Future of TV sports: Pay up or be blacked out – Chicago Tribune
When ESPN sneezes, the entire sports world shivers.
The largest force in the sports TV universe, ESPN has lost more than 11 million subscribers since 2011 and more than 4 million since last summer.
The cable giant — now in 88.78 million homes, according to Nielsen — has been dramatically affected by two factors: Viewers known as cord-cutters are shunning cable or satellite entirely and current subscribers are electing to decline ESPN in scaled-down packages operators offer known as “skinny bundles.”
Earlier this year, 56 percent of participants in a BTIG Research survey said they would dump ESPN to save $8 every month on their bill. Those numbers aren’t completely surprising, given that most people would prefer not to pay anything for a service. But it is a snapshot that has to concern ESPN and other sports channels regarding their fee structures.
Sports TV networks are already the most expensive on the cable and satellite menus. And if teams such as the Cubs go through with plans to create their own networks, fans will have to pay even more — or be blacked out from the majority of televised games.
The question is: How much more are you, the sports fan, willing to add to your monthly bill?
ESPN charges distributors a monthly fee of $7.21 per subscriber, and another 90 cents for ESPN2, according to SNL Kagen, an offering of S&P Global Market Intelligence. The cost for ESPN is up more than 120 percent from 2007, when it was $3.26 per subscriber.
For Chicago-area subscribers, CSN Chicago, the primary TV home for the Cubs, White Sox, Blackhawks and Bulls, is the next highest at $3.86 per month. No other channel, sports and otherwise, is even close. Fox News has a $1.41 monthly fee and CNN is at 71 cents.
There has been a backlash. Several major cable distributors have pushed back over rising sports TV costs that have risen in large part because of the ever-escalating rights fees the networks are paying to pro leagues and colleges.
The bottom line has caused networks to re-examine their options in the effort to bring more people, in the words of one executive, “back into the conversation.” The long-term ramifications could affect the Cubs’ expressed goal to start their own network in 2020.
What of Cubs?
The Cubs are monitoring the situation in Los Angeles with an eye on their future TV plans. The Dodgers TV network, now in its third season, still isn’t seen in nearly two-thirds of the market because operators don’t feel it is worth the $4 monthly fee to their consumers. That means most Los Angeles-area viewers are not getting to hear 88-year-old Vin Scully call his last games for the Dodgers.
Could a similar scenario occur in Chicago? Currently, cord-cutters still can see on average 75 games on WGN-9 and WLS-7, the largest free over-the-air offering in baseball. But that figures to change when the Cubs’ TV deals with those networks and CSN Chicago expire after the 2019 season.
If the Cubs do launch their own channel, moving all of their games to the network (with the exception of a handful of national games that air on Fox and ESPN), can they convince cable operators to add another $4-$5 per month to subscribers’ bills? Keep in mind expectations are that it will be essentially a one-team channel, leaving the fall and winter months largely devoid of any live game programming.
The Cubs are betting that the local passion for their team in Chicago is much higher than for the Dodgers in Los Angeles, and that fans will want their channel. But given what is happening in the marketplace, nothing is a sure thing.
“The Dodgers situation is a cautionary tale for everyone,” said Adam Gajo, a sports analyst for S&P Global Market Intelligence. “You can’t just say the dollar signs are here, let’s just go. You have to know that it is the right package for everyone.”
Live sports events long have been considered the geese that lay an infinite pile of golden eggs for cable and satellite providers, the irreplaceable programming for which viewers always will open their wallets. In turn, the rights fees for those events have continued to climb, bankrolling leagues and subsidizing the contracts of highly compensated athletes.
What happens when the people paying to watch those events — you, the sports fans — decide enough is enough? Does the whole house of cards start to wobble?
The decline in subscribers and the cord-cutting trend have produced several doom-and-gloom stories about the future of ESPN. The stories took on additional resonance when the network laid off 300 employees last year.
“We believe ESPN is in serious trouble. They spent far too heavily on long-term rights contracts, given the deteriorating state of the multichannel video bundle and accelerating shift of TV ad dollars to mobile,” said Richard Greenfield of BTIG Research.
ESPN President John Skipper counters that everything is fine at the headquarters in Bristol, Conn. He insists the recent turn of events has not surprised ESPN.
The network continues to dominate in all the key demographics, routinely producing the highest ratings on cable thanks to its strong portfolio of live sports.
“We think we still have a little swagger,” Skipper said.
Former ESPN President George Bodenheimer, who ran the network from 1998 to 2011, cautioned about using a short-term view to assess the situation.
“(When I took over), I remember vividly when we were having some ratings issues,” Bodenheimer said. “The thought in the industry was, ‘Well, gee, there’s nothing you can do. The audience is split with this new Internet product.’ We simply refused to accept that. We weren’t going to accept declining ratings.”
CSN President Phil Bedella and BTN President Mark Silverman say their networks have not seen similar erosion because of the strong bonds fans have for local teams. Nevertheless, they both are aware of the fast-moving seismic shifts in the business.
“We’re very aware and plotting a strategy,” Silverman said. “Does this continue? Will it accelerate? We have to be prepared for how this evolves.”
Indeed, these things do tend to run in cycles. However, it appears there are adjustments taking place within the market.
Gajo doesn’t believe the bubble has burst. He sees “a contraction.”
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