A lot of to-do has been made about “cord-cutting” – namely, canceling traditional cable/satellite TV service in favor of online delivery – lately. Just about all non-cable/satellite provider set top boxes except for Tivo, SilconDust’s HDHomeRun PRIME, and Ceton devices get their content from the internet. Typical comment threads on cord cutting articles feature users triumphant over saving money “kicking cable to the curb” or something like that.
Unfortunately, that’s a fantasy for anyone who’s a hardcore sports fan. If you love live sports, watching them in the comfort of your own home will always be expensive, regardless of which delivery method you choose. Why? Well, for one, major sports, leagues, and conferences – and for that matter, works of art – are NOT fungible or commodities. A commodity is something whose nature is more or less invariable with respect to its source, e.g. table salt. Iodized table salt is the same whether it’s Morton or store brand.
Conversely for example, if you like pro football, there is no true equivalent to the NFL anywhere. Events are unique experiences which cannot be (legally*) duplicated. Ergo, sports organizations have tremendous (almost monopolistic) pricing power. The latest example of this is ESPN having to lay off nearly 5% of its workforce** to cover the costs of the sports broadcasting rights it pays for. ESPN’s last such buy of note was getting the rights for the SEC Network for an undisclosed sum. “Undisclosed,” that is, unless you jog your memory back to 2008 when they paid a whopping $2.25B for SEC broadcast rights. And that’s just for a single, nonprofessional, regional conference. I’m guessing the number for the SEC Network deal is at least $4B and maybe as much as $5B. Put in perspective, even the low end of that estimate is ~30% more money than the highly profitable Google made last quarter.
The bottom line of all of this is that these costs will invariably be passed to the consumer as ESPN in turn charges TV providers and ISPs for access to their content. In fact, monstrous licensing fees might be one of the leading, often overlooked reasons why the unit price of bandwidth for broadband access in the US is so high relative to that in other countries.
Oh, and it’s not just ESPN or the SEC. Multiply that effect by the number of sports leagues/groupings in the US and then again by the number of networks with various exclusive deals.
All of the above leads to an Animal Farm-esque situation, in which the technologies replacing “outdated” cable and satellite cost just as much or even more as their predecessors. If you’re a sports fan, hold tight, but your paycheck might determine whether you’re grabbing your seat arms or your ankles.
*Technically it’s possible to pirate sports events, but operators of such sites can find themselves in world of hot water, even if they live outside the US
**For those of you who think ESPN was stupid for doing that, if they hadn’t someone else (Fox, Comcast NBC, CBS) would have. SEC sports attracts such high viewership networks are quite willing to literally pay an arm and a leg (as ESPN is doing) for the rights to it.