To hear some people talk, 2015 may be shaping up to be a turning point for the sports TV landscape and that of TV in general, where cord-cutting may be hitting a tipping point and substantially impacting ESPN’s business. It started with the advent of Sling TV allowing people to get ESPN without a traditional cable subscription, and has continued with the launch of HBO NOW and other over-the-top services. Then ESPN let several high-profile personalities go in the name of cost-cutting, including Bill Simmons and Colin Cowherd. More to the point, after years of sports events moving seemingly inexorably to cable, some of them are finally starting to move the other way. ESPN losing several lower-tier rights to entities that will place them on broadcast networks is more about ESPN trying to save money and Fox and NBC not quite being as willing to go all-in on the cable network front as ESPN has been than anything else, though there is surely some symbolic value in the British Open, which moved to ESPN exclusively shortly before the BCS deal, returning to broadcast on NBC and Golf Channel. What may send a bigger message is ESPN itself announcing that their upcoming NFL Wild Card game will be simulcast on ABC, as well as moving the ESPY awards to ABC (though I can’t help but wonder if they knew about Caitlyn Jenner’s appearance attracting a lot of non-sports fans when they made the latter move). All this is taking place on a backdrop of ESPN losing over three million households just in the year from July to July.
It’s tempting to say this marks the bursting of the sports TV bubble and the start of broadcast reclaiming its former dominance in the television, or at least sports television, landscape. Certainly it looks like the smart thing for the Big Ten to do in its upcoming rights renegotiations is to adopt a fairly broadcast-heavy strategy, and between that and ESPN’s penny-pinching I’d be very surprised if ESPN claimed the entirety of the Big Ten rights. (Given the potential synergy with the Big Ten Network, I’d be shocked if Fox was completely shut out of the Big Ten rights.) But the decline of ESPN’s subscriber base and the erosion of their subscriber-fee advantage is only half the story. It won’t mean much if broadcasting doesn’t survive long enough to take advantage of it – and if broadcasters aren’t able or willing to take advantage of it. It won’t mean much if broadcasters remain unaware of or resistant to their potential in the video landscape of the future, or if market and regulatory concerns prevent them from realizing that potential.
We’re now five months away from the broadcast incentive auctions scheduled for late March. Many stations may elect to go off the air out of the belief that they can get more money surrendering their spectrum to wireless companies than by staying on the air, in part because of the perceived limited potential of broadcast given the programming available to them and the market forces favoring cable networks. In some places, large station group owners may elect to consolidate multiple stations they own onto a single signal, with some having already done so and either selling the shell of the vacated station to groups with not much to do with it but cash it out at auction or simply outright returning the licence to the FCC. Pretty much any station that’s not an affiliate of a Big Four network is liable to put up their stations at auction, because they’re not programming anything that’s worth people’s attention at the moment. Those stations that survive could end up terminally crippled by a variable band-plan that could subject many stations to interference from wireless carriers and a landscape that could make it impossible for new stations to start up if anyone decides some of the stations that shut down or consolidated shouldn’t have.
As I’ve laid out many times before, cord-cutting should be a boon to broadcasters even as it disrupts the cable business, or at least it should hinder broadcasters much less than cable operators. But it’s not happening fast enough to change the fact that cable networks’ access to subscription fees give them a massive advantage over broadcast networks and stations, compounded by regulatory restrictions on content cable networks aren’t subject to, and retransmission consent, broadcast’s means of trying to correct this imbalance, only gives them as much reason to fear cord-cutting as the cable networks, to the point of threatening to abandon over-the-air broadcasting entirely if Aereo was allowed to cripple their retransmission consent leverage, and doing little to overcome the industry’s other challenges. (Even when some do attempt to lay out the benefits of continued cord-cutting for broadcast, retransmission consent still plays a key role.) Cord-cutting’s benefit to broadcasting has been limited by a poorly-implemented digital transition that made it far too difficult for far too many Americans to pick up their signal and a digital standard that wasn’t future-proof enough to allow broadcasters to reach mobile devices without using the Internet as an intermediary or using an optional, poorly-supported kludge, with the result that far too few Americans know, and fewer care, about the plight of broadcasting or its importance. The broadcast industry has been hard at work on a next-generation digital television standard with the potential to fix some of these technological shortcomings, but there’s no guarantee it’ll be ready in time for the incentive auction, that it’ll actually do enough to solve these problems, or that it’ll overcome the larger market and regulatory forces holding back the industry and hindering support for the standard. The FCC might fix some of the outdated and backwards ownership rules holding broadcast back, but not only would solving the biggest problems require Congressional action, they don’t even plan on finishing the ongoing ownership review until June, after the auction, betraying how much interest they have in the continued survival of the broadcast industry.
By and large, the broadcast industry seems unaware of the real nature of the forces destroying their industry, of the value the technology of broadcast potentially has in the video landscape of the future so long as broadcasters are willing and able to maximize it, and has little interest in attempting to surmount its obstacles, including the ones they’re complicit in, to ensure its continued survival. They seem unaware their most dominant players, the ones that threatened to ditch broadcast in the Aereo affair, do not really have their best interests at heart, placing far more stock in their cable networks and only sticking with broadcast, and the threat it could potentially pose to their cable networks, as long as they can keep collecting retransmission consent and they can’t get away with ditching it without a major PR disaster and Congressional action. Fox just announced it’s renewing the MyNetworkTV “programming service” on its non-Fox network stations for another two years, beyond the incentive auction – even though Fox’s own MyNet station here in LA doesn’t even show MyNet in the very primetime spots that are supposedly MyNet’s reason for existence in the first place. It’s all the more apparent that the real purpose of MyNet is to keep stations from posing any real competitive threat to Fox’s broadcast or cable networks by “filling their primetime needs” with the sort of reruns that are perhaps least necessary to have on linear broadcast television in the age of Netflix.
I don’t know what might happen to get the broadcast industry to wake up and embrace a path that will allow it to survive and thrive in the future. Perhaps it’ll come from outside, with a billionaire sports team owner willing to take a risk on a new (old) distribution paradigm and a new business model for the 21st century. Perhaps it’ll come from within, with a station group large in its own right but with less investment in cable willing to recognize MyNet for what it is and offer the industry a different path using infrastructure it’s been building for the past two years. Or perhaps Congress, overcoming its ongoing dysfunction ever so briefly, will find enough wisdom to rewrite the rules to fit the market conditions of the 2010s, not the 1990s. Or maybe it’ll be something else entirely. But whatever it is, the clock is ticking for it to happen, or else the turning point 2015 is shaping up to be for cord-cutting may prove to be too little, too late for the broadcast industry – and that would mean ESPN would have much less to fear from cord-cutting than you might think.