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Broadcast rights fees are going nuts. Are they sustainable?

Apr 11, 2012, 1:30 PM EDT

old TV

What has been driving the huge free agent deals we saw this past winter, the large contract extensions we’ve seen recently and the $2 billion sale price of the Los Angeles Dodgers?  Why, big-time increases in broadcast rights fees, that’s what.

Today at Variety our friend Jon Weisman takes a look at this phenomenon, what is behind it and asks whether it’s sustainable or, rather, if it’s a big bubble that could be popped via cable TV regulation or something.

It behooves you to read this if you care at all about the financial context in which baseball currently finds itself, as broadcast rights and the riches they are raining down on the game are the most important thing impacting it, by far.

  1. dowhatifeellike - Apr 11, 2012 at 1:58 PM

    It’s only sustainable as long as people can afford cable. A year’s subscription to mlb.tv premium is less than I pay for two months of cable.

    • winkandthegun - Apr 11, 2012 at 2:52 PM

      Except if you live anywhere close to your favorite team, you can’t watch them on mlb.tv. I’m 3+ hours from Wrigley and blacked out from Cubs games. All of Canada is blacked out of Blue Jays games, etc etc.

  2. bleedgreen - Apr 11, 2012 at 2:11 PM

    If they could get rid of the blackouts for home teams on MLB.tv, I’d still most likely watch games on TV when I’m at home. I really wish they would just stream the network broadcast, commercials and all, and say screw it, here you go. That way everyone is happy, and everyone gets their money and their eyes on ads. I’d pay for MLB.tv to watch games when I’m NOT home. I have a 70″ TV and 7.1 surround sound… why would I choose to watch an MLB game on my phone/iPad with that setup? When I’m NOT home and want to catch the game is when I’d goto my phone/iPad. They’re not losing anything by letting people watch on their mobile devices, but if they’d allow the broadcast with commercials to be streamed, they just opened up their viewing audience by a large number, if you ask me.

  3. Ben - Apr 11, 2012 at 2:17 PM

    No, it’s not sustainable for two reasons. One economic, one social.

    “As pay-TV costs rise and consumers’ spending power stays flat, the traditional affiliate-fee business model for pay-TV companies appears to be unsustainable in the long-term,” NPD warned in its analysis.

    “While Nielsen data demonstrates that consumers are viewing more video content across all platforms — rather than replacing one medium with another — a small subset of younger, urban consumers seem to be going without paid TV subscriptions for the time being. The long-term effects of this are still unclear, as it is undetermined if this is also an economic issue that will see these individuals entering the TV marketplace once they have the means, or the beginning of a larger shift to online viewing.”

  4. Jon Weisman - Apr 11, 2012 at 2:24 PM

    Those people have alternate means for seeing average TV programs. But there is no multiplatform alternative to see a live cable broadcast of your home team. To that extent, the sports cable networks are underpriced right now.

  5. Ben - Apr 11, 2012 at 2:27 PM

    Yes there is. And monopoly (which is what exclusivity is) ≠ underpriced.

    • Ben - Apr 11, 2012 at 2:29 PM

      Oops, that was supposed to be at Jon Weisman. And very interestingly, it appears HBT filters comments with links to First Row Sports?

      • jwbiii - Apr 11, 2012 at 2:50 PM

        HBT seems to filter a lot of commercial sites. I’ve lost posts which linked to
        – An excellent bakery in a AAA city
        – A client list for a player agent

      • ezthinking - Apr 11, 2012 at 3:02 PM

        So do you work for First Row or just trying to help benefit their advertisers? It’s the same game wherever its played. Like most things, if you steal enough content, the owners will shut you down.

    • ezthinking - Apr 11, 2012 at 2:35 PM

      Online viewing of TV shows is different than sports programming, specifically, sports fans rarely TiVo or the like because the result is known. TV, even reality TV, no so much. So being able to broadcast live sports events with a live audience is the local TV draw and benefit.

      • Ben - Apr 11, 2012 at 2:36 PM

        First Row broadcasts in real time.

  6. hansob - Apr 11, 2012 at 2:29 PM

    $100M a year when your average viewership is 100,000 households just isn’t a sustainable model. The Dodgers got an average of 65,000 households per game last year, down from 92,000 in 2010. (source http://www.sportsbusinessdaily.com/Journal/Issues/2011/10/03/Media/MLB-RSNs.aspx).

    Apparently the model they are counting on is getting all subscribers to shell out $10+ a month regardless of whether they want to watch games or not. I can’t see non-sports fans putting up with that. There may not be the multi-platform competition for sports programming, but there is for everything else, and if the non-sports fans opt out of the system because they are finally fed up with cable/satellite increases due to sports programming, the system that Fox Sports is relying on is going to come crashing down.

    • ezthinking - Apr 11, 2012 at 2:40 PM

      The number of viewers helps drive the amount charged to advertisers. That is where the money is, not the fee for the service. That’s a bonus.

      • Ben - Apr 11, 2012 at 2:42 PM

        That’s not what the Variety piece claims:

        Advertising is only a small piece of the pie. Ad revenue from local Dodgers broadcasts — including over-the-air as well as cable — was $3.3 million in 2011, according to research by Kantar Media, up from $2.8 million in 2010.

      • hansob - Apr 11, 2012 at 2:57 PM

        I did find where the Fox Sports network that shows Dodger games (Fox Sports Prime Ticket) has something like 6 million subscribers, but last year only 1.1% of them tuned into the game on the average night. So if you can get just $3 a month from each of the 6 million subscribers, that’s $216M a year. So my $10 estimate might not be reality. Then again, the cable/satellite company has to make money, too, and the Dodgers aren’t the only thing on FSPT, so it’s probably at least $5 a month forced on the 80% of the population that probably tunes in to that channel anywhere from 0-10 times a year.

  7. If the Shoe Fits - Apr 11, 2012 at 2:31 PM

    Something that is happening may already influence the revenue model: There is a workaround for the local mlb.tv blackouts: regional sports networks offering access via mlb.tv from only within the broadcast area. YES network does this now:

    http://wwwyankees-on-yes-in-market-yankee-games.mlb.com/mlb/subscriptions/inmarket/index.jsp?c_id=nyy

    You pay $49.99, log in to your tv provider to prove you are a customer, and get all the YES broadcast games via mlb.tv. I’m still trying to figure out if it works via mobile devices, but you definitely can get them via computer. Coming to other devices is just a matter of time, as is this spreading to other RSN’s.

    This is a great way for them to offer the service to local customers, and also generate additional revenue. As long as MLB protects them like this (as they will), this will add fuel to the fire. But as a fan, it’s worth it for me to pay the extra money on top of my cable to have access to games I might normally miss. YES wins, and I win.

    I’m surprised people aren’t talking about this more…

    • ezthinking - Apr 11, 2012 at 2:38 PM

      Do you see local commercials on the broadcast? If you do, then YES gets the $49.95 on top of the likely increase in advertiser fees. YES would have just broadened its exposure to local ads. There is a reason the Steinbrenners’ have been as successful as they have. And I’m not talking about baseball.

      • If the Shoe Fits - Apr 11, 2012 at 2:45 PM

        I can’t remember if I see locals on the YES version of the mlb.tv broadcast (I think I do). But to me, it’s worth the money over and above the cable. I don’t get control of the tv (having 2 kids & a wife) anyway, but this way I can have the game on my laptop and keep peace in my house. Small price to pay.

        If this comes to mobile devices, it means I can spend 30 minutes of my commute home from work watching baseball, and that for me will be a steal at $50/ year.

        There’s money to be made in all of this, it’s just about giving people what they are willing to pay for.

  8. rcali - Apr 11, 2012 at 4:18 PM

    $10 to watch Juan Riviera and Juan Uribe? Pass.

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