What We All Pay for Sports

Maryland TerrapinsI read an article this week in the LA Times that talked about how sports have jacked up the cost of cable TV everywhere. They cited the fact that the Pac-12 Network alone is going to get over a billion dollars per year in revenue, all gathered from people’s monthly cable rates.

There is no question that pro and college sports are driven by television revenues. Everywhere you look the numbers are huge. For example, the NFL gets over $4 billion per year in television rights. That’s $1 billion from ESPN, $1 billion from DirecTV, over $700 million from Fox, and over $600 million each from NBC and CBS. To put that in perspective, there are 100 million cable households in the country and that works out to each one of them paying $3.33 per month to get the NFL.

Now I will grant that the NFL is the most popular sport in the country and perhaps most households would not be upset by that number. But it’s only the beginning. There are also lucrative deals with television for college football and basketball and for major league sports like baseball, basketball and hockey. Additionally the cable bundles that people buy force them to buy more sports programming for other sports like golf, tennis, horseracing and even bass fishing.

When you add this all up the average consumer in a major metropolitan market that has all of the pro teams is probably paying around $15 per month to get all of this sports programming. That’s $180 per year. In more rural markets where there are not direct channels for baseball and basketball the bill is probably closer to $11 per month or $130 dollars per year. This is a heck of a deal for sports fans. Let’s face it, paying $180 to get a huge array of the sports is a great deal when you figure it would cost that much for two people to go to one pro football game.

But the problem is that not everybody is a sports fan. It’s been estimated through polls that maybe 40% of households are serious sports fans. If you do the math and if only the 40% of households that really want sports had to foot the bill that works out to $37.50 per month, or $450 per year, and that monthly number is climbing a few dollars every year. That’s where the rubber hits the road, because polls also say that a majority of those households would not pay that bill on an unbundled basis if they were asked to pay their fair share.

What nobody wants to talk about is that the wheels are slowly starting to come off the cable industry. A recent nationwide poll said that 21% of households were thinking of dropping their cable TV subscription. They won’t all do that, of course, but it is a very bad sign for the industry when that many people say they are thinking about it. We can certainly expect millions of households per year to ditch cable. The average cable bill nationwide is now over $90 per month and many households are deciding that they just can’t afford it.

And if the wheels come off the whole sports industry will have a major crisis. My beloved Maryland Terrapins have gone so far as to change their conference in order to make more money from television. They are getting a lot more money from TV rights to become part of the Big 10 network. That extra money more than covers the extra cost from having to fly to places like Minnesota and Iowa for all of its sports teams.

But what happens to Maryland and to all of the other major universities if in a decade those TV revenues are greatly decreased? It’s bound to happen, but nobody can really say when. But do the math. Cable rates have been increased about 7% per year for a decade, largely driven by programmers like the sports networks. If this goes on for another decade (and the current long terms contracts for programming suggests that it will), then the average cable bill is going to grow from $90 to $165 per month. Along the way to that kind of price a whole lot of households are going to drop out of the system. And when they do, pro and college sports are going to lose a lot of the revenues that have been making them so flush.

I think we can look out a few decades from now and foresee a very different sports world. It’s probably likely that major sports will go to a pay-per-view basis so that you are going to have to pay directly to watch the games that you want. This means that the teams with big popularity, like Michigan, Notre Dame or Penn State football, or teams like Duke or Syracuse basketball are going to probably do okay while teams with smaller followings will not. I think this breaks the sports model and that means that a lot of colleges will be dropping out of major sports altogether and that major league salaries are going to take a big downward hit. These are maybe not bad things in the big picture of life, but I know that if Maryland can’t afford to play football a few decades from now it will leave a big hole in my heart.

6 thoughts on “What We All Pay for Sports

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