Paying a ‘tax’ for sports, even if you don’t watch
Published 4:00 am Friday, December 16, 2011
Are you ready for some football?
You’re paying for it regardless.
Though “sports” never appears as a line item on a cable or satellite bill, American TV subscribers pay, on average, about $100 a year for sports programming — no matter how many games they watch. A sizable portion goes to the NFL, which dominates TV sports and which struck an extraordinary deal this week with major networks — $27 billion over nine years — that most likely means cable bills will rise again soon.
Those spiraling costs are fraying the formerly tight bonds between the creators and distributors of television. Cable channels like ESPN that carry games are charging cable and satellite operators more, and broadcast networks are now doing the same, demanding cash for their broadcast signals and using sports as leverage.
And higher fees are raising concerns across the industry that cable bills may be reaching the breaking point for some consumers who are short of money.
The NFL contracts announced this week “will surely enrich NFL owners and players just as much as it will impoverish all pay TV subscribers, particularly those who will never watch an NFL game,” said Matthew Polka, the president of the American Cable Association, which represents small cable operators. His group wants government officials to step in and make it harder for channel owners to demand higher fees for carriage and drop the channels when operators disagree.
Publicly expressing the private sentiments of others, Greg Maffei, the chief executive of Liberty Media, recently called the monthly cost of the media empire ESPN a “tax on every American household.”
Patrick Flynn personifies the consumer challenge. He and his wife, who pay Comcast $170 a month for television, Internet and a home phone in Beaverton, Ore., are keenly aware that part of their bill benefits the sports leagues that charge networks ever-increasing amounts for the TV rights to games. Save for one regional sports channel, he said, none of them are worth it.
“For the two or three games a year that our Washington Huskies are on ESPN, we can arrange for someone else to host the party,” he said.
But there are also millions of viewers like Russell Tibbits, of Dallas, who says, “If you eliminate sports channels from cable packages, I literally would not own a TV.”
Television and league executives argue that the vast majority of viewers not only want sports, but are, like Tibbits, willing to pay to watch a favorite team. On Sunday night, about 25 million people watched the New York Giants play the Dallas Cowboys on NBC — by far the highest-rated show on television for the night, more than tripling NBC’s average audience. ESPN, which broadcasts “Monday Night Football” and floods its week with football programming, is typically found by surveys to be the most valuable cable channel among subscribers.
But ESPN is also far costlier than any other channel, earning about $4.69 a month for each cable and satellite household in the United States, according to the research firm SNL Kagan. Next year the firm expects ESPN to cross the $5 a month threshold for the first time. On Thursday, ESPN announced its latest rights deal, one that extends through 2024 with the NCAA.
“Sports is hugely popular in America,” said Edwin Durso, an executive vice president for ESPN, “and I think the prices that we and others pay for programming clearly reflect that.”
To date, the cable industry’s slight concessions toward the rising costs of sports have not amounted to much. Time Warner Cable offers a cheaper, smaller bundle of channels that lacks ESPN, but few have signed up. Both Time Warner and Cablevision have refused to carry the NFL’s own network, citing the high cost — 81 cents a month, according to SNL Kagan — but they have been harshly criticized by sports fans for it.
Soon, though, there may be an Internet alternative — something that was heresy until recently. Distributors like Dish Network are talking to channel owners about creating virtual cable providers that would stream channels over the Internet instead of traditional cables. That would break up the bundle of channels that subscribers have grudgingly accepted for years and allow subscribers who don’t like sports to avoid paying for them.
Even if such online providers materialize, the leagues and the entrenched TV networks are now locked into lucrative contracts for the long term. Wednesday’s NFL agreement doesn’t expire until the end of the 2022 season, which Brian Rolapp, NFL Media’s chief operating officer, said was a “recognition that the world will change and we don’t know what it will look like.”
But the networks are betting that, no matter what television becomes, it will include a lot of football.