Does ESPN LIKE the “Competition” from Fox and NBC?

Before I left for Seattle for a week and a half, I had reason to start thinking about the possibility of our household becoming a cord-cutting household, because as we were wrapping up the book my Dad mentioned that he had thought about cutting the cord, and maybe that he should cut the cord, but something was keeping him from pulling the trigger. What immediately leapt to my mind (besides the fact that our “TV” is not only SD, but an old-fashioned tube with dials that’s older than me and has decayed enough to be really fuzzy, especially with our cable box letterboxing literally every channel) was the fact he’s a pretty decent-sized sports fan, and an absolute soccer fanatic. (This is one reason Chapter 3 of the book spends three sections on soccer.) His favorite team is Italian, his second favorite is the Seattle Sounders, and near as I can tell his third favorite is Barcelona. So you might think he’d be able to get by with a subscription to Sling TV, which carries beIN Sport for games from Italy and Spain and ESPN3 for any Sounders games that aren’t nationally televised. His second favorite sport is basketball, specifically the NBA, and Sling TV works very well for an NBA fan, since it carries both ESPN and TNT (but not, apparently, NBA TV, despite what I say in the book).

But in order to catch every Sounders game, namely a substantial percentage of the biggest ones (such as playoff games and games against rivals Los Angeles and Portland), he would also need access to MLS’ other English-language TV partner, FS1, which he would also need to catch most of his favorite European teams’ UEFA Champions League games, most of the World Cup, and half the baseball playoffs (which is another sport he follows). Since the Sonics left Seattle and he’s spent more time in LA, he’s become attracted to the Clippers as they’ve actually become good and lost their incompetent, racist owner, and regularly turns the TV on to their non-nationally-televised games on Fox Sports Prime Ticket, another Fox Sports outlet he would need access to. And while he’s not that big a fan of the Premier League, he has taken to watching a good number of their games given their wide availability under NBC’s contract, so he wouldn’t mind getting NBCSN as well.

While none of those channels are on Sling TV, all of them are on PlayStation Vue, the streaming service Sony introduced last year, and Los Angeles is one of PS Vue’s few launch markets (as the presence of Prime Ticket indicates). But a year ago, when Sling TV was announced, I mentioned that it was preserving the cable bundle, not breaking it up, and PS Vue is that much more so – once it adds the Disney networks, as it’s slated to do soon, it will have channels from all nine of the companies I mention in Chapter 7 as controlling most of your cable lineup – so it hardly represents breaking free of the cable bundle or in line with the real spirit of cord-cutting, as Cord-Cutters News recently pointed out. A package of channels containing beIN Sport and Prime Ticket would set him back $59.99 a month, $54.99 a month under a promo offer, assuming those prices don’t go up when the service adds ESPN, and he still wouldn’t be able to catch non-nationally-televised Galaxy or Laker games on Time Warner Cable SportsNet, let alone Dodger games on SportsNet LA. Time Warner Cable, by my calculation, will be charging him about $125 once their rate hikes take effect, while offering the Internet speed he’s currently getting standalone for $45 for the first 12 months; throw in a $10 fee for modem leasing, and under all promotional offers he’d be paying $110, the same price he pays now, to essentially switch television providers and lose access to any channel not programmed by the Big Nine (or the Epix he receives in a promotional deal), before even picking up any other streaming services he might want like Netflix, or any other fees he’d still be paying.

In October, Todd Juenger, an analyst for an investment firm, laid out the exact process for how a standalone ESPN would dismantle the cable bundle. It wouldn’t be because sports fans would dump cable en masse to sign up for ESPN – like my dad, they would want to watch their local team on regional sports networks and other sports on FS1, NBCSN, TNT, and numerous other networks. Rather, it would be because ESPN’s defection would trigger a massive move to similar streaming services by all the other networks in the bundle, making it that much easier for non-sports fans to cut the cord and break free of the cable bundle – without sending $100 a year to ESPN. It’s a delicate balance holding the cable bundle together: ESPN needs everyone who wants to watch The Walking Dead, The O’Reilly Factor, Naked and Afraid, or Adventure Time to take part in some sort of bundle that forces them to pay the ESPN tax, but in order to justify that bundle’s existence, they need sports fans to need the entire bloated cable bundle. Look at it this way: sports fans whose cable companies are members of the NCTC wouldn’t cut the cord if the NCTC and its members followed through on their threat to drop AMC and deprive them of The Walking Dead, but losing the NCTC as a distribution partner would make it much more attractive for AMC to launch some sort of standalone service that would make it a lot easier for Walking Dead fans to stop paying the ESPN tax (especially if they could team up with Viacom, which has been missing from Suddenlink for over a year, as mentioned in the book), while doing the same to Fox or some other outfit with valuable sports might just set off a chain of events that causes the cable bundle to collapse surprisingly rapidly. ESPN is effectively ransoming all the other members of the Big Nine to remain tied at the hip with them, and the more of them that are themselves invested in sports on cable, the better.

A while back, after wondering why ESPN kept helping Fox win sports rights in order to box out NBC when Fox was already looking like a more credible challenger to ESPN’s throne, I seized on a throwaway comment in a post on the Frank the Tank site to write a post of my own suggesting that, while ESPN may not have wanted competition, what they really didn’t want was for that competitor to be associated with one of their distribution partners, making it that much easier for Comcast to drive them a harder bargain on distribution fees, to the point of building FS1 as their own competitor in order to keep NBCSN down. In turn, Dave Warner, proprietor of the What You Pay For Sports website, seized on that post and made it an important piece of his own message, even as I became uncomfortable with building too much of a theory on a one-paragraph comment that may not even have reflected its author’s full thoughts on the issue, or even necessarily was held all that strongly by its original author (especially after NBC’s original Premier League deal, made shortly after my post, re-raised the spectre that Comcast just wasn’t that interested in running down ESPN). My post led Warner to believe that there was no way ESPN would let NBC re-up with the Premier League when that contract came up for renewal last year, that NBC had built the value of the property so much and had picked up enough momentum from it that ESPN would have to bring it to a screeching halt. Obviously, that didn’t happen; in fact, even before that ESPN decided it didn’t want to keep NASCAR any more, which combined with Turner’s own decision to that effect basically placed perhaps the most valuable property NBCSN has yet attained into their lap. Clearly, there’s more to the story of why ESPN would help out Fox so much than just “we need to keep NBC out at all costs”.

Part of the explanation, as suggested in the book, might be that companies are willing to team up to keep their own price down. But perhaps a more accurate explanation might be that ESPN doesn’t want to have a complete monopoly on sports on television – if it were, everyone else could team up to create a service without it (which, ultimately, is why ESPN and Disney signed up for PS Vue, a deal only announced in November). Instead, ESPN is willing to sprinkle just enough sports throughout the rest of the cable bundle to give sports fans a decent enough reason to keep giving money to as much of the Big Nine as possible, without giving up so much to actually allow anyone to challenge them (or raise their fees enough to accelerate cord-cutting, or dilute ESPN’s own value). ESPN is fine with staying out of the regional sports network business and letting Fox and Comcast be the dominant players there, and they’re willing to let Fox and Comcast have enough content to build their own national sports networks without getting anything truly valuable. It’s true they would rather have Fox be stronger than Comcast be strong enough to drive a hard bargain with them, but that doesn’t mean they don’t want Comcast to have anything valuable, just that they’d rather have NBCSN remain a niche sports network (and in some very real senses, the Premier League and NASCAR are still niches) and help Fox get the stuff on the higher end of the value scale that ESPN is willing to give up. After all, as more sports (like, say, the half of the LCS that wasn’t there already) move to cable, regardless of the network that airs it, giving sports fans more of a reason to stay tied into the cable bundle, ESPN benefits more than anyone. As Awful Announcing’s Matt Yoder put it, “In what other industry can you still get 24 times as much money from a customer who chooses your competitor’s product over your own?”

This turns pretty much everything I’ve written about the sports TV wars – including the big book I just put out – upside down. I’ve framed the war as ESPN protecting their hegemony against insurgents, but cord-cutting is the real insurgency, and it may be that ESPN (maybe without even initially realizing it) has actually used Fox and Comcast to protect their hegemony by fortifying the resiliency of the cable bundle. The title of my book, The Game To Show The Games, may have been more accurate than I realized – for ESPN, it’s just another game for them to benefit from, perhaps even more so than college football or the NFL. The cable bundle truly is ESPN’s world, and everyone else is just paying the rent – literally.

3 Trackbacks

  1. […] Last month I suggested that ESPN actually benefits from having as many companies as possible invested in sports, keeping them tied to the cable bundle and preventing any attempt to defect from it from being much use for sports fans. But only those four companies – Disney, Comcast, Fox, and Time Warner – have any serious investment in sports on cable, with CBS the only other Big Nine member with any stateside presence in sports at all. I talk about the Big Nine, but the reality is there’s a divide within the Big Nine between the Sports Four-and-a-Half – which as it happens, make up the most valuable members of the Big Nine, in rough order of the level of their investment in sports aside from Comcast being propelled by its cable-operator business ahead of the rest – and the remaining members with no presence in sports. What would happen if those four companies – Viacom, Discovery, AMC, and Scripps – decided to defect from the cable bundle themselves, on their own or individually? […]

  2. […] has acknowledged elsewhere). In retrospect of course, the best approach for ESPN might have been to let Fox and Comcast have valuable sports to shore up the cable bundle, but to some extent they did that, particularly by tag-teaming with Fox on a number of rights. In […]

  3. […] least making up Fox’s share of it) even if you can get Fox with an antenna. Sports fans are still hitched to the entire cable bundle, and FS1 offers few sports whose fans can go without ESPN or other sports networks (basically the […]

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