Why are sports leagues so eager to return to action, even if fans must be barred from watching in person?
LOL, are you new here? It is to protect a revenue source that drives the biggest portion of the business of big-time sports: media.
But the unprecedented disruption in the sports calendar since mid-March has created unprecedented disruptions to the intricate food chain that drives that part of the business. That, in turn, has led to many thorny questions.
Let us try to ask and answer some of them here, shall we?
Q: Why has my cable/satellite/telecom provider not offered a discount on my monthly bill in the absence of live sports?
A: Ah, yes. This is the big one, representing the point on Media Mountain where the revenue stream begins its long, meandering path to an open ocean of money, where it empties into the buckets of owners and players.
The answer largely is that discounts have not been offered because the pay TV providers have not felt compelled to offer them.
That will come when consumers – or their representatives in the form of district attorneys and other such authority figures – exert enough pressure for this to occur.
Unlike other links in the sports media food chain, this one is not entangled in long-term contractual relationships.
If you want to cancel, you may cancel. If you want to downgrade to a plan with fewer expensive sports channels, you may do so. If you want to switch providers, feel free.
It often is not that simple, though. Everyone needs a good internet connection these days, and that service often is provided more affordably as a package deal with video content.
Also, the evil genius of the traditional cable TV bundle is that getting rid of some channels you can do without means getting rid of other channels you cannot do without.
But still: Cord-cutting was an existential threat to the traditional bundle before anyone had heard of COVID-19, and now that threat is accelerating.
Before COVID-19, non-fans were left wondering why they were paying for national and local sports channels that are – by a wide margin – the most expensive part of a typical monthly bill. Now even sports fans are wondering about that.
Hence the existence of streaming services such as ESPN+, in preparation for a day without cable bundles at all.
Anyway, back to the immediate situation: No, you are not getting what you are paying for on your monthly bill.
ESPN’s “The Last Dance” series was as big an event as a sports documentary can be, but the business is built on live sports – period. Studio shows and documentaries are fine, but in business terms, they are footnotes.
Q: Don’t pay TV providers have their own bills to pay to the likes of ESPN, ESPN2, ESPNU, Golf Channel, NFL Network, MLB Network, NHL Network, NBA TV, NBC Sports Network, CBS Sports Network, TNT, TBS, Big Ten Network, SEC Network, ACC Network, FS1, FS2, YES, SNY and MSG?
A: They do. Thus providers have said in recent weeks that their refunding hands are tied as long as they do not get relief from programmers. Altice USA said this when asked about giving rebates to Optimum subscribers:
“We don’t want customers to have to pay for content they aren’t receiving. However, sports programmers continue to charge Altice and our customers the same rates. We have contacted the relevant networks to request relief for our customers and are closely monitoring the situation.”
The difference between your relationship with Altice and Altice’s relationship with ESPN is that the latter is governed by contractual language that means that eventually the cable providers will be made whole.
The key word is “eventually.”
Sports Business Journal reported that ESPN’s contracts typically require a certain number of hours of premium sports content to be provided over the course of 12 months, with another six months’ grace period after that to reach those benchmarks.
Meanwhile, local channels such as YES and SNY must deliver a certain number of games, but at the moment no one knows exactly how many games will be played – and when.
So it is true that in the short term, cable/satellite/telecom operators are paying for content they are not getting from programmers just as you are paying for content you are not getting from providers.
One other thing about the traditional cable bundle that is a common misconception: It is not your cable company that most wants this system perpetuated.
Most pay TV providers would be happy to move expensive live sports onto a separate tier rather than force your Aunt Tilley in Riverhead who lives alone and does not care about sports to pay for them.
It is the national and local sports channels that benefit most from the system. It is what ESPN’s empire largely was built on. Non-sports fans have been subsidizing sports fans’ TV enjoyment for decades.
In a market such as New York, with four regional sports networks in addition to national outlets, total costs for sports channels add up quickly. Putting an exact dollar amount on it is difficult because of differences in plans and other bookkeeping nuances, but figure around $40 per month.
But lately non-sports fans have caught on, and the old system has begun to crumble. Everyone in the media business has understood for years that live sports was the biggest thing holding the old system together, and for now there are almost no live sports to show.
Sure, advertising adds to the programmers’ revenue, but it is a far smaller piece of the money puzzle than monthly subscription fees are.
Q: ESPN, other national networks and local sports channels all have bills to pay, too, don’t they? What about the money they still are shelling out to leagues and teams that are not currently playing?
Again, a fair point. But again, those relationships are covered by contracts written by smart lawyers.
Leagues and teams are required to deliver a certain amount of live content, and if they do not, refunds or make-goods of some sort will be in order – eventually.
This is one reason leagues have been reluctant to call games “cancelled” rather than merely “postponed.” Why admit games never will be played until it becomes absolutely necessary to do so?
(In England, soccer powers already are planning to repay many millions of dollars to media outlets for games not played.)
There is a complication in this link of the food chain: In some cases, teams own big pieces of local sports channels, such as the Yankees with the YES Network and (even more so) the Mets with SNY.
But the Yankees cannot simply say to YES: Hey, don’t worry about paying those rights fees, it’s all going into the same pockets anyway.
It does not work that way. For one thing, YES has ownership interests other than the Yankees, including Amazon and Sinclair Broadcast Group.
No matter how closely associated some teams and channels are, they are not the same companies.
Q: OK, so if EVENTUALLY, Altice, Verizon and DirecTV get a break from ESPN and YES and EVENTUALLY ESPN and YES get a break from MLB and the Yankees, doesn’t that mean that EVENTUALLY there will be less money in the pockets of owners and players?
In theory, it does, yes.
In a world in which fewer consumers pay for sports media there will be fewer dollars to go around, and the financial whales at the end of the food chain will go (relatively) hungry and the entire industry will shrink.
For this year, that already is an unavoidable outcome. Baseball players agreed to have their salaries pro-rated for a shortened season, even though there is much haggling to come to account for playing in empty stadiums.
But if the current crisis accelerates the cord-cutting movement, there is no guarantee streaming and pay-per-view models will make up the difference even when sports returns to relative normalcy.
Then again, people have been predicting incorrectly for decades that rights fees are unsustainable and a shrinking of the sports TV business is inevitable.
So far, the opposite has been the case historically. But has that long-predicted “someday” finally arrived? As they say in the TV business, stay tuned.