The average cable bill in the US is now somewhere between $75 and $80 per month (depends on who measures it). Nobody can say for sure how much of that average cable bill that is needed to pay for sports programming, but we know it’s huge. There are a number of reasons why it’s hard to get at the true cost of sports programming. First the deals with sports teams are often private since the sports teams and the companies buying rights to the content are often closely-help corporations. Further, cable companies sign a mountain of non-disclosure statements that prohibit them from talking about what they pay for a given network.
Anybody who buys a big channel lineup has a tremendous amount of sports programming available today. I currently count 35 national sports networks in the US. This includes the ESPN family of networks as well as the Fox Sports networks. But there are also networks that carry tennis, golf, horse racing, skiing and fishing. There are the national networks that carry college football such as the Big 10 network, the SEC Network and the PAC-12 network. The major professional sports of baseball, basketball and football each have their own channels. In addition to these 35 channels, there are 50 regional sports networks that carry mostly local professional sports and college sports not represented on other networks.
In addition to all of this there are sports costs buried within the cost of many non-sports network. Certainly when you pay for CBS you are paying for some of the deals they have made for the NFL, college football and basketball, tennis, golf and auto racing. With NBC you are also paying for the Olympics, which alone have a monthly cost of over 80 cents per cable customer in the US. When you buy TBS you’re paying for the Atlanta Braves. And local stations everywhere carry local college sports.
There were some hearings earlier this year in Congress that looked at the high cost of cable TV. There were a variety of estimates put forth for the cost of sports programming that ranged from a low of $21 per household per month up to an estimate that sports represents nearly half of programming costs. I think the answer is somewhere in between.
One of the problems with sports programming is not just the proliferation of networks, it’s the fact that sports programming costs are increasing much faster than the cost of other programming. It’s a vicious circle where companies bid for the rights to get sports content with the assumption that they’ll be able to pass it all on to the public. And for the most part they have been able to do this.
But consider the deal made for the Los Angeles Dodgers. The Dodgers were able to negotiate a new 25-year programming deal that increased the team’s TV revenue from $39 million to $335 million per year. That’s an 860% increase. It’s a great deal for the Dodgers certainly. Some of the smaller market baseball clubs don’t have total revenues greater than $300 million per year. But this turns out to have not been a good deal for the newly formed SportsNetLA. This company is owned partially by Time Warner Cable. The network wants cable companies in the area to pay them between $4 and $5 per customer per month to air the Dodgers, and all except Time Warner have declined to do so.
It’s obvious this is driven largely by greed. Every time the existing carriage rights end for a given sport there are generally multiple parties bidding up the price for the new rights to content. There is a lot of incestuous behavior in this part of the industry since cable companies like Time Warner and Comcast own significant rights to sports that they pass on to their own subscribers without negotiations.
It’s been estimated that about 30% of households actively watch sports of some kind. But even that number is aggressively high because the majority of that 30% favor one or two sports and not the wide range of programming we are all paying for. It’s been estimated that maybe 4% to 5% of households are the total sports fanatics who watch it all. Doing a little math shows that if the 30% were asked to pay for all of the sports programming the cost would be $85 per household per month. And if the 5% had to pay for it all the cost would be $500 per sports fanatic household per month. It’s obvious that households who care nothing for sports are subsiding this lucrative industry.
At some point in the near future this model is going to break, because the cost of programming is rising far faster than inflation, driven in large part by sports programming. Nobody knows what the magic number is, but there is going to come a point where the average home is just going to say no to the monthly cable bill. One doesn’t have to look very far in the future and the average cable bill in ten years is going to be $150 and within fifteen years it will be $200. I am guessing that long before those numbers that a whole lot of households are going to opt out of paying for sports and other programming that they don’t even watch.