.
Fox Sports is not fledgling. They've been number 2 to ESPN for most of their history, and a huge number of NBA and MLB games are broadcast on Fox Sports.
Fox Sports (and FSN aren't) but FS1, the non regional Fox network with the highest subscriber fee, is.
But I think I agree with you on a broad level that the sports other than football are going to have to rebuild their revenue structures (probably via direct access streaming) before the cable complex completely collapses. Football is largely, but not completeley insulated.
> For the NFL, having ESPN drop out would probably be a blip.
Perhaps, but worth noting that when NHL ended their relationship with ESPN business suffered.
While NFL is much larger, w/ greater and more diverse revenues, NHL suffered all sorts of unintended consequences, like reduced exposure when ESPN deprioritized hockey highlight packages.
The NHL isn't the greatest example (they left ESPN the same year they also skipped a season with a lockout to implement a hard salary cap), but it's the best of the major leagues.
* They had a small national contract with NBC and showed top games on OLN, a tiny cable sports network that mostly showed fishing.
* OLN became Versus, which later became NBCSN (after Comcast & NBC-Universal merged). NBC airs the higher-profile games (many playoff games, marquee weekend matchups, and most outdoor games), so cable ratings will be a bit lower as a result.
* Looking at the ratings for the final round, they're up more than 100% over the current period (2007 averaged a 1.2 rating, while last year's final scored a 3.2 rating; these ratings fluctuate greatly based on the teams taking part).
The NHL is interesting, since the hard cap puts them in a position to be able to slowly ratchet down without putting as much pressure on teams. On top of that, hockey has always been more gate-driven than TV-revenue-driven, so as long as attendance figures stay high, they'll be OK.
That's completely backwards, ESPN dropped the NHL. NBC picked up NHL rights for next to nothing and did a good job growing the package into a compelling brand, which resulted in them paying a good bit more (yet still less than the other 3) for the rights.
When ESPN was adding subscribers, the $6.50 per-month-per-subscriber it charges to every cable operator meant $78 of additional annual profit for each new subscriber.
7,000,000 * $78 = $546,000,000
Yeah, that's definitely not a blip.
The reason this affects sports leagues is because a huge chunk of their revenue comes from TV.
ESPN pays the NFL nearly $2B per year[1] just for Monday Night Football - or roughly 16 games a year. That's more than $100mm per game.
It's becoming pretty clear that ESPN isn't going to be able to afford TV rights deals like that for much longer. Which means the NFL is going to have to find someone else (there is no one else) or reduce its prices. When the sports league revenue drops, collective bargaining agreements will be disrupted and the result will be labor unrest and (potentially) team bankruptcy.
It's going to be entertaining to watch the entire industry implode before our eyes. When it's all over, we'll be able to enjoy sports as they should be - any game, streaming for a reasonable price, no blackout dates or other restrictions.
It's a shame an entire industry has to collapse to get a good user experience.
[1]http://www.nytimes.com/2011/09/09/sports/football/espn-exten...