Yeah, i was going to mention that, Tyrion. We have a number of issues that are coming to the fore.
There’s waaaaay too much quality TV. It sounds like a weird problem, but it is for the aforementioned reasons. It’s sort of like being an app in the App Store. Good lucking being noticed. We’re past the point that even TV critics, whose job it is to watch television, can’t keep up, even if they forgo sleeping, eating, and having a life. Meanwhile, ratings keep getting splintered.
It takes a lot of money to make all this content (salaries, production costs, CG costs, location costs, sets, etc), but it’s even harder to make a return on that investment. Between cord cutting and a la carte options, it’s pretty terrifying to be a cable network, particularly a basic cable network. If they try and charge higher carrier fees to the cable companies, the cable companies feel pressure to pass the costs to the consumer in the form of rate hikes, which just furthers the cord cutting by consumers who have been watching their cable bills climb.
ESPN is the perfect example of this. The Worldwide Leader spent $15 billion to get the Monday Night Football contract for 8 years, $7.3 billion just for the college football playoff games for 12 years, $2.25 billion for SEC football games for 15 years, teamed up with Fox to give the Pac-12 $3 billion for rights to their games for 12 years, then there’s the Big 10, ACC, etc, etc And that’s just for football! That’s not counting the other major sports contracts they need to pay, such as NBA and MLB.
There’s tremendous pressure on the networks for ratings in the age of the DVR and timeshifting and streaming. Sports is one of the very few forms of televised entertainment that is almost impossible to timeshift. So they’ve become especially valuable for advertisers. But, still, ESPN has to jack up their carrier fees to the cable companies, which is directly passed on the consumers. But then blue-haired grandmas who don’t watch sports complain to their congressmen about sky high cable bills and ask why they have to pay essentially an ESPN tax for stuff they don’t watch. There is pressure building for this. Richard Blumenthal joined with John McCain to offer a bill that would force a la carte pricing. The bill sorta died, but you know there is pressure building when a guy like Blumenthal, whose state is home to ESPN, could get behind something like that.
Even without a la carte pricing, people are cord cutting, and there’s tremendous pushback from the cable companies to the networks against any hikes in carrier fees because the cable companies aren’t stupid; they see that rate hikes leads to more cord cutting. Meanwhile, ESPN is desperately trying to cut costs, but they’re in a difficult position because their biggest expenses are these long-term contracts that cannot be reduced. What It’s going to have to create its own streaming service. But if they do that, then that might actually accelerate the cord cutting, since sports is one of those few things that people still stick to their cable service (you can’t watch the BCS playoffs on Netflix). But if lots of people suddenly cut cable and sign up for ESPN streaming, it’s going to devastate cable television as we know it.
Meanwhile, I imagine that ESPN fans will be surprised by the real cost of their entertainemnt. Because all of those blue-haired grandmas and everyone else who has a cable subscription but doesn’t watch sports are today subsidizing ESPN’s costs for everyone who does watch sports. But once the cable subscriptions collapse, there will be less subsidizing by non-sports viewers and ESPN viewers will have to shoulder more and more of the costs. Which totally sounds fair, but I expect a total shock from people when they’re hit with the bill.