The writing’s on the wall… at least that’s what a lot of people think. Regional sports networks, which started in the 1980s as modest ways for people with cable TV to see out-of-market games, have grown greedy and as they rose… many people forecast that they will fall.
It’s pretty simple… pay-TV operators just can’t continue to shell out for multiple channels per market. At first it was just New York and Los Angeles, but more and more cities are finding themselves home to a separate channel for baseball, football, hockey, and basketball. Add in Spanish versions of those channels and you could easily have half a dozen channels, each asking a dollar or more per subscriber per month. That may not seem like a lot to you but it quickly adds up to billions for pay-TV operators. Those operators pass on the costs they can to their customers, but costs are rising faster than pay-TV companies can raise prices.
I think it’s pretty obvious that the turning point has already come. When DIRECTV refused to shell out for Pac-12, it was pretty obvious that there were big changes coming. After all DIRECTV built its subscriber base on great sports, and even though Pac-12 isn’t very popular, the fans it does have are practically rabid. Other pay-TV companies caved to Pac-12 (even AT&T) but to this day DIRECTV has stood its ground. The channel, they say, is just too expensive.
And then of course came the highly publicized deal between Time Warner Cable and the LA Dodgers. TWC famously shelled out over eight billion dollars for the rights to Dodgers games and expected every cable company to pay between $5 and $8 per month per subscriber. In many cases that’s more than companies pay for ESPN and all you really get from TWC’s SportsNet LA channel is one baseball team.
DIRECTV and others balked and for two years, most people in the Los Angeles area haven’t watched Dodgers home games. They’re carried on Time Warner Cable, Charter (who is hoping to merge with TWC) and Bright House Networks (who let TWC do their negotiating.) That’s it. It’s a real shame and fans have a right to be upset, but the math just doesn’t make sense. DIRECTV says the number of people who would drop their service due to the price increase would be more than the number of people who would come to the service because of SportsNet LA. For the record I believe them.
So how will it go down? It’s hard to know for sure but it’s very possible that we’ll see one or more regional sports networks going bankrupt this year. Poorly-conceived contracts with teams have left them financially weak, and those channels without big fat corporate parents are not looking good. There are a few channels that really charge far too much for coverage of teams that just don’t have much of a following, and they’re incredibly vulnerable at this point.
It goes without saying that at some point Time Warner Cable will have no choice but to default or renegotiate its position with the Dodgers. TWC is a big concern, but there’s a point where you just can’t absorb that sort of loss year after year. DIRECTV isn’t budging and strangely, their numbers keep going up while Time Warner Cable’s keep going down. That says to me that DIRECTV made the right choice… and it’s time for Time Warner Cable, and the rest of the regional sports network establishment, to rethink their futures.