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Expert on baseball’s TV money: “I am certain that at some point in the very near future, that balloon will burst”

Apr 2, 2013, 4:02 PM EDT

old TV

Baseball has been riding a wave of big money based on big TV deals, both local and national. The deals are paid for by cable TV customers whose bills keep going up and up. There are an increasing number of voices who believe we have a bubble on our hands and that bubble is bound to burst.  From Pete Kotz’s report in City Pages last week:

Today, the average TV bill rests at $86 per month, about half of which pays for sports programming. That’s more than double a decade ago. So it’s no coincidence that the cable and satellite industries have been jettisoning customers for nine years straight.

The new round of deals promises to hasten these unpleasant trends. “I can’t tell you what will be the trigger,” says Matthew Polka, president of the American Cable Association. “But I am certain that at some point in the very near future, that balloon will burst.”

And when it does, baseball will take the brunt of the explosion.

One has to be at least tad skeptical of this particular report given that it begins with what I feel is a fundamental misunderstanding of baseball’s relationship to television (i.e. national TV ratings are close to meaningless as a gauge for the health of televised baseball), but the nut of the article — cable bills can’t possibly keep going up at the rate they are to pay for all of these rights deals — seems pretty intuitive.

Indeed, as recent (and not-so-recent) history has shown us, no market spirals forever upward. There will be ruts at best, crashes at worst, and the balloons always pop eventually.

Baseball had best have a contingency plan in the event it happens to it as well.

  1. chacochicken - Apr 2, 2013 at 4:11 PM

    Bailouts.

  2. kjericho43 - Apr 2, 2013 at 4:13 PM

    MLB Extra Innings or pay rent on time? Tough call.

    • kjericho43 - Apr 2, 2013 at 4:23 PM

      Damn. Early bird is like 189. That’s about 40 bucks more than it was 2-3 years ago. Thanks Bud.

      • thebadguyswon - Apr 2, 2013 at 4:51 PM

        Bud Selig could give two shits about the fans. Its all about more money for the owners.

    • carbydrash - Apr 2, 2013 at 4:27 PM

      I prefer MLB TV on my Roku. With my high speed internet, I can watch up to 2 minutes of game action at a time before it freezes and has to reload. It’s the best way to watch baseball.

      • thebadguyswon - Apr 2, 2013 at 4:53 PM

        MLB TV is awesome. Unfortunately for me, the only “high speed” internet I can get is DSL with “up to” 3 mbps. Not good enough for streaming HD. So, its back to Extra Innings.

        Cable internet is 2,500 feet from my door but the cable company wants a small fee of $7,500 to run it to my house. God Bless ‘Murica.

  3. stex52 - Apr 2, 2013 at 4:15 PM

    It’s already happening in Houston. The Astros/Comcast deal is at a standstill with the cable providers to 60% of the greater Houston area. This is also keeping the Rockets from being televised. It’s gone to a war of commercials to try to bully the other providers into giving in.

    I expect it will be settled and we will get broadcasts at some time, but I’m not sure. And the ownership team of the Astros is counting on that income stream to make their investment pay off. They overpaid a bit.

    Without that 80 MM$ annual income stream, I’m not really sure what Plan B would be for rebuilding the franchise.

  4. pkswally024 - Apr 2, 2013 at 4:15 PM

    This is why I don’t pay for for the regular cable package. Screw that. If I wanna see the game, it’s called a bar or the Internet. F U Comcast.

    • El Bravo - Apr 2, 2013 at 4:22 PM

      Comcast is the worst. Sorry NBC, but your daddy sucks balls.

      • aceshigh11 - Apr 2, 2013 at 4:39 PM

        I agree 100%. My internet slows to a crawl or drops out entirely around 11 or midnight almost every night, forcing me to power cycle the cable modem.

        What the hell kinda halfassed outfit are they running, especially with the cash I’m forking over for supposedly “high speed” internet?

    • shaggylocks - Apr 2, 2013 at 4:39 PM

      Until your bar decides the cable bill is too expensive, then’ll it’ll just be the Internet (as long as you’re not in a blackout area).

      • Kevin S. - Apr 2, 2013 at 4:51 PM

        Highly doubt sports bars stop paying for sports packages. The bubble would burst long before they reach their maximum threshold.

  5. dowhatifeellike - Apr 2, 2013 at 4:20 PM

    I’m dumping Comcast as soon as my contract expires. Netflix + Amazon Prime + Hulu Plus + MLB.TV + watching NFL at my local bar = far less $$

    • stlouis1baseball - Apr 2, 2013 at 4:21 PM

      Far less monies (even with the beer and food prices)?

      • dowhatifeellike - Apr 2, 2013 at 4:27 PM

        That averages out to roughly $45/month for the TV services.

        I could get the NFL package for $300some dollars, or for about $400 I can watch my team’s games and eat and drink with friends all season. Easy choice.

        Looking at about an average of $78 per month. Add $20/mo. for CenturyLink internet. Considering that Comcast is currently getting over $150/mo. from me, that’s a win.

      • mgdsquiggy17 - Apr 2, 2013 at 4:30 PM

        I actually saved a lot of money this year ordering the NFL package as opposed to going to the bar (no more cabs, asking friends for a ride, paying for beer, food etc…)

        I paid $400 for the package and even if I spent only $20 at the bar each week (which would never happen) that would be $320 for the year. not sure how you’re saving there. Now using Hulu, Netflix, etc to replace cable I can definitely see the savings.

      • dowhatifeellike - Apr 2, 2013 at 4:32 PM

        And if I didn’t live out of market, I could save that $400 and watch the games at home on local TV. But that’s a choice I have to live with.

      • dowhatifeellike - Apr 2, 2013 at 4:35 PM

        I’m not technically saving anything by going to the bar… but given that I’m going to do one or the other, going to the bar is the better value. An extra $100 for food and drink during every game? I’d spend that much just buying chips and a 6er and watching at home.

      • dowhatifeellike - Apr 2, 2013 at 4:37 PM

        I guess I should add that at the Ravens bar out here, I basically drink for free. That goes a long way.

    • aceshigh11 - Apr 2, 2013 at 4:43 PM

      Yeah, but…you still need an internet provider.

      I’m guessing you have competition in your area, right? Where I live, Comcast has a regional monopoly on cable-based internet.

      I could switch to DSL (AT&T) but that doesn’t sound particularly appealing either.

      • UgglasForearms - Apr 2, 2013 at 5:25 PM

        Do NOT use AT&T. Horrible customer service experience with them about a year ago… the only time I needed customer service.

    • aceshigh11 - Apr 2, 2013 at 4:46 PM

      D’oh…forget my original comment.

      What I meant is, even though I don’t pay Comcast for cable TV, I still pay them for internet…and I honestly, I’d rather not even do THAT considering the quality of service I receive.

      • dowhatifeellike - Apr 2, 2013 at 4:56 PM

        We have CenturyLink DSL out here. I don’t think it’s as good as Comcast’s internet service (which has actually been pretty outstanding the 1.5 years I’ve had it), but you can lock the price at $19.95 for 5 years.

    • thebadguyswon - Apr 2, 2013 at 4:56 PM

      Until those services decide that you need a TV subscription to access their services. That’s on the way, you know.

  6. nagrommit - Apr 2, 2013 at 4:26 PM

    Last night, in Charlotte/Greensboro, Time Warner Cable subscribers were denied access to the national ESPN feed of the Braves games due to blackout rule. The game was on Fox Sports South, but at the same time there was a Bobcats game and a Hurricanes game, so no Braves.

    Fortunately Time Warner Cable fixed the issue, but not until the 7th inning.

    So sometimes, even if you do pay you don’t get to watch.

    • churchoftheperpetuallyoutraged - Apr 2, 2013 at 5:45 PM

      Was TBS not covering it? I admit I wasn’t watching baseball last night so I missed it. But honestly, fuck TWC. As soon as AT&T U-Verse is available, i’m dropping TWC like 3rd period French.

  7. Marty - Apr 2, 2013 at 4:28 PM

    Cable has kept me tethered by offering discounts every time I get settled to cancel. No coincident my 1 year contracts always expire in October. At retail cable I will be moving to radio. watching 50-60 games is definitely not worth $1200 a year, which is pretty much all I use that service for.

  8. kinanik - Apr 2, 2013 at 4:56 PM

    This analysis has the direction of value all wrong. Sports TV deals are not paid for by viewers. Sports is one of the view programs still watched live, which means that it is more valuable for advertisers than ever (the supply of viewers who see advertisements has shrunk considerably with DVR and online viewing, driving the price for advertisements to the remaining viewers higher). The price of Sports TV deals reflects this.

    It’s also wrong to say that 50% of what viewers pay goes to Sports. Imagine all viewers only wanted one channel, and were willing to pay $10 to get that channel. If five viewers wanted sports and five wanted National Geographic, they would each be willing to pay $10 for a channel package that included both sports and NatGeo. *Because people are willing to pay this, the sports channel is able to charge the same that NatGeo is.* If four of those viewers switched from NatGeo to Sports, Sports would be able instead to charge 9x what NatGeo does. In the first case, the average subscription price would be $5 sports, $5 NatGeo, in the second case $9 sports $1 NatGeo: but this is a useless measure, because each viewer pays for what they want either way.

    Prices derive from consumer willingness to pay for a thing and the alternative uses of the resources used to produce that thing. Prices do not derive from ‘costs.’ If players all decided to play for free, would you really expect ticket prices to drop? That would be silly, since the revenue maximizing point has not changed.

    • kinanik - Apr 2, 2013 at 4:58 PM

      All this is to say that the Sports TV contract price increases is probably not really a bubble, unless there’s some innovation that delivers advertising as effectively as live TV.

    • dowhatifeellike - Apr 2, 2013 at 5:03 PM

      I have all the “standard” sports channels (ESPN and the Deuce, Altitude, NBC Sports, etc.) But not NatGeo or the Science Channel. I’d gladly drop the ESPNs for those two channels since ESPN has nothing of value except 30 for 30 and 16 NFL games.

      I think the major networks will never offer channels a la carte because then each channel would have to produce enough quality programming to stand on their own.

      • voteforno6 - Apr 2, 2013 at 5:48 PM

        I don’t know about that…the FCC, Congress, or the courts could force a la carte on cable providers. If that happens then I think that we would see the bubble pop.

    • natedawg321 - Apr 2, 2013 at 11:57 PM

      This is of course the correct view. What we are seeing in the massive run-up of the sports tv deals is simply a reallocation of the collective advertising budgets of all US companies.

      Of course, that also means that those ad budgets represent a max value for the deals so at some point it will s-curve. But that will have basically nothing to do with who is providing the game to eyeballs.

  9. sportsdrenched - Apr 2, 2013 at 5:01 PM

    This topic has come up here a lot. And I have to agree that at some point there will be a burst bubble on this.

    When we decided to give up cable/sat and go with streaming 90% of our viewing content we were in the minority. Now, I think half of the people in my social circle have done that. I give it 48 months before we see a major change in how cable/sat deliver their channels. Whether it’s al-a-cart channel selection and another wrinkle I can’t think of, but change is surely coming.

  10. macjacmccoy - Apr 2, 2013 at 5:04 PM

    What sucks about Comcast is they have a monopoly on sports in Philadelphia. Bc they are based in Philly and own the Flyers and use to own the Sixers they think they are the only ones that have a right to air the games. So the channel that mostly cares flyers phillies and sixers games, comcast sportsnet philadelphia, isnt on any other tv provider. You can get csn boston or ny in philly but not csn philly which means if you want a different provider like Direct Tv, Dish, or Verizon you cant watch Philly sports.

    Its disgusting that the Philadelphia government just lets this happen just bc Comcast is their biggest in city private company, 1 of its biggest employers, and developers. Cities shouldnt bend to private companies it should be the other way around.

  11. randygnyc - Apr 2, 2013 at 5:12 PM

    The problem here is that if you want to watch your local, favorite team, MLB TV won’t help. I pay $250 per month for my time warmer bill (wife and daughter all have different viewing habits). I have MLB TV too, along with multiple sling boxes. Also, Netflix. If I could get cable where I could pay a la carte for the stations I want, I’d choose that in a NY minute.

    • thebadguyswon - Apr 2, 2013 at 6:32 PM

      $250 a month for Time Warner. We have finally found out why you’re so grumpy.

  12. ezthinking - Apr 2, 2013 at 5:16 PM

    Comcast made more than $4 BILLION in the first three quarters last year. That’s $4,000,000,000.00.

    Comcast, as you know, is the majority owner of NBC.

    http://www.bloomberg.com/news/2012-10-26/comcast-profit-more-than-doubles-on-nbc-asset-sales.html

    News Corp., owners of Fox Sports, made $4 BILLION in the 4th quarter alone last year.

    Bubbles do burst, but only after they stop growing. Those profits were made after paying the sports teams.

    The growth phase isn’t over.

    • ezthinking - Apr 2, 2013 at 5:17 PM

      Here’s the News Corp. link. http://www.guardian.co.uk/media/2013/feb/06/news-coporation-quarterly-profits

    • Marty - Apr 2, 2013 at 5:40 PM

      I agree. People are so frenzied over content that we have a while, and we it happens it will be a technology shift rather than an economic one.

      My guess is in the end, they will get their $86/month on average somehow, be it increased data rates or a la carte programming not being close to the deal most suspect it will be.

  13. chris1019 - Apr 2, 2013 at 10:13 PM

    Ala carte will never happen because contrary to what most people think, your bill actually go up. In LA for instance Cox raised everyone’s bill $4 to makeup for the cost of the contract to carry Time Warner Sports in their lineup. You think these companies are going to lower their profit margins, no, you are just going to pay more for their channel. So what happens when you have your 8-10 channels you want at $8-$10 a pop plus box rental fees and state taxes? Exact same bill with about 250 less channels. So please stop with the ala carte lunacy, it’s just gonna make our bills higher than they already are.

  14. joerymi - Apr 2, 2013 at 10:28 PM

    This bubble is going to burst in the face of these college confrences that are breaking with regions in order to extend the claws of their networks as far as possible.

    Look at the recent Big Ten expansion. It was a joke, and everyone out east that could give two shits about the conference are going to foot the bill so a handful of super fans of Rutgers and Maryland get their coverage.

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