Advertisement
 
YOU ARE HERE: LAT HomeCollectionsBusiness

Rising sports programming costs could have consumers crying foul

Nearly half of the monthly cable or satellite bill goes to sports channels. Escalating prices are triggering worries that subscribers will start walking away.

December 01, 2012|By Joe Flint and Meg James, Los Angeles Times
  • The new Dodger owners -- from left, Peter Guber, Stan Kasten, Mark Walter and Earvin "Magic" Johnson, are expected to get $6 billion-plus for the TV rights to their team’s games.
The new Dodger owners -- from left, Peter Guber, Stan Kasten, Mark Walter… (Robert Gauthier, Los Angeles…)

The new owners of the Dodgers are expected to get $6-billion-plus for the TV rights to their team's games.

That may be a big win for the home team, but consumers won't be doing high-fives once they see their pay-TV bills.

The average household already spends about $90 a month for cable or satellite TV, and nearly half of that amount pays for the sports channels packaged into most services. Massive deals for marquee sports franchises like the Dodgers and Lakers are driving those costs even higher. Over the next three years, monthly cable and satellite bills are expected to rise an average of nearly 40%, to $125, according to the market research company NPD Group.

So far, people seem willing to pay. But the escalating costs are triggering worries that, at some point, consumers will begin ditching their cable and satellite subscriptions.

"We've got runaway sports rights, runaway sports salaries and what is essentially a high tax on a lot of households that don't have a lot of interest in sports," said John Malone, the cable industry pioneer and chairman of Liberty Media. "The consumer is really getting squeezed, as is the cable operator."

A key concern is that the higher bills driven by sports are being shouldered by subscribers whether they watch sports or not. National and local sports networks typically require cable and satellite companies to make their channels available to all customers.

"I pay $98 a month for cable and half of that is for sports?" said Vincent Castellanos, 51, a fashion stylist who lives in Los Feliz. "I've never once gone to a single sports channel. I wasn't even aware I was paying for it. I want my money back. Who do I call?"

Cable TV and satellite providers have long paid a premium for national sports channels such as ESPN. Now they are increasingly paying higher fees to the regional sports networks that carry local football, basketball, baseball, hockey and soccer games.

For many years, Los Angeles had just two regional sports networks — Fox Sports West and Prime Ticket, both owned by News Corp. They shared rights to the Dodgers, Angels, Lakers, Clippers and Kings.

Then Time Warner Cable entered the fray, followed by Pac-12 Networks — the Pac-12 Conference's sports service, which includes one channel devoted to USC and UCLA and another channel that focuses on the entire conference.

Time Warner Cable agreed to pay more than $3 billion last year for a long-term deal to take the Lakers rights away from Fox Sports West and launch its own sports channels. Now Fox Sports is preparing to spend at least $6 billion to keep the Dodgers on Prime Ticket. The Dodger and Laker deals could end up adding more than $10 a month to existing pay-TV bills in the region, according to industry analysts.

The competition has spawned turf wars for sports rights among big media companies both nationally and locally. NBC and CBS have launched their own national sports networks to compete with ESPN. Fox is expected to follow suit next year.

"There are not new pro and college games being created," said Dan York, an executive vice president of satellite broadcaster DirecTV. "You are getting the same product being reshuffled into smaller slices at higher prices. That's not a model consumers can continue to support."

Cox Cable executive Bob Wilson estimated that sports account for more than 50% of the bill for the provider's Southern California subscribers even though just 15% to 20% are regular watchers. "That relationship is getting way out of whack," he said.

For the sports leagues and teams, this is found money. When an investors group led by Chicago-based Guggenheim Partners paid $2.15 billion to buy the Dodgers from Frank McCourt last spring, many sports business analysts thought the buyers had wildly overpaid.

Guggenheim was betting that either Fox Sports or Time Warner Cable would spend big for the team. That gambit will probably pay off, as Fox Sports is trying to wrap up a deal this week to keep the team on its Prime Ticket channel, according to people close to the situation.

Under the current contract expiring at the end of next season, Fox's Prime Ticket will pay $39 million for the 2013 TV rights to the Dodgers. In 2014, that price tag would more than double — and continue to escalate for the next two decades. A Fox Sports spokesman declined to comment.

Sports costs are also rising because this programming is considered "DVR proof" — consumed live by viewers, and thus more valuable to advertisers and networks. Increasingly, consumers are opting to record other types of shows to watch later, and then fast-forwarding through the commercials.

"Sports are foolproof when it comes to ratings," said Charles Bergmann, associate director of Mindshare, a prominent advertising buying firm. "Sports fans can't wait to watch a game; they want to know the outcome. And that's not traditionally the case with most prime-time shows."

Advertisement
Los Angeles Times Articles
|
|
|