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Cable pioneer John Malone says sports costs are out of control

November 19, 2012|By Joe Flint
  • Cable mogul John Malone thinks the cost of sports programming is out of bounds.
Cable mogul John Malone thinks the cost of sports programming is out of bounds. (Bloomberg )

Add cable industry pioneer and Liberty Media Chairman John Malone to the growing list of people who think sports programming costs are out of control.

"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," Malone said in an interview. "The consumer is really getting squeezed, as is the cable operator."

Indeed, by some industry estimates sports programming now accounts for about half of the typical pay-television bill.

Malone, who has been an operator of cable systems and a programmer in his long career, said "the control of sports rights by a few entities has almost created a redistribution of wealth." The entities he was referring to include News Corp., which owns 20 regional sports networks (RSNs) and is launching a national service; Walt Disney Co., which owns the ESPN juggernaut; Time Warner, whose cable channels TBS and TNT carry baseball and basketball, respectively; and Comcast, which also owns almost a dozen RSNs.

The price of sports is only going to get higher. News Corp.'s Fox Sports is near a deal to acquire a 49% stake in the New York Yankees cable channel YES for more than $1 billion and will look to recoup that investment by increasing subscriber fees. Time Warner Cable just launched its own pricey RSN in Los Angeles and spent billions for Lakers rights and may end up in a bidding war with Fox Sports for the rights to the Dodgers.

Competition between these media giants, Malone said, is "creating quite a bit of distortion in the valuation of sports rights."

Long known for his resistance to government rules and regulations, even Malone thinks it might be time for the Federal Communications Commission or Congress to step in.

"The only way it is going to change in the short run is for government to intervene," he said. One solution, Malone said, is that more expensive services such as ESPN or RSNs be offered to consumers on an a la carte basis. ESPN, according to consulting firm SNL Kagan, costs more than $5.00 per subscriber, per month. RSNs are also very expensive. SNL Kagan said Comcast's SportsNet in Washington, D.C., costs more than $4.00 per month, per subscriber.

Ultimately though, Malone thinks technology, not government, will solve the problem. As more platforms such as Netflix and Hulu emerge and increase the quality of their content, consumers will have options beyond the current pay TV system in which large programmers bundle their content together into a one-size-fits-all package.

"People will watch and pay for what they want, it is kind of inevitable," he said. "I can’t forecast the future but usually markets have a way of correcting themselves."

ALSO:

News Corp. in talks to acquire stake in YES

Dodgers a factor in negotiation for Lakers channel

Baseball hits it out of park with new television deals

Follow Joe Flint on Twitter @JBFlint.

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