Sports networks have always
been among the most highly priced cable
channels — ESPN still reigns as the priciest,
with an average monthly cost of $4.76
per subscriber, according to SNL Kagan —
but regional sports networks are beginning
to pick up the pace.
According to SNL Kagan, affiliate-fee revenue
for all regional sports networks rose
44% in the past five years, from $3.2 billion
in 2007 to $4.6 billion in 2011. At the same
time, affiliate revenue for non-sports cable
networks has climbed nearly 41% in the
same period, from $12.3 billion in 2007 to
$17.3 billion in 2011.
“What was a minor problem is turning
into an astronomical problem,” Time Warner
Cable chairman and CEO Glenn Britt told
the press in December, speaking of sports
costs in general.
Cable operators have been emboldened
lately by what they claim are price increases
run amok — MSG and MSG Plus were blacked
out to Time Warner Cable customers in New
York for 48 days, as the cable operator refused
to pay what it claimed was a 53% increase in
rates from the programmer. MSG,
which disputed TWC’s numbers
and characterizations, said it was
merely asking for fair value for the
content it provides.
The two sides, with the prodding
of some local politicians, came to
an agreement on Feb. 17 — about
48 days after the networks went
dark on Dec. 31.
While that dark period was shorter
than an earlier dispute between
TWC and MSG in 2005 — when the
sports channel was dark in New York
for 62 days — other distributors have
pushed back at high RSN fees. Dish
Network, which does not offer MSG,
SportsNet New York or YES Network
in the New York area (where
it has a small customer base) went without 19
Fox Sports Networks RSNs for 28 days in 2010
while it tried to hammer out a deal. And Dish
chairman Charlie Ergen has said that the day
will come soon when a distributor will decide
to do without those increasingly pricey networks.
But TWC figures to become part of the
pricing problem soon, as it gets ready to
launch two regional sports networks with
the NBA’s Los Angeles Lakers in time for the
2012-2013 basketball season.
Sports-media consultant Lee Berke, CEO
of LHB Sports, Entertainment & Media, said
that just how much TWC charges for the Lakers
network will be a key development in the
arguments for and against regional sports
programming.
Some reports have said based on the estimated
$3 billion TWC paid the Lakers
for rights to air their games for 20 years,
the MSO will need to
charge as much as a
combined $3.50 per
subscriber per month
for the two networks to
turn a profit.
“Based on the pretty
substantial rights fee
they were charged, they,
in turn, will probably
charge a pretty substantial
[carriage] fee,” Berke
said.
When asked on a
conference call with
analysts in January how
TWC planned to price its Los Angeles RSN,
Britt said it was premature to answer.
“Obviously, what we end up charging
other affiliates in L.A. is of great interest to
everybody in the sports market, and it’s a
complicated situation,” Britt said on the call.
“But when we’re ready, we will tell everybody
what the pricing is going to be.”
According to research firm SNL Kagan
there are more than 30 RSNs in the U.S.,
charging an average affiliate fee of $2.30 per
subscriber per month — more than double
the fee for the priciest non-all-sports cable
net, TNT, at $1.08. (TNT does carry some
National Basketball Association and NCAA
men’s basketball tournament content.)
But despite complaints, annual affiliatefee
revenue growth for the RSNs has been
fairly stable for the past three years at 8.7%,
down from the more than 12% yearly increases
in 2007 and 2008, according to SNL
Kagan. Non-sports annual affiliate revenue
growth has declined from 10.6% in 2007 to
6.5% in 2011, but is expected to rise in the
mid-to-high single digits in 2012.
“Sports is obviously rising much more
quickly than anything
else, but this is nothing
new,” SNL Kagan senior
analyst Derek Baine
said. “I think the only
surprise is that sports
rights fees seemed to
accelerate during the recession,
not decelerate.”
The value of RSNs has
not gone unnoticed —
Comcast owns interests
in nearly a dozen RSNs
and others like Cablevision
Systems, Cox Communications
and Charter
Communications have
dabbled with the networks.
In addition to the
Lakers networks, TWC
owns a minority interest
in SNY, alongside the
owners of the New York
Mets and Comcast.
And the field is growing.
In addition to the
Lakers networks, other
new entrants expected to join the field this
year include a new Comcast RSN in Houston
this fall; Pac-12 Networks, consisting of a national
network and six RSNs is scheduled to
launch in August; and Fox Sports San Diego,
which is scheduled to carry San Diego Padres
baseball games, is slated to launch in April.
Berke said that RSNs deliver value through
larger and more engaged audiences, which can
be five to 10 times that of general-interest cable
channels on game nights. And 20% to 30%
of younger viewers watch on multiple screens,
which has gained in importance as TV audiences
have become more fragmented
“That is right up the alley of any subscription
cable provider, satellite distributor, or
telco,” Berke said.
