THE BUSINESS AND POLITICS OF SPORTS
Your cable TV bill will be rising in 2012 and beyond and there is a simple reason for that. Sports programming is about to become more expensive.
The local hikes will come shortly after the Madison Square Garden Network is back on Time Warner cable systems when the two sides reach a more expensive agreement for consumers. The hikes nationally will arrival when ESPN and other cable TV sports carriers renegotiate carriage deals. Regardless cable TV prices will be escalating.
Locally, the multiple systems operator (MSO) Time Warner doesn't want to live with the financial demands of the Madison Square Garden-FOX Sports Net combo at the moment. The MSG-FOX channels are owned by another MSO, Cablevision. The sports channels have disappeared from an estimated 2.3 million Time Warner subscribers in the metropolitan area and upstate New York. Meanwhile, Knicks, Rangers, Devils, Islanders along with a slew of college games are gone from the metropolitan area and Buffalo Sabres games have disappeared from upstate New York Time Warner systems.
As of now, those Time Warner subscribers have darkened channels, MSG, FOX Sports Net and a seldom watched music channel called Fuse. Whether Time Warner will pass along the decrease in expenses is an interesting question. Sports cable channels and MSOs who own sports networks (Time Warner is a minority owner in SNY, the outlet that is controlled by New York Mets ownership and Comcast, another MSO) generally don't provide refunds to consumers because of lost channels or lost sports events. such as the 240 canceled NBA regular season games this year due to the NBA owners’ lockout of the players.
There was also the entire 2004-05 National Hockey League season lockout. Consumers are still waiting for refunds from the 1998-99 NBA owners’ lockout, the 1994-95 NHL owners’ lockout and the 1994-1995 Major League Baseball Players Association strike.
The MSOs blithely and conveniently forget about those pesky labor situations and cable TV contract negotiations in customer relations.
Eventually Time Warner and Cablevision will cut a deal. Cablevision will jack up the wholesale price of MSG-FOX Sports Net and keep Fuse on Time Warner systems.
The cost will be passed onto consumers.
Consumers don't have much choice if they want to keep cable TV around as an entertainment option. Because of the 1984 federal legislation that socialized cable TV, cable TV operators don't have to be pro-choice.
A cable TV customer can take basic and add on a basic expanded tier where most of the sports channels have found a home. There are other add ons as well. The MSO bundles a bunch of networks together, generally ESPN and maybe even the rebranded NBC sports network (owned by Comcast) along with local regional sports channels and the so-called news channels, CNN, MSNBC and FOX and a bunch of others like the Cartoon Network, TNT, Comedy Center. The MSO gives the consumer no choice in selecting the product they want. The MSO is protected by federal law thanks to President Ronald Reagan's signature in 1984 and can act as a monopoly. The consumer can switch to satellite but generally runs into the same anti-choice problem.
Earlier this week, the nation’s largest MSO, Comcast, signed a 10-year carriage deal with the Walt Disney Company. The deal will make sure Comcast will carry Disney’s 70 offerings including the ESPN family of channels. Comcast decided for what was best for Comcast subscribers yet there is no financial breakdown and consumers will just pay for Disney stuff on a variety of platforms and not know what the costs will be over the next 10 years. It is a legal deal under United States laws and the MSO doesn’t have to tell consumers what they are paying for.
Sports teams and leagues have found the mother lode thanks to Reagan's approval of a bill in the basic expanded tier of cable TV. Arte Moreno, the owner of Major League Baseball's Los Angeles Angels of Anaheim signed Albert Pujols and C. J. Wilson last month because he was able to get more television money out of Rupert Murdoch's FOX sports regional cable TV network in the Los Angeles area. Moreno has a valuable property, his Angels, and Murdoch is about to enter a battle for "survival" with Time Warner in the LA cable television market. Time Warner has teamed up with Jerry Buss' Los Angeles Lakers business and formed a regional sports network in the market.
Murdoch is paying Moreno an estimated $160 million annually. The Time Warner/Lakers enterprise will need programming besides Lakers cablecasts. Murdoch is desperately trying to hang onto Dodgers cable TV rights in the market knowing that if the Dodgers brand (as tarnished as is) with a new owner ever got into the marketplace in 2014, Time Warner is a formidable foe and could wrest the cable TV rights away from Murdoch at say $200 million annually. Somebody has to pay for the rights and it will not come out of News Corp's pockets or Time Warner coffers.
Southern California cable TV (and satellite) consumers will have to reach into their pockets and pay for the rights fees. The entire basic expand tier universe will be subsidizing the sports channels which means 100 percent of the customers will be paying for something that maybe three or four percent watch. That not only applies to the sports channels including ESPN but to the poorly watched FOX News Channel, MSNBC, CNN, CNBC and FOX's business channel along with whatever CNN is calling "Headline News" these days, TNT, the Weather Channel, MTV, VH1 and the rest of the basic expanded lineup.
It is Ronald Reagan socialism 101 although the bill was crafted by both Democrats and Republicans in the House and Senate in 1984.
The Walt Disney Company’s ESPN has gone shopping lately and has picked up various college sports conferences along with the National Football League at a cost of billions annually. The National Football League has been fighting with MSOs to get the National Football League Network onto the basic expanded tier because that is where the money is. Major League Baseball formed a partnership with the major MSOs to make sure that the industry's baseball channel is carried. The MSOs own a piece of the baseball channel.
Murdoch apparently has won a major battle in the Dallas-Fort Worth metroplex and staved off a competitor to generously endowing the Texas Rangers baseball franchise. Partially because of cable television, the once bankrupt Rangers franchise is now swimming in money and in part explains how the Texas franchise was able to submit a more than $50 million bid for Japanese pitcher Yu Darvish.
That huge money advantage the New York Yankees franchise once had because of the enormous amount of dollars coming from the YES Network over everyone else in baseball no longer exists. Of course as soon as YES Network contacts are done with local MSOs like Cablevision, Time Warner and Comcast, YES can just jack up the price and justify the hike by saying "we are the Yankees." The Yankees franchise will get back to the top of the perch but regional cable networks are demanding a lot of money and are getting it from MSOs.
Time Warner and Comcast don't have to deal with MSOs like Time Warner and Comcast because they have partial ownership of the Mets-SNY channel. But Time Warner will have to deal with Cablevision at some point soon on SNY carriage renewal and that will be a battle of the heavyweights. The cable TV deals that could come between SNY and MSOs may keep the Wilpon family financially afloat in their quest to keep the Mets franchise in the Wilpon-Katz family portfolio.
Sports teams, sports leagues, sports organizations like the International Olympic Committee need more and more money for operating expenses. The easiest place to get that cash today is cable TV. Very few communities are going to build new stadiums and the business community is tapped out for big ticket items (although you would never know that with the corporate love that Dolan's Knicks get). Cable TV is the place where money can be made and no one has put the brakes to rising rates.
The Time Warner-Cablevision battle will go on and there will be a predictable pattern to the talks. Politicians will get involved and pressure the Dolans over at Cablevision to work out a deal with the Time Warner brass to keep sports fans happy. There will be jawboning in public which seems scripted from a wrestling script and eventually both sides will reach an agreement because they are concerned about their customers.
The bills will go up but there will not be a breakdown of real costs to the consumer. There never is. Cable TV socialism has enriched a lot of the world's biggest capitalists, sports owners and athletes. A cable TV channel blackout is no big deal; it is just a part of doing business.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition" is available at www.bickley.com and Amazon.