ANGELES — Last year, Americans collectively spent 31
billion hours watching sports on TV — a 40 percent
increase from a decade ago.
watched football, baseball, basketball, hockey, horse
racing, NASCAR, rowing, rugby, soccer and volleyball —
even Little League championships and poker games.
sports is the most valuable content on the planet,"
said Adam Ware, head of digital media at Tennis Channel.
distributors like DirecTV and Charter Communications
have written bigger and bigger checks for the rights to
carry sports channels — fortifying a business model in
which cable and satellite TV subscribers, and
advertisers, underwrite the costs.
have become the glue holding the pay-TV bundle together.
While internet streaming options including Netflix, Hulu
and Amazon.com offer thousands of hours of scripted
shows, there is little in the way of live sports. So
sports fans remain tethered to their cable bundle.
heading into 2017, it could be a new ball game. The
cable business model that sports channels helped build
is under siege. Pay-TV companies are balking at paying
higher rights fees, fueling the kind of standoff that,
for example, has kept thousands of fans from watching
the Los Angeles Dodgers’ channel.
penetration peaked in 2009, and declines in the number
of households that subscribe to a satellite or cable TV
service have accelerated. Since 2010, basic cable
channels, including ESPN, TNT and Discovery, have lost
more than 8 million subscribers.
are weary of never-ending increases in their monthly
pay-TV bills, which have been partly fueled by rising
sports costs. And unlike years ago, they have cheaper
year, there are more entertainment options for people to
fill their leisure time," said Dennis Deninger, a
former ESPN production executive who now teaches sports
communications at Syracuse University.
sports channels retain considerable leverage. Sports
programming generates $30 billion a year in revenue for
TV companies, according to Barclay’s Capital. Big
games grab the highest ratings. Last month, Fox
Broadcasting scored 40 million viewers for the final
World Series game. And fans tend to watch sports
programs live, rather than fast-forwarding through the
ads, which allows networks to charge a premium for the
have rabid fan bases, and they have generations of loyal
fans," Ware said. "These are all the
ingredients that make for hit TV."
and cable TV executives teed up more than 127,000 hours
of sports programming last year, according to audience
measurement firm Nielsen. That represents a 160 percent
increase compared with 2005.
major beneficiaries have been sports leagues and teams,
which are expected to rake in an estimated $18.9 billion
in media rights fees next year from TV, radio and
internet outlets, according to a recent PwC report on
NFL alone collects nearly $7.5 billion a year from media
companies, including nearly $1.9 billion a year from
Walt Disney Co.’s ESPN for "Monday Night
Football" and other football extras. The NFL reaps
$1.5 billion a year from DirecTV for its Sunday Ticket
package and roughly $3.7 billion a year from NBC, CBS
a long way from the first national TV sports contract,
which was struck in 1960 between the ABC network and the
American Football League.
year, ABC agreed to pay $8.5 million over five years to
televise weekly games and championships, said Deninger,
who wrote "Sports on Television: The How and Why
Behind What You See." The rival NFL then "saw
the wisdom of doing a national television contract to
replace the 12 regional television deals that each of
the NFL owners had," he said.
lucrative business model was born. But the game-changer
was Rupert Murdoch’s upstart Fox Broadcasting’s
gambit in 1993 for television rights for Sunday
afternoon NFL games. Though TV broadcasters were losing
money on the NFL, the network behind "The Simpsons"
and "Married with Children" was desperate for
credibility and a program that could bolster its TV
stations. Fox bid a staggering $395 million a year —
$100 million more than CBS had offered.
when the rights fees started to soar into the
stratosphere," Deninger said.
football put Fox on the map. Affiliate TV stations
flipped their alliances to Fox. A few years later, when
the rights package was up again, CBS swallowed another
huge increase, dislodging NBC, and the race was on.
Fox pays $1.1 billion a year for pro football, and CBS
pays $1.4 billion for its Sunday afternoon and Thursday
night games. NBC’s total is nearly $1.2 billion. The
broadcast networks are demanding higher fees from pay-TV
operators to carry their station signals, in part, to
help cover their football costs.
rising cost of sports is a major reason for the higher
cable bills. Sports now make up about 40 percent of
programming costs paid by cable and satellite TV
operators. For example, ESPN costs an average $7.20 a
month, per subscriber home, and a channel like SportsNet
LA has been offered for about $4.50 a month, per
subscriber home, according to consulting firm SNL Kagan.
The NFL Network costs pay-TV companies $1.39 a month per
subscriber — nearly twice the fee of such popular
channels as Nickelodeon or CNN.
Kagan estimates that pay-TV customers next year will
chip in an average $18.37 a month for sports, up from
$2.85 a month in 2001.
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behind the soaring costs? One contributor is the
proliferation of regional sports channels. In 1990, SNL
Kagan tracked 25 regional sports networks around the
country but, by last year, the roster had swelled to 50.
The net effect is that consumers are paying
substantially more to watch many of the same teams.
have the same amount of sports rights as you did
before," said Adam Gajo, sports analyst with SNL
Kagan. "It’s really the number of networks
entering cable packages that are making the costs go up.
It’s five networks now, not just two, and the new
networks debuted at higher price points."
land grab for sports channels began accelerating a
decade ago. Existing TV rights deals were expiring and
pay-TV distributors including Time Warner Cable, Comcast
and DirecTV wanted in. They had been watching as teams,
such as the New York Yankees, were pulling in sizable
audiences with their own channels.
sports channels seemed like a sure bet.
logic paid off for Spectrum SportsNet, the four-year-old
cable network that televises Los Angeles Lakers games.
Time Warner Cable nabbed the rights to the Lakers in
2011 after a fierce bidding war. Fox Sports also was in
the hunt but Time Warner Cable offered more: a $3
billion, 20-year deal with the Lakers. That represented
a 400 percent increase in fees over what Fox Sports had
been paying for Lakers games.
up to bat was the Dodgers. The new owner of the team,
Guggenheim Baseball Management, wanted its own channel.
Fox again was in the running, but Time Warner Cable in
2013 clinched the deal by agreeing to pay the Dodgers
$8.35 billion over 25 years — a 1,100 percent increase
in fees, according to one estimate.
Dodgers channel, SportsNet LA, launched in 2014 but
quickly sputtered. The dispute between DirecTV, Cox
Communications and others and Time Warner Cable
attracted the attention of federal prosecutors. Last
month, the U.S. Department of Justice sued DirecTV, now
owned by AT&T, alleging that it colluded with other
distributors to block the channel’s distribution.
LA isn’t the only channel lobbying for greater
distribution. The Pac-12 TV Networks, which include a
channel that features UCLA and USC games, won carriage
on all of the major systems — Spectrum, AT&T
U-Verse, Cox Communications and Dish Networks — except
have broken out in other areas: A regional sports
channel in Houston that carried Astros and Rockets
games, previously backed by cable giant Comcast Corp.,
filed for bankruptcy two years ago after other pay-TV
distributors refused to carry it because of its price.
AT&T and DirecTV then bought the channel out of
early this year, Comcast dropped the Yankees channel,
YES, which is most expensive regional sports channel in
the nation. Comcast complained that only a fraction of
customers that it serves in northern New Jersey and
Connecticut were watching YES.
are other signs of strain. The NFL is grappling with
falling ratings this year. The audience decline has
prompted some to wonder whether the NFL has tried to
slice the product too finely. But most analysts expect
the NFL will fetch a lofty sum for the mobile phone
streaming rights when the current pact with Verizon
expires in 2018.
is going to repeat itself: It used to be that sports
were on broadcast TV channels, then cable channels found
a nice business," said Ware of the Tennis Channel.
"And now you will see sports moving to digital
this month, CBS scored a big win by clinching digital
streaming rights for NFL games. The network had been
angling for more than two years for permission to stream
the games that air on CBS to subscribers of its
$5.99-a-month digital All Access service. But the league
had been holding back, instead flirting with new media
players Yahoo and Twitter.
NFL ultimately granted the coveted rights to its 50-year
broadcast partner at a time when tech giants have been
sniffing around. Retail giant Amazon.com, which operates
the Prime Video streaming service, is on the hunt for
rights from channels and niche sporting leagues in an
effort to create a sports channel package that it could
is spending nearly $1 billion for a minority stake in
the streaming company BAMTech, which has the technology
to deliver high-quality video streams. ESPN is expected
to join Tennis Channel, CBS and several sports leagues,
including Major League Baseball, in marketing its
product directly to consumers.
digital offerings could be alluring to sports fans
because they already have an affinity for their favorite
teams and channels. Digital media also can be
personalized to build stronger relationships, keeping
customers on their phones and tablets longer.
don’t have to be a broadcast network anymore,"
Deninger said. "If you have money, and a way to
distribute programming, then you too can be a player.
And that’s what the leagues want — more players
because that means even higher fees."