Sports worry cable guys

Fees to sports channels 'out of whack'

Los Angeles TimesDecember 29, 2012 

The new owners of the Los Angeles 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 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 are driving those costs even higher. In the next three years, monthly cable and satellite bills are expected to rise an average of nearly 40 percent, to $125, according to 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, a cable industry pioneer and chairman of Liberty Media. "The consumer is really getting squeezed, as is the cable operator."

A key concern is 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.

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.

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 sports account for more than 50 percent of the bill for the provider's Southern California subscribers, even though just 15 percent to 20 percent are regular watchers.

"That relationship is getting way out of whack," he said.

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.

The idea of offering channels on an "a la carte" basis, though, used to be sacrilege to the industry. Executives argued it would not lower prices because networks would just charge more to make up for the loss of subscribers.

But now some cable and satellite operators think it's time to go down that road with sports.

"I wish Time Warner Cable would give me the option to offer SportsNet as a choice for my customers," said David Shull, senior vice president of Dish Network. "I would do that deal in a heartbeat."

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