May 2014 – MorganWick.com

The Nexus of Television and Sports in Transition, Part IV: Pricking the Bubble

May 9, 2014 by Morgan Wick

The cable business model might be the greatest scam in history, and the best part is that it’s entirely legal. It’s not merely that cable networks get to collect money from the dual revenue streams of advertising and subscriber fees. It’s that they collect subscriber fees from every single person who subscribes to cable. ESPN and ESPN2 were in about 96.2 million homes each in March. ESPN2 collects about 70 cents a subscriber, so the two of them combined take $6.24 out of your cable bill. Do the math: 96.2 million homes times $6.24 means ESPN is raking in $600 million dollars every month before it sells a single advertisement. That adds up to $7.2 billion every year from subscriber fees alone, the vast majority of ESPN’s yearly revenue – and it’s going up so fast it crossed the $7 billion threshold just last year. Not a bad chunk of change if you can get it. By contrast, TNT – which is actually in more homes at 96.9 million – is only collecting $129 million a month or $1.5 billion a year, and it wouldn’t be collecting nearly that much if it didn’t have valuable NBA inventory. The amount ESPN pays each year for Monday Night Football or even the SEC would chew up most of that amount.

These subscriber fees aren’t determined strictly by popularity; in terms of total viewership, the USA Network is actually more popular than ESPN, thanks to a combination of WWE Monday Night Raw and a collection of critically-acclaimed and popular original series. But USA collects only 71 cents a subscriber, about sixth-most in cable and roughly neck-and-neck with ESPN2, because if you drop USA you’re only pissing off a few wrestling fans and fans of a few original series, but if you drop ESPN you’re pissing off fans of just about every popular sport under the sun, including the almighty NFL – and those fans can’t live without their sports. Even so, even by the most optimistic estimates, only about 80 million of that 96.2 million watch any ESPN at all that’s taking so much of their cable bill. Far fewer, probably less than a third, would decide ESPN is so indispensable they would pay six dollars a month for it. Yet ESPN is raking in the dough from every one of those 96 million. ESPN’s certainly happy with this state of affairs, and so are its rights partners, who get to count the money from the lavish rights fees ESPN pays them. No wonder everyone else wants in on the action. But if you’re an ordinary cable subscriber, especially if you’re not a sports fan, you’re not so happy.

For several years now, many have called for the government to step in and do something about the subsidization of sports networks, and media companies have resisted those efforts mightily. The most popular idea is to force cable companies to offer their wares a la carte, allowing you to only pay for the networks you want; Senator John McCain introduced an a la carte bill last year, and the effort has attracted the support of none other than Senator Richard Blumenthal, who represents ESPN’s own home state. Media companies claim that most channels are underpriced compared to what they would receive in an a la carte world, that cable is still a good value for the vast majority of customers who would gladly pay as much as what they do now for what they do watch, and that a la carte would actually end up hurting consumers in the long term: because each network would have far fewer customers, it would need to jack up rates considerably. On average, people would end up paying the same or more for their cable than they do now and getting less for it, although sports fans would likely pay more and non-sports fans would pay less. Media companies claim the effects would be so catastrophic that the vast majority of cable networks would go out of business, especially those targeted towards minorities and underserved communities; the number of networks that would be left might be in the single digits.

You could poke several holes in that logic and point to evidence that the eventual outcome might not be quite so dire. But even if things happened exactly as the media companies say, someone with a good grasp of the overall video landscape might find reason to say: “So?”

It’d be one thing if sports fans were merely passionate enough about their sports that if a cable operator were to drop a sports network they’d leave en masse. But it turns out sports fans are incredibly important to the other half of cable’s dual revenue stream, advertising, as well: as said before, they are disproportionately likely to be in the male 18-49 demo, which just so happens to be the most valuable demographic to advertisers, and they’re the one type of programming that’s DVR-proof, meaning sports fans are a captive audience to actually watch the advertisements. But these two things are connected in a way that casts a long shadow over the future of the entire television industry.

Concerns over time-shifting are nothing new; the television and movie industries attempted to kill the VCR when it came out, and once VCRs caught on, sports rights already became incredibly valuable for their immunity to time-shifting, to the point that many of the same points being made over the sports rights bubble, as Deadspin pointed out, were being made in 1989 in response to CBS’ multi-million dollar baseball deal. But these days, DVRs are, or at least should be, the least of television programmers’ worries, if not so much advertisers’. The biggest reason why those age 18-49 are so valuable these days is simply because they watch less television than older people, and while that has a number of reasons, the biggest is because of the rise of the Internet as a source of entertainment.

Well aware of the futility of attempting to fight piracy and the rise of YouTube, content providers have increasingly embraced the Internet as an alternative venue for their content, through sites such as Hulu and Netflix. But the Internet challenges some of the deepest assumptions of the television industry in a way few within it have recognized and, to the extent they have recognized it, they have resisted at all costs: if non-live programming can be watched any time you want it, why does it need a spot on a linear television schedule at all?

Before the Internet, the only way to consume content was to watch it when someone else told you it was on, unless you rented a video from the video store. You visited the movie theater when they decided the movie was going to start; you watched a program at the time the broadcast station or cable network scheduled it for. Each television station or network, even with the increased capacity of cable, had to be assigned a certain portion of spectrum, a channel, that could be used to show one piece of video and one stream of audio at a time, so any program that wanted an audience on television had to find a channel that would show it at a particular time. But once a video is on the Internet, you can pull it up any time you want. You don’t need someone else to schedule it for you. The traditional linear television schedule is an artifact of these pre-Internet days.

It’s entirely possible the prospect of hundreds of channels falling by the wayside may end up falling on deaf ears, because we may not need hundreds of channels anymore. It’s very possible that the vast majority of programming that would find itself without a home because of the collapse of so many cable channels would be able to find a home on the Internet without a problem, though admittedly the financial infrastructure that would support that may not be in place yet. It’s even tempting to wonder if the Internet could pick up the slack even of live programming, which would render television completely obsolete.

More is at stake here than just sports. As much as the likes of CBS, Fox, and NBC may want a powerful sports network for their own sake, they also want a popular network cable companies can’t afford to drop. That way, they can force those companies to carry a bunch of other, far less popular, channels.

Just six companies own the vast majority of channels on your cable lineup. Go down the list of cable networks with the most penetration. Once it’s properly ordered, at the top of the list is the Weather Channel, which is owned by Comcast, which also owns NBC, USA, Bravo, E!, Syfy, Oxygen, the Esquire Network (formerly Style), and G4, besides NBCSN and the Golf Channel. Next is the Food Network, a relative independent owned by the E.W. Scripps Company, which still owns thirteen ABC and NBC affiliates as well as HGTV, the Travel Channel, the Cooking Channel, and DIY Network. TBS is owned by Time Warner, which also owns TNT, Cartoon Network, CNN, HLN, HBO, Cinemax, truTV, and TCM. Discovery Channel is another relative independent owned by Discovery Communications, which also owns TLC, Animal Planet, and a host of smaller networks. Nickelodeon is owned by Viacom, which also owns Comedy Central, MTV, Spike, VH1, TV Land, BET, CMT, and numerous MTV and Nick spinoffs. A&E is owned by A+E Networks, a joint venture of Disney and Hearst (split 50-50 this time) that also owns Lifetime, History, and smaller networks like Bio and H2. The Disney Channel is, of course, also owned by Disney, which besides ESPN and ESPN2 also owns ABC Family, Disney XD, and others. AMC is another relative independent owned by AMC Networks, which also owns IFC, We, and Sundance. Fox News Channel is owned by Fox, which also owns FX, the National Geographic Channel, and spinoff networks Fox Business, Nat Geo Wild, FXX, and FXM, to say nothing of Fox Sports 1 and 2.

CBS is the last of the big conglomerates, owning Showtime, TVGN, and the CBS Sports Network. The broadly-distributed commercial networks not owned by one of these companies can be counted on one hand, and most are owned by formidable corporations themselves. A cable company that wants the popular channels – ESPN, TNT, USA, Fox News, MTV, Showtime, arguably even AMC, Discovery, and Food Network – has to carry the lesser ones. The result is a situation where a cable company’s hands are tied as much as the consumer’s are.

In the same breath that they stand side by side with media companies in opposition to a la carte, cable companies also push back against the increased price of sports networks that they’re stiffed with and left to pass on to consumers, thus either losing customers or taking less profits. They’ve been working to roll back the sports subsidy as much as they can. As far back in 2011 the president of Dish Network raised the prospect of some company deciding to go without sports programming entirely and market itself as a low-price service for non-sports fans. These days, DirecTV has started imposing a $3 fee to customers in markets with multiple regional sports networks, and multiple companies have experimented with offering sports-free packages to customers.

Those sports-free packages haven’t achieved much penetration, though, in large part because the contracts sports networks have with cable companies guarantee them a certain level of penetration, and cable companies can’t risk accidentally breaking those contracts. Moreover, the bundle works both ways: cable operators may be stuck taking lesser networks if they want ESPN, but they also can’t just drop ESPN without dropping other channels like the Disney Channel, and that means people who might not otherwise have an interest in sports suddenly have their kids pestering them to get the Disney Channel back. In turn, the contracts cable networks have with leagues and especially conferences require them to have a certain level of penetration.

And because of this, even the relatively modest advent of the sports-free package has the potential to completely pop the sports cable bubble. ESPN only has the rights to the new college football playoff because it happens to be in the vast majority of households. How many leagues and conferences would bail on ESPN once people start electing not to pay for it en masse, leaving only sports fans still getting it? How many sports would be willing to risk completely shutting out the casual fan? Considering how few sports went the way of boxing, with all the top-caliber fights on pay-per-view and the remaining fights of any consequence on premium networks like HBO, the answer may not be something any of the programmers of sports networks would like.

There is one way to collect ESPN-type money, at least on a per capita basis, in cable. That’s to run a regional sports network airing the games of local MLB, NBA, and NHL teams. $2.50 is the baseline subscriber fee in the regional sports business, and more than a few charge north of $3; some even dare to demand more than what the mighty ESPN charges. As a result, teams have benefitted from the sports rights bubble as much as larger leagues and conferences – especially in baseball.

When the New York Yankees founded the YES Network in 2002, it was a milestone in the history of baseball. Under Bud Selig’s tenure as commissioner, baseball has attempted to even out the imbalance between the “haves” and the “have-nots” without instituting a salary cap by means of various revenue sharing schemes. The Yankees are indisputably one of the “haves”; in fact, after one luxury tax went into effect, the Yankees were the only team in all of baseball to be affected by it. The Yankees collected a rights fee from YES like from any other RSN, but it also owned a sizable chunk of the network itself – and the money it raked in from the network’s profits, unlike the rights fee, wasn’t subject to baseball’s revenue sharing. In a sport without a salary cap, that loophole was huge for the Yankees to maintain its spot atop the heap.

The rest of baseball took notice, and these days, it seems like if you pick a baseball team at random they probably own an RSN – even some of the more unlikely ones, like the Cleveland Indians who sold their SportsTime Ohio network to Fox last year. After purchasing the SportsChannel and Prime networks in the 1990s, Fox had attained a near-monopoly in the RSN business and attempted to mount a challenge to ESPN with them using the overall branding of “Fox Sports Net”; it failed, but Fox still had a lucrative revenue stream and a lofty position it would be hard to knock them off from. That is, until Comcast began offering teams equity stakes in its networks – the Cubs, White Sox, and other Chicago teams, the Mets in New York, various other MLB and NBA teams elsewhere. Fox had long resisted offering teams equity stakes in its networks, but eventually decided it had to offer such stakes to the Angels and Rangers to keep them in the family. Meanwhile, Time Warner Cable, after years of messy disputes with regional sports networks, decided to get in on the lucrative business themselves and launched new networks with the Lakers and Dodgers.

Yet it may also be here that the sports rights bubble is already starting to burst, specifically in the heart of Texas. Comcast recently convinced the Astros and Rockets to leave Fox and start a new regional sports network they would own a stake in, giving Comcast an effective monopoly over the Houston sports market. A year later, the network is largely considered a disaster and a laughingstock, failing to pick up carriage agreements with any cable companies other than Comcast, putting it in less than half of Houston-area households, not helped by the Astros being a laughingstock themselves as the worst team in baseball. The network has declared bankruptcy, and the Astros have accused the bankruptcy proceeding as a way for Comcast to keep the Astros from pulling out of the arrangement. If the Astros or Rockets can put good, attractive teams on the field things might start looking up for CSN Houston, as New York’s MSG learned in 2012 when Jeremy Lin caught fire for the Knicks as MSG was in the middle of a heated carriage dispute with Time Warner Cable, forcing TWC to abruptly end the dispute. That may help explain why the Rockets signed Lin that offseason. But a playoff Rockets team with multiple stars hasn’t been enough to boost its RSN, at least not yet.

Across the state, the University of Texas’ attempt to bring the RSN to college sports, the Longhorn Network, has similarly struggled to pick up carriage agreements and has also been considered a laughingstock. Pushback may be spreading outside of the Lone Star State: Time Warner Cable’s LA-area networks have struggled to pick up distribution, with the Dodgers network basically unavailable to any providers that aren’t Time Warner, to the point that the Dodgers’ own legendary announcer, DirecTV customer Vin Scully, can’t get the network in his own home. For teams across the country, the money train may be running out, and cases like these may increasingly become a cautionary tale.

There is an unassuming warehouse in Brooklyn housing something that media companies are completely panicked over: thousands of teeny-tiny little television antennas. These antennas belong to a startup called Aereo, founded by mogul Barry Diller, who once helped the Fox network get off the ground and who is now – so the broadcasters, including the network he helped launch, claim – completely destroying the foundation of their business. Aereo charges customers in the New York area, and a growing list of other places, $8 a month to rent one of its tiny antennas. With those antennas, you can watch any broadcast channel you like over the Internet and even record up to 20 hours of programming using Aereo’s DVRs. And broadcasters are apoplectic about it.

They’re apoplectic because the once-fledgling retransmission consent program, created to level the playing field and allow broadcasters their own piece of cable networks’ dual revenue stream so that broadcasting could survive the rise of cable, has now completely warped their incentives and made it so that broadcasters would be first to destroy it themselves in order to save it, so they could place all their programming on cable and collect retransmission consent fees from all their customers. Literally: multiple national networks, including CBS, Fox, and Univision, have floated the possibility of pulling their programming off the free airwaves if they don’t win their court challenges against Aereo. The courts have so far yet to make any actual ruling on the matter, but for the most part have refused to grant the broadcasters’ requests for injunctions against the service. That in itself is too much for broadcasters to bear: they’ve gone so far as to ask the Supreme Court to weigh in on the matter, again before any lower court has actually come down with an actual answer.

To be perfectly honest, I wouldn’t be surprised if Aereo ultimately loses the court challenges against it, and I’m not even sure it should prevail even if it might be on the right side legally; Aereo’s claim that they’re simply making it easier for consumers to use an antenna to pick up the free over-the-air broadcast signals they’re entitled to anyway seems somewhat chintzy and getting off on a technicality, and even if they do ultimately prevail in the courts I wouldn’t be surprised if Congress closed the loophole shortly thereafter. In fact, Diller may not actually be interested in Aereo’s success in and of itself so much as pushing broadcasters to change their business model to one more based around the Internet, if his comments to the Wall Street Journal are anything to go on. But even if we took Aereo’s claims at face value, there seems to be a question that has been insufficiently explored: why is Aereo necessary to begin with? Why would someone sign up for Aereo instead of simply putting up an antenna themselves and watching TV that way?

There are several answers to that question, starting with the fairly basic one regarding the hassle of putting up an antenna at one’s house – especially when they often need to be oriented towards wherever the signals are coming from, which ordinary people can’t be expected to know, and beyond a fairly short distance away retrieving said signal requires more than just rabbit ears, but a huge rooftop antenna, which unlike satellite dishes with a similar footprint and restriction you probably won’t find anyone who’ll install it for you. Then there’s the DVR access you get with the Aereo fee, which can be especially important when most cable and satellite subscribers get their DVR service from their cable or satellite provider. But perhaps the one that is, if not most important, certainly the most telling, is mobility: the ability to connect to your Aereo antenna from any device, including your computer, tablet, or smartphone.

The DVR question is not prohibitive – it certainly is possible to get a DVR that will record straight from an antenna, though the options are limited – but the other two raise questions about the nature of the digital transition that America’s broadcasters went through in 2009. Digital signals are all-or-nothing – no ghostly, static-filled images anymore – and many areas that could have once gotten at least the latter from a set of rabbit-ears now appear to be out of luck. But the more serious issue is the lack of mobility – and it goes beyond the new digital standard failing to anticipate technologies that didn’t exist yet at the time it was adopted.

The digital transition may have actually killed off the existing market for battery-powered portable TVs – interference makes it impossible to watch an unmodified digital signal while on the move. The digital standard is thus ill-suited to be watched on anything other than a typical, stationary TV – thus not merely failing to anticipate, but actually becoming less well-prepared for, mobility becoming the new watchword among consumers. It is actually harder to watch digital television “anytime, anywhere” than it was to watch an analog signal.

To some extent, the broadcasting industry has recognized this, adopting an addendum to the digital standard that allows them to send a second signal that achieves an interference-free mobile picture by sacrificing picture quality, resulting in an image suited for smaller smartphone screens. (The portable TV market is still thriving in Europe in part because their DVB standard included a similar addendum from the start.) But even this shows the relative neglect America’s broadcast television infrastructure has fallen into without the general public making use of it and without anyone having much of a financial interest in promoting and maintaining it; not only have you not heard of it, the vast majority of devices don’t support it natively, requiring you to plug in an antenna dongle, and of the largest network stations in the New York area – the epicenter of the Aereo controversy – only three transmit mobile feeds: the NBC, Telemundo, and surprisingly, Fox stations.

If a la carte isn’t coming down the pike and a sports-free package isn’t coming to a cable system near you, there is still another way for consumers to take control of all the money being siphoned off their cable bill to pay for ESPN: cut the cord entirely. Services like Netflix and Hulu make it increasingly easy to watch the shows you want whenever you want, regardless of whether you have a cable subscription. Long feared by media and cable companies, it’s becoming a growing reality: nearly 900,000 people cut the cord in the past year, more than doubling the number the previous year, according to one analysis – and for all their problems, deals like the recent one between Comcast and Netflix could help build a network robust enough to make buffering a thing of the past and make the online streaming experience closer to on par with cable TV, which could accelerate cord-cutting (or at least “cord-shaving”) even further. And media companies are putting as many roadblocks in its way as they can.

Media companies want the Internet to work for them, not against them, but the way they tend to do so is to keep people tethered to their cable company – and thus, to the cable bundle and their millions in subscriber fees – as much as possible. The future they see is termed “TV Everywhere”, and it allows you to watch the shows you want to watch not just on your TV, but on your computer, tablet, or smartphone – so long as you “authenticate” with a participating cable provider. In the case of services such as HBO GO, this includes the ability to watch popular shows like Game of Thrones and True Blood anytime you want to. HBO already operates on the a la carte business model, but so far has refused to offer HBO GO standalone to people who don’t want to subscribe to cable, although Comcast has begun offering it to customers who sign up just for its Internet service. A considerable amount of Internet-delivered video is being restricted to maintain a structure that by all rights should be becoming obsolete – and not even everyone has the future yet: until very recently only about 20 million subscribers could get ESPN’s TV Everywhere offering, WatchESPN, which ESPN president John Skipper admits is in large part “a significant measure to preserve the current system.”

Yet cord-cutting doesn’t seem to have had an associated increase in antenna viewership, at least outside of areas where Aereo has set up shop; most coverage of cord-cutting has limited its implications to Internet viewership, to the point that most cord-cutters may not even consider putting up an antenna – in fact, some might even be eagerly awaiting the demise of broadcasting, even as they benefit from it. Cord-cutting should be a boon for broadcasters who can find themselves a willfully captive audience limited to their wares and whatever is offered online, yet not only is broadcasting woefully unprepared for the demands of the modern consumer (whether cord-cutting or no), the companies with the biggest pockets in the industry are more worried about losing their retransmission consent revenue – not to mention the revenue from their lucrative cable networks – than in any way excited over what must seem like a hollow “opportunity” presented to them by cord-cutting. As a result, the general public doesn’t even understand the modern broadcast landscape very well, to the extent it’s even aware it still exists.

These are tough times for the broadcasting industry, under attack from multiple fronts to the point of seeming to be on life support, and it’s not even clear how many people would miss it if it went away. Wireless providers covet their spectrum, cable operators would love to eliminate the free competition provided by an antenna, even broadcasters themselves would love to ensure every one of their potential viewers is paying retransmission consent fees. Those that do watch broadcast television on an antenna tend to be older and poorer, pretty much the antithesis of the people those in the television industry care about.

With the traditional linear television channel seeming to be obsolete in the age of the Internet, it’s easy for even an idealist to assume broadcasters are a relic of a bygone age, hogging spectrum that could be put to more productive use. Already the federal government has set up a two-way auction, currently scheduled for 2015, allowing stations to voluntarily give up their spectrum, either going off the air entirely or sharing spectrum with another station, to auction off to the wireless carriers and take a cut of the proceeds – seemingly just a waypoint to the complete liquidation of over-the-air television spectrum. What purpose could it possibly serve that couldn’t be served by the Internet? The answer requires a good technical understanding of how the Internet works – and there is a supreme irony about the whole debate over sports and cable television waiting at the end.

When you call up a video on Netflix, or any other video service, the device you use to access it sends a message asking for the video and sends it to the ISP or wireless provider, which sends it on its way through the network to Netflix. Netflix receives the message and sends the video on its way back through the network to you. If someone else wants to watch the same video, they go through the same process, even if they’re on the same ISP. Streaming a live event works the same way: your device tells the streaming provider it wants to watch the stream, and the streaming provider sends the content of the stream back through the network to you. It does this for each and every person that wants to access the stream, again regardless of whether or not they’re on the same ISP, even though they’re watching the exact same thing at the same time, with each new person joining the stream joining at the exact same point, yet each of them watching, in effect, on their own individual “channels”.

You can imagine what the effect is when a huge number of people want to watch the same thing at the same time, and indeed NBC’s streaming coverage of the 2012 London Olympics was notorious for running into massive issues as as many as a million people tried to access it at the same time. No one has ever heard of a television channel, whether broadcast or cable, regularly freezing while it buffers or fluctuating in picture quality, or even being completely inaccessible, without thinking something was wrong with their signal or connection, yet such is often the norm when it comes to watching things online, at least in the case of a live stream. Broadcast stations send out one signal, and that signal can be received by anyone with an antenna; similarly most cable companies send out their offerings in one burst, and anyone can tune in to the sliver they want while leaving everything else for everyone else. It is infinitely scalable in a way the Internet, at least as described here, can never be.

Video puts a massive strain on the Internet; Netflix alone can make up 30 percent of an ISP’s traffic despite a very small minority of consumers actually using it, and video traffic as a whole make up a majority of all traffic on the Internet. A disproportionate amount of bandwidth is being used by visitors to a few video sites, many of which are now paying ISPs for faster transit through the network, as with the recent Comcast/Netflix deal. The amount of video people consume may well pose the single most serious threat to net neutrality, the backbone of the free and open Internet, and it will only get worse as more and more people discover the selection of video available online and as more and more video currently being consumed on linear television channels moves to the Internet. Deals like Comcast/Netflix may help capacity keep pace, but at the expense of allowing ISPs to be gatekeepers by forcing video providers to pay a tax, exactly the antithesis of what has built the Internet – including Netflix itself – into what it is today.

Considering all this, it should be apparent that anything that can take some of the video load off of the Internet as we know it today should not be dismissed out of hand, and there are some within the industry that have at least started to recognize as such. Of course this argument could apply equally to either broadcast or cable channels, but there are a couple reasons to expect broadcast to be the more important; for one, broadcasting is pretty much the only option for reaching mobile devices that can’t be connected to (or at least can’t be expected to be connected to) a cable connection (and mobile devices are no small matter; already, according to one study, people are now spending more time in front of their phones than in front of the television). Further, as was hinted at earlier when talking about how many teams and leagues would desert ESPN if it no longer reached the vast majority of homes, content providers will always seek to reach the widest possible audience, and that means reducing the amount they’ll have to pay to be part of that audience as much as possible. At the very least, there will always be demand for a YouTube of linear television as opposed to a Netflix.

Considering what advantages the Internet brings to the table to begin with, what sort of content would people be willing to watch at a particular time set by someone else? Certainly people may still want to simply turn on the TV (or whatever would fill that role) and have something on in the background while they do other things or watch a parade of thematically connected programming without having to think too much about actually picking out anything specific, but this question really boils down to, what sort of programming would benefit from the linear television model, in that it inspires a large number of people to tune in to the same thing at the exact same time? Certainly anything, including scripted programming that theoretically can be seen at any time, can inspire people to want to see it as soon as it’s available if they wish to avoid being spoiled about it on social media (or conversely if they want to take part in the conversation surrounding it), but what really inspires this sort of behavior is live programming.

And it is here that we come upon the supreme irony in all of this, because while live events can encompass a number of things such as awards shows or breaking news, the vast majority of this sort of live programming, the exact sort of programming that broadcast television is best suited for, is the same exact sports that it is increasingly being deprived of. Indeed maybe this isn’t so surprising; perhaps, for all the talk about captive audiences and DVRs and money demos, what ultimately underlies the entire rush to pour so much money into sports, all the skyrocketing contracts and subscriber fees, all the multimillion dollar contracts and abandonment of tradition and principles, all the rush to build new sports networks, is the simple, largely unacknowledged fact that sports is one of the last few things holding people to traditional linear television at all, and the fact that so much of it has benefitted cable networks is a simple reflection of the fact that cable has so far enjoyed a decided monetary advantage without much in the way of substantial audience loss.

The Nexus of Television and Sports in Transition, Part III: The Fight for the Sports Cable Dollar

May 8, 2014 by Morgan Wick

For gearheads, August 17, 2013, may well go down as Black Saturday. The first signs of it were the previous day, when many of the personalities heading up Speed Channel’s coverage of NASCAR practice and qualifying started talking about the end of an era, and the network’s Trackside talk show held its final edition ever. Then, when they woke up the following morning, Speed had been replaced with something called Fox Sports 1. For much of the day, Fox Sports 1 carried much of the same NASCAR coverage that had been on Speed, but that night it aired a bunch of fights from the glorified cagefighting promotion known as the UFC, followed by a couple of snarky Canadians yukking it up alongside a bunch of ex-jocks talking about just about every sport except their beloved cars. The succeeding days would see Speed’s lineup of car-oriented shows completely gone by the wayside, replaced by a bunch more shows talking about nothing but stick-and-ball sports. Just like that, the only network gearheads had that was totally dedicated to cars was gone.

Speed fans were not happy, and quickly took to the Internet to voice their displeasure, flooding the comments of just about any article having anything to do with the new network. Here are just some of the comments they posted, all reprinted with spelling, grammatical, and other errors intact:

what idiot decided we needed another stick and ball sport station? mma? boxing? you people are totally out of touch. speed was a car channel, the only car channel…hopefully this channel will fail miserably and maybe we`ll get a car channel back. we don`t need more retired jocks and announcer wannabes telling us the same retread crap that we get fed on 100 other channels.

did you really need anther stick and ball channel? I thought cutting wind tunnel to 30 min. was bad enough but then to cancel it!!…I have an idea, change the classic espn channels format. I can’t believe anyone whatches that channel…car guys spend a lot more money on motorsports than most stick and ball sports fans. I can only hope you will change your minds, but I will not know because I will not be watching any espn channels!

who in the world decided to take speed off the air my god another sports program channel really no speed channel come on this sucks now what I can watch chopped but nothing about cars which is a large industry you have gear heads every where that watched speed n all the shows including Barret -Jackson action . also gearz and all the other shows like pinks and motorcycle racing this sucks

we did not need another all live sports channel, not everyone watches sports, we want all the car shows back from speed and everything else it had on it, now what, where did all those shows go? this is crazy that corporations keep messing with everyones lives on what we have to watch and we still have to pay the price for it.

All of my car shows, car repair shows, collector car shows are gone. Not on the air anymore. No more Stacy doing donuts in a Year One Bandit Trans Am, or climbing mountain trails in some crazy 4X4 that he just welded together. NO, Just another ESPN Wannabee Channel sadly similar to how Comcast destroyed Versus with my fishing and hunting shows. Now both of those lame ass channels are playing European Soccer games instead. Seriously. Fox and Comcast can both go screw themselves.

the reason America is a great country is because of change. What makes it the best country on the planet is admitting our mistakes. FX1 is an obvious mistake. Im sure this channel was created to further better the lives of Fox share holders. SPEED was what built America, cars. trucks. racing. DIY! shows. buying selling/auctions. Ive been patiently awaiting some good from FX1, its just not there. a huge mistake! please, bring back SPEED, u can even keep your crappy FX1 channel, just put channel 607 back on my receiver so Americans can feel like Americans again. am i the only one that feels like moving to Canada? ha, i hear SPEED still aires there. Fix this mistake FX1, i refuse to watch your programming, at least ESPN is original. l.o.l.

While Discovery’s Velocity network remained and remains focused on cars, and several old Speed programs found their way to the fledgling MavTV network, neither is anywhere near as prominent or widely-distributed as Speed was. Speed fans had been swept up by a force far bigger than their own corner of the world, one no demographic could be rich enough to avoid. That the new Fox Sports 1 format was a carbon copy of ESPN, and so many other networks, was precisely the point: ESPN was making over $8 billion a year, over half a billion from subscriber fees alone, and a business model that’s making that kind of money is one any businessman would be falling over themselves to emulate.

Fox had spread out many of their sports contracts across several different networks – besides Speed, there was FX, Fox Soccer, and Fuel – but by consolidating them all onto a single network Fox hoped to charge cable companies higher subscriber fees and lure away some of the massive ESPN audience. Speed, in fact, was a victim of its own success: its presence in nearly 90 million households was far more than Fox Soccer, which had barely 50 million, and Fuel had even less, so it was, from the perspective of the Fox corporate bean-counters, a logical choice to convert to a prospective competitor to ESPN.

It didn’t work out the way Fox had hoped – several cable operators balked at paying the increased rights fees Fox demanded, insisting on paying the same rate they had been paying for Speed, and Fox only gave in a couple days before the launch – and the ratings would be so miniscule, especially in comparison to ESPN, that Fox ended up giving advertisers make-goods on its World Series coverage, but with rights to major college football and basketball and big-time European soccer on top of the UFC, and Major League Baseball, the NASCAR Sprint Cup Series, and the World Cup and US Open golf tournament coming down the pike, Fox likely felt that, in the long-term, they could take a bigger bite out of ESPN’s pie than anyone else. What were a few pissed-off gearheads to them when those were the stakes?

The challenges ESPN faces today are very different from the challenges it faced for the first twenty years of its history. Putting sports on FX made sense for Fox during the 1990s, when ESPN’s biggest challengers dating back to the 80s were the Turner networks and USA, general-entertainment networks all, with Turner arguably holding the upper hand with the NBA, half the NFL season, TBS’ long-standing Atlanta Braves coverage, and more. The continued presence of NBA games on TNT and baseball games on TBS today is very much an anachronism. With most cable providers not offering much more than 70-odd channels, a good chunk of which was chewed up by local broadcast stations, ESPN was the “sports channel”, just as other channels, following ESPN’s “narrowcast” lead, staked their ground to their own fields or, as Turner and other such networks did, threw up a potpourri of programming.

The growth of digital cable and direct-broadcast satellite services (such as DirecTV, which boomed in popularity on the back of its exclusive carriage of the NFL’s out-of-market games) in the late 90s and early 2000s changed all that by allowing an explosion of channels of all types, and the end result was a vindication of ESPN’s all-sports strategy. People had been talking about the possibility of television growing to a thousand channels; now half that number was very much a reality, even as HD increasingly chewed up that capacity as the latter decade progressed. Brand-new channels sprung up that were even more niche, looking to fill out all the new space the cable operators had, while existing channels expanded their brand onto more specialized channels (including CNNSI and ESPNEWS) and previously niche channels found their corner increasingly crowded out and broadened their appeal in response. In a sense, digital cable ended the first war over sports on cable with ESPN scoring a resounding victory, while setting the stage for a second war. Why did Fox need to put sports on FX when they could spread FX itself to several other networks (including Fox Soccer’s rebrand to FXX) and still have enough room for two all-sports networks?

One of the new channels was the 1999 launch of NBA.com TV, which launched with highlights, live look-ins, and other NBA-produced programming; although it started as almost a glorified barker channel for the League Pass out-of-market package, some saw it as a bulwark for the league in case they needed to take their games in-house in the post-Jordan era, as well as a hedge on this Internet thing whose role in sports going forward no one was quite sure of yet.

The NBA has long been at the forefront of new revenue streams and innovation, especially during David Stern’s leadership. The standard was that sports leagues had a network partner and a cable partner, and each only aired your product one or two days a week, but as it entered a new round of negotiations with NBC and Turner in 2002, Stern was open to a brand new scheme hatched up by ESPN, which wanted to get into the NBA without having to compete with Turner. ESPN and Turner would share cable coverage of the NBA, with ESPN having games on Wednesdays and Fridays and TNT holding on to a Thursday doubleheader that would be the only games of the night. ABC would take over the broadcast package, but wouldn’t show any games until Christmas and only show 15 games total (less than half of what NBC was showing); TNT would show the All-Star Game, and the playoffs would air mostly on ESPN and TNT until the Finals.

Placing its product so heavily on cable was a big risk for the NBA, but the end result was that the league saw a 25% increase in its rights fees despite a recession and ratings tanking in the post-Jordan era, as well as games all throughout the week. The new deal also put games on the renamed NBATV, and began a long relationship between that network and Turner, almost by accident: the league originally wanted to partner with Turner on a new basic-cable general sports network, but cable operators balked.

The NBA blazed a trail that other leagues would eventually follow; the NHL Network launched in Canada in 2001 and the United States in 2007, while Major League Baseball, though late to the network party, eventually launched one in 2009, using its Extra Innings out-of-market package to blackmail cable operators into acquiring a stake in it. The NFL launched the NFL Network, its time filled mostly with programming from the NFL Films library and some basic studio shows, the year after the NBA’s landmark 2002 deal, and it would end up becoming the focal point of the controversy over sports on cable for the latter half of the decade.

The NFL’s 2005 rights negotiations turned out to be a landmark for multiple reasons. ESPN was looking to renew its Sunday night package while ABC looked to continue an over 35-year-long relationship airing Monday Night Football. But Disney was in disarray as Michael Eisner was on his way out as its head, having recently fought off a takeover bid by Comcast, and both Eisner and the NFL was concerned about the dwindling ratings for MNF. The league wanted to move the NFL’s main primetime package to Sunday, where people would already be home and where flexible scheduling could allow the league to ensure quality matchups throughout the season, but ABC was loath to interfere with the ratings hits they had found on Sunday night.

Bob Iger, Eisner’s heir apparent, was convinced NBC had no interest in the NFL, and so was willing to wait for the dust to settle over his own ascension, but the league’s executive vice president of media, former ESPN head Steve Bornstein, slowly brought Dick Ebersol around and inked a $600 million/year deal to take over NBC’s Sunday nights. It’s possible Disney could have kept both packages for much less than they ultimately paid had they jumped in sooner; instead, Iger was left with no choice but to accept a $1.1 billion deal to put Monday night games on ESPN. (Under the old arrangement, ESPN and ABC had paid $1.15 billion combined.) Just like that, ABC’s Monday night tradition was over.

NBC benefitted from the new flex-scheduling arrangement, but ESPN began setting cable ratings records left and right. By the time ESPN’s first season of Monday night games was over, it already accounted for the nine most-watched programs in ESPN history – in other words, more than half the Monday night games in just the first season had beaten every single Sunday night game on ESPN – including one game that became the most-watched program in cable television history, beating a 1993 CNN debate between Al Gore and Ross Perot, a record ESPN would set again each of the next three seasons and then hold until the BCS deal came along.

Monday Night Football still had cachet, was still a destination program, even if the NFL considered it on par with ESPN’s old Sunday night package and lower in the pecking order than what NBC had; it was the one game that had people’s undivided attention all day, and ESPN was able to build up to it all day and make it a true event. NFL games may have put ESPN on the map, but the move to Monday night established ESPN’s NFL games – and thus ESPN itself, and cable as a whole – as destination, must-have television. On the flip side, the end of Monday Night Football marked the end of ABC Sports itself; by the time the 2006 season, the first under the new deal, started, all sports programming on ABC had been rebranded as “ESPN on ABC”, complete with ESPN graphics. Soon, the sports that were airing on ABC began to inexorably dwindle.

But the NFL also opened a package of eight games on Thursday and Saturday nights up for bid. While Comcast on behalf of its Versus network, NBC Universal on behalf of USA, and Turner all expressed interest, the league ultimately opted to put the games on its own network, foregoing a rights fee in exchange for getting better distribution for its network whose profits the owners would all share in. It didn’t work as planned; for the rest of the decade the league constantly fought cable providers for carriage. Comcast initially offered the network to its digital cable subscribers the first year but moved it to a sports package the next, while Time Warner Cable and Cablevision, among others, held out entirely, many refusing to carry the network unless the league made the Sunday Ticket package available to them.

The league was able to get broad distribution for the network on Comcast again and break several other holdouts by offering a modified version of the Red Zone channel DirecTV had been offering Sunday Ticket subscribers as a premium service, but couldn’t get Time Warner Cable and Cablevision on board until it increased NFL Network’s schedule to a full season in 2012. It was the first high-profile carriage dispute arising from quality sports programming being placed on a marginally-distributed network cable providers were loath to carry at the prices they were being charged, but it would be far from the last.

The power of sports programming has the potential to create some strange bedfellows. It is such that two very different media companies can be drawn very close together almost entirely on the back of their complementary assets that they can bring to a sports contract, to the point of drawing speculation about a merger. Such is the case with the split between the CBS Corporation and Viacom in 2005, a split borne of personality conflicts between Les Moonves and the head of MTV Networks as well as a generally stagnant business, one that promised to insulate MTV Networks from the slower-growth businesses that CBS inherited, yet which created two companies with very similar revenues – and CBS was the one better situated to take advantage of the boom in sports rights… if it weren’t for most of the old Viacom’s cable networks joining the new Viacom.

By 2010 CBS wanted to get out from under a contract to air the NCAA Tournament that was set to lose it considerable amounts of money each year, to the point of engaging in talks to get ESPN to take it off its hands. Certainly the NCAA was very interested in moving most of the tournament to cable, which not only had the potential to increase the rights fees the NCAA collected but also allowed every game to be shown nationally, without the regionalization CBS had engaged in. CBS ended up retaining the tournament by forming an alliance with Turner to show games on TBS, TNT, and truTV in addition to the CBS broadcast network. Turner had never shown college basketball before and truTV, once known as Court TV, had never shown sports of any kind before, but Turner went so far as to start alternating the Final Four with CBS starting in 2016 (later negotiations allowed TBS to show the national semifinals in 2014 and 2015 while the national championship game remained on CBS).

CBS’ lack of any credible cable network prevented it from holding on to the tournament on its own, but neither was Turner in particularly good position to mount a bid without CBS. For the moment, the ability to partner with a broadcast network remains a critical piece of any effort to build a strong cable sports operation. To be sure, Turner’s strategy, as an owner of general-entertainment networks with almost-vestigial sports programming, has generally consisted of limiting itself to high-profile, big-ticket items like the major sports, but that didn’t prevent it from losing the rights to its portion of the NASCAR schedule, in part due to monetary losses. Since the NCAA Tournament deal, Turner has repeatedly looked for other properties to put on truTV, and has reportedly looked into turning it into a sports-heavy network, possibly moving over their MLB and NBA programming from TBS and TNT, but hasn’t been able to secure any other properties to put on the channel.

CBS’ broadcast network and Turner’s cable networks have talked about alliances for other sports rights, and CBS and Time Warner present complementary pieces in other ways as well – the two entities each own half of the CW network – with the only real point of competition between their respective television networks being the premium-cable networks HBO and Showtime. Even so, you’d expect any talks of an actual merger between the two companies to be limited to a very superficial analysis by a poster on a message board, yet it’s something respected financial analysts have discussed since the start of the NCAA Tournament alliance. There are a whole host of reasons to expect such a merger to remain limited to people’s fantasies, but given just how important sports have become, it’s easy to see just how enticing such a merger can look to armchair CEOs.

The prospect of ESPN and Fox competing to rack up sports rights, while also fending off advances from NBC, as CBS and Turner lurk trying to get their own piece of the action, has sports leagues salivating at how high it could drive their rights fees. Even for those without a horse in the race, the competition between the bunch of them can often seem like something out of a soap opera.

Major League Baseball has already seen the benefits the newfound competition can net them. Already it had benefitted from the steps taken by the NFL and NBA to move to cable: its 2006 rights re-negotiations placed almost the entire postseason on TBS, which ended its long tradition of national Braves games in favor of a general package of games on Sunday afternoons, with only the World Series and one League Championship Series remaining on Fox. (Previously Fox and ESPN had split the postseason with Fox airing both LCS’s and marquee Division Series games, effectively taking over Fox’s primetime in early-to-mid October.) But by 2012 it found itself in position to take advantage of its position as programming it would be hard to replicate, certainly in the near term, on sports networks.

First, it renewed its existing deal with ESPN. The new deal was not much different from what ESPN had before: ESPN kept its Sunday, Monday, and Wednesday night packages, only adding games on holidays, one game from the new Wild Card round, and any tiebreakers, yet ESPN paid close to double what it had been paying under the old contract. Doubtless a big part of the premium ESPN paid was to reduce the value of baseball to any other competitor, especially NBC, by locking them out of any of the most popular cable packages. Baseball intended to consolidate its remaining inventory to a single partner.

Desperate to maintain its presence in baseball that helped build TBS into what it became today, Turner began talking with CBS about an alliance that could allow CBS to air as little as the All-Star Game and World Series, but baseball was skeptical about the offer. That left the remaining inventory as Fox’s to lose, but Fox was unwilling to take on the weak Sunday afternoon package TBS had held for the price baseball was asking, so baseball ultimately split the rights between TBS and Fox. End result: Fox has two time slots every Saturday, with the vast majority of those games airing on Fox Sports 1, and splits the division series with TBS along the same league lines as the LCS, again with as many games as Fox wants, potentially up to and including (as is reportedly planned this year) every one of its LCS games, on Fox Sports 1, except for two games surrendered to MLB Network, while TBS reduces its Sunday afternoon commitment to the later half of the season. Both entities also paid double what they were before, despite TBS’ reduced commitment.

The biggest leagues and conferences may be salivating at having multiple competitors groveling at their feet for the valuable programming they represent, but smaller leagues, conferences, and events may benefit even more. With multiple ESPN networks, plus Fox Sports 1, NBCSN, and CBS Sports Network, there’s a lot of time in the day that needs to be filled. All these channels are desperate for programming, and that’s very good news for entities that might otherwise be completely ignored.

This is especially the case for CBS Sports Network, which is substantially weaker than the others, and which has signed contracts with the likes of Major League Lacrosse, the National Lacrosse League, the Arena Football League, and the last, abortive season of the UFL. After George Mason’s magical run to the Final Four and other NCAA Tournament success, the CAA managed to secure a substantial number of games on NBCSN, only to lose many of their best teams to the Atlantic 10, which also had a deal with NBCSN; NBCSN also has agreements with the likes of the Canadian Football League.

However, no sport may have benefitted more from the rise of cable sports networks than soccer, whose rise in the American sports landscape has been intertwined with the rise of digital cable, especially the Fox Soccer Channel, which launched in 1997 as Fox Sports World. For its entire existence through its closure last summer, Fox Soccer was the home to England’s Premier League, and as such was instrumental in spiking its rise in popularity. By the end, the Premier League was joined by games from Italy and occasionally France, as well as Europe’s biggest club competition, the UEFA Champions League, while GolTV, a significantly smaller operation launched in 2003, carried games from Spain and Germany, and sublicensed some of the former to ESPN.

Then Al Jazeera, the outfit best known as the news operation that aired Osama bin Laden’s tapes, stepped in, spiriting away the Spanish, Italian, and French leagues to create a network in beIN Sport that cable operators would have to carry, decimating GolTV and taking away a significant part of Fox Soccer’s depth. Fox Soccer, in many ways, became a victim of its own wild success; it built up the Premier League so much stateside that NBC swept the league away with a new deal that made it featured programming for NBCSN. Combined with also losing its MLS inventory to NBC, it made Fox Soccer’s conversion to the entertainment channel FXX inevitable, even with the Champions League set to be joined by World Cup soccer and other FIFA competitions. But starting next year Fox will take the German Bundesliga away from GolTV, leaving them with mostly South American leagues and potentially setting up the Bundesliga as the second-most popular European league in the states with most other leagues on the much-smaller beIN Sport.

Television has long had an impact on the biggest sports, but with sports increasingly becoming more important as programming for cable networks than in their own right, nearly every one has contorted itself to extract more money out of its partners, even in ways the fans may not like but will watch anyway. Such was the case when the NCAA considered expanding the basketball tournament to 96 teams during its 2010 renegotiations, as well as when baseball introduced its new wild-card games – in both cases motivated at least in part by a desire to increase inventory to sell to television networks. No doubt the evolution of the BCS to the new College Football Playoff was motivated as much by the desire to extract more money out of a TV partner as by the outrage surrounding the BCS system. And of course we’ve already seen how TV money has fueled conference realignment in college sports. Even smaller sports have been affected: Oracle head Larry Ellison signed an agreement to show the 2013 America’s Cup on NBCSN and designed a fast-yet-dangerous boat to make the race more TV-friendly, earning criticism and pricing almost all potential competitors out of the race.

Nothing shows the power of TV money to shape a sport, however, quite like the NFL. Forget the introduction of the Red Zone channel or the recent move to 4:25 ET starts for its late-afternoon doubleheaders. Consider that the NFL (and to a lesser degree, football as a whole) has come under fire in recent years over the issue of concussions and player safety more generally – yet the league has expanded its Thursday-night slate to a full season, meaning every team will have to play after only three days’ rest once a season, and continues to toy with the idea of expanding the regular season to 18 games, meaning more wear and tear on players’ bodies. But two more games means collecting another pound of flesh from the TV partners, and an expanded Thursday night slate means the possibility of selling some of it to a cable outlet – possibly one like Fox Sports 1 or NBCSN that would fall over itself to get the valuable programming of the NFL, even if the quality of play on Thursday nights has tended to be poor.

But when the NFL finally did sell part of the Thursday night package earlier this year, they made clear that whoever got the package would simulcast games on NFL Network, and that they were primarily looking to do business with a broadcast partner, not a cable network. The NFL didn’t like how the Thursday night games were lagging behind the other packages in viewership; by putting games on the largest possible platform, the league hoped make Thursday more of a destination night for football, thus increasing the value of the package for a longer-term deal. Audience size still matters, even for the almighty NFL, and broadcast television still provides the largest audiences. How much of the relatively weak Thursday night audiences are due to NFL Network’s still-relatively-limited distribution, how much due to some of the weaker teams the NFL’s rules require to play on Thursday night (the NFL has made clear it sees CBS’ part of the Thursday package as on par with NBC’s Sunday package), and how much due to the poor play that comes with only three days off, are all things the league will find out as the package plays out later this year. The requirement to simulcast games on NFL Network suggests that the NFL may still be leaving open the possibility of keeping games there without selling any at all over the long term.

Tomorrow: How the bubble may already be bursting and what the future might hold for sports and television in general.

The Nexus of Television and Sports in Transition, Part II: College Sports’ Faustian Bargain: A Case Study in ESPN’s Influence

May 7, 2014 by Morgan Wick

No one could have imagined just how much the NCAA v. Board of Regents decision would end up changing college football. The colleges who brought the suit simply wanted more control over the television contract, and for most of the 80s the CFA didn’t offer much that was different from what the NCAA had been offering. But ESPN began offering more and more games to a nationwide audience, and in 1991 Notre Dame broke from the CFA and signed a contract to air its games nationally on NBC. The SEC and Big East followed suit in breaking from the CFA in 1995, and the floodgates opened. College football was no longer a regional phenomenon played out on Saturdays throughout the fall; now it was a national sport played nonstop for three months.

Before 1984, the national championship was a sideshow, something that people paid attention to and debated over but that was of secondary importance to people’s regional rivalries and conferences. Every year the AP and coaches’ polls were taken at the end of the season and whoever got the most votes was declared the national champion. It was an extra crown to wear at the end of the season on top of the prizes that really mattered, winning your conference or at least winning your rivalries and going to a bowl game. Now people could follow the best teams and conferences all season long, and the sport’s basically nonexistent national championship, in a sports landscape littered with playoffs and certain championship games, became unacceptable. After co-champions were crowned in 1990 and 1991, the conferences that housed the CFA schools (the Big Ten and Pac-10 had separate contracts) plus Notre Dame formed the Bowl Coalition to attempt to force a “national championship game” between the top two teams in the nation. This was superceded by the Bowl Alliance in 1995 and finally by the Bowl Championship Series in 1998 following the CFA’s demise. The BCS managed to get the Big Ten, Pac-10, and Rose Bowl on board, putting decades of the Rose Bowl pitting Big 10 and Pac-10 champions against one another at risk (or throwing it out entirely every fourth year, at least at first), but meaning for once it could claim to really and truly be the true national championship of college football.

Except it wasn’t. Despite many tweaks to the formula over the years, the BCS only focused attention on just how much college football wasn’t set up to crown a true national champion. Controversy over the national champion – and if not that the championship game matchup, and if not that the teams in the other BCS bowls – appeared nearly every year of the BCS’ existence, and beyond that teams from the so-called “mid-major” conferences were utterly precluded from playing for the national championship. Their ability to play at the level of the major conferences had long been in doubt, but a series of high-profile wins over major-conference teams on the occasions they did make BCS bowls made more people wonder whether they – or at least, the Mountain West’s Utah, TCU, and BYU, and the WAC’s Boise State – really did deserve to play for national championships. Calls for a true playoff mounted over the years, and eventually the commissioners relented, instituting the new six-bowl, four-team College Football Playoff system to begin next year.

ESPN also created proliferation in the bowl system in general. There were only eleven bowl games in 1975, sixteen in 1983, and nineteen as late as 1994 (and eighteen for the next two years); for perspective, there were 107 teams in Division I-A in 1994, and any team with a winning record was eligible for a bowl, so you would expect 53-54 teams to be eligible for 38 invitations, most of them going to members of the power conferences. By 2000 there were 25 bowls; luckily Division I-A had grown to 116 teams as schools sought the vast amounts of television money pouring into college football’s top division, so there were 58 teams to fill the 50 spots. In 2002 three new bowls were added, bringing the total to 28, but only one team had joined I-A, so the 58-59 teams now had to fill 56 spots – in other words, you were nearly guaranteed a bowl if you finished with a winning record.

Then the NCAA decided to add a twelfth game to FBS teams’ schedules and allow 6-6 teams to go to bowl games, meaning the way was clear for more than half of teams in FBS to go to bowl games; four games started up in 2006 alone, opening 64 bowl spots for the 119-team FBS. As of the 2013-14 season there were 35 bowl games – only two of which are not on an ESPN platform – and a further flurry of teams entering the FBS ranks has expanded their number to 124, with five more to come. Naturally, although the new CFP will remove the BCS Championship Game from the slate of bowl games, there are already four games lined up to take its place, with several more looking to join their ranks.

ESPN and NCAA v. Board of Regents also shattered tradition and stability in the very makeup and identity of conferences. In 1984, no major college conference had more than ten teams, and most of them had most of their lineups remaining the same for decades. But in the 1980s, many members of the Southwest Conference, made up mostly of Texas schools, were hit with NCAA sanctions, including SMU’s infamous “death penalty” in 1987. In 1992, Arkansas left the SWC for the SEC, which had found a loophole in the NCAA bylaws that would allow it to split into two divisions and hold a conference championship game if it had 12 members, and so added then-independent South Carolina as well to hit the 12-team mark. That inspired Texas, Texas A&M, Texas Tech, and Baylor – half of the SWC’s then-membership – to join with the members of the Big Eight conference, including Oklahoma and Nebraska, to form the Big 12 conference, complete with their own title game, starting in 1996. The remaining four schools fell into mid-major conferences.

Television money and the BCS meant your conference defined your prospects. The more appearances on national television your conference, and thus your team, had, the more visibility you had in the public eye and the more attractive your school was to recruits. And if your school was a member of one of the six “BCS conferences”, the financial benefits couldn’t be counted; the worst team in a BCS conference made much more money off the BCS than the best team in a non-BCS conference could ever hope for. Independence – there were 26 independent schools in the 1990 season, five of which were ranked, more than any single conference – was no longer a viable option unless you were Notre Dame, whose independence survived only because of a combination of being one of the five most storied programs in the country (if not the most storied), its alumni being dead-set against joining a conference for any reason, and the fact NBC was willing to pay it to air its games and only its games.

The Big East, a basketball conference that had been formed primarily with monetary considerations in mind and greatly benefitted from ESPN’s money and exposure, only formed its football conference in 1991, adding five schools to fill out an eight-team football lineup, meaning only three of its prior members were members of the football conference. Though it enjoyed BCS status (thanks to initially having powerhouse Miami and later adding some of the better teams from Conference USA like Louisville), the Big East saw repeated defections to the ACC and the tension between its football and basketball sides ultimately caused it to split in two. Conference USA itself was only formed in 1996, composed mostly of independents whose previous non-football-sponsoring conferences had just merged. The WAC briefly expanded to 16 teams at the same time, taking in three of the SWC’s refugees, but that proved to be too unwieldy a size and it soon broke in two, with half its schools leaving to form the Mountain West in 1999; the MAC, meanwhile, added two schools in 1997 and also started staging a conference title game.

By 2007 only three independents remained in FBS – Notre Dame, Navy, and Army – and Army had spent several years in Conference USA. As early as 2004 Notre Dame and Navy were joined as the only independent schools by Florida Atlantic, which had just made the move to what was still called Division I-A and would join the Sun Belt the following year.

But 2007 would also completely and fundamentally redefine the nature of television money and make what conference you were in more important than ever. That year, the Big Ten, in association with Fox, launched the Big Ten Network. The Mountain West had launched its own network the previous year, but the BTN was the first network devoted to and owned by a major college conference. Much like the professional teams that launched and controlled their own networks, the Big Ten would control half the advertising and subscription revenue for the network that aired their games, rather than just collect a rights fee. Within three years, the BTN was making almost as much money for Big Ten schools as the conference’s contract with ESPN, resulting in Big Ten schools making $22 million each per year – more than three times as much as a school in any other conference, BCS or no, outside the SEC. For all its tradition and history, the Big Ten was now, more than anything else, a moneymaking alliance.

With Big Ten schools making so much money, the Big Ten could have its pick of just about any school in the country that would leap at the chance to get in on the action. In the past, even when driven by television money, realignment had been based primarily on geography and rivalries; the four Texas schools were a natural addition to the Big Eight, besides the existing bitter rivalry between Texas and Oklahoma; the additions of Arkansas and South Carolina were natural outgrowths of the SEC’s existing footprint; the Big Ten itself had added Penn State, a natural fit to its Midwestern roots. Now all that mattered to schools was the value of the conference’s television contract, and all that mattered to conferences was how an addition could maximize that value. If the Big Ten could add Texas and the bounty of television households it added to the Big Ten Network (and an inroad into those fertile recruiting grounds), or add a school that could help it make inroads into the lucrative New York market, it would. Too much geographic fit was now actually a bad thing if it didn’t help the BTN get into any new households.

Even the Big Ten’s role as a conference became less important than its television contracts to its identity. It could easily expand to a 16-team “superconference”, maybe even 20, doubling the size of what any conference might have looked like just a generation earlier, despite there still being only 12 games in an FBS season and some of those needing to be nonconference games, to say nothing of the impact such an unwieldy conference would have on other sports, including basketball. Indeed, the Pac-10 came close to recruiting three Texas schools, Colorado, Oklahoma, and Oklahoma State to form a superconference itself, with the arrangement only falling apart when Texas A&M elected to join the SEC instead and ESPN guaranteed the value of the Big 12’s contract to keep it together, leaving the Pac-10 with only Colorado.

The spectre of ESPN and TV money in general hovered in the background throughout the process, and sometimes moved very much into the foreground. ESPN saving the Big 12 was far from the end of it. The Big East rejected a massive TV contract from ESPN, only to lose two of its most prominent schools, Syracuse and Pittsburgh, to the ACC – and then listened to Boston College’s athletic director make comments about the move that included the money line “TV – ESPN – is the one who told us what to do”. The AD and all parties involved quickly backed off the comments, but for many bloggers it seemed an admission that ESPN was pulling all the strings on conference realignment and, in this particular case, may have given the Big East the proverbial “offer they couldn’t refuse” and the departures of Syracuse and Pittsburgh were the metaphorical horse’s head in their bed. The Big East effectively divorced from itself, the conference’s Catholic schools seceding and winning the rights to take the Big East name with them, while the remnants that were left behind – those that didn’t decide they didn’t want to join after all – were left to take much less money from ESPN and go forward as the American Athletic Conference.

Longstanding rivalries were thrown by the wayside in this round of realignment in the name of chasing the almighty dollar. The “Backyard Brawl” between West Virginia and Pittsburgh was quite possibly the biggest college football rivalry in the Northeast, with only World War II interrupting it since 1919. Didn’t matter: the Big 12 needed teams to make up for defections and decided West Virginia had the best combination of a strong school and a strong football program known nationwide despite being hundreds of miles from any other team in the conference, while the ACC decided they needed to shore up their claim to being the conference of the Northeast and added Syracuse and Pittsburgh despite how far those schools were from the Atlantic coast or the rest of the conference. The “Border War” between Kansas and Missouri reflected a bitter rivalry between those states that dated to before the Civil War. Didn’t matter: the SEC needed a 14^th team to go with Texas A&M and valued the population Missouri could add to the conference and the overall quality being enough to make up for adding another mouth to feed.

The Big Ten ultimately decided to add Nebraska, a team from a small market but a football powerhouse with a national following and another natural geographic and cultural outgrowth for the conference, while the Pac-10 added Utah to complement Colorado and decided to start their own conference network without help from anyone else and retaining a considerable amount of inventory for itself. The result earned so much money that the SEC reconsidered their position on conference networks. The SEC’s contract was up for renegotiation shortly after the BTN was unveiled and ESPN effectively bribed them away from starting their own network by paying them over a billion dollars, taking control of virtually their entire inventory, and giving them one of the most widely-distributed syndication packages in the country, but the SEC, despite having the richest contract and in the midst of an unprecedented run of national championships, added Texas A&M and Missouri in part as a pretext to renegotiate the contract to start a network, even if the terms of the contract effectively made partnering with ESPN the only way to do so.

Meanwhile the Big Ten, despite sitting at twelve teams (in a much-commented-on irony, the Big 12 sat at ten), the sweet spot to hold a conference championship game, decided they needed to expand further, and while in the past Penn State and Nebraska had been good cultural fits for the rest of the conference, this time they added Maryland and Rutgers, two schools on the eastern seaboard a good distance away from any other Big Ten schools, Maryland a rising basketball power that had recently started a budding intra-ACC rivalry with Duke but facing massive financial problems, Rutgers a school that had played in the first-ever college football game and had had a brief flowering of success but was still an uninspiring school with an apathetic at best fanbase. More than anything else, the addition of Maryland and Rutgers showed how the priorities had changed: it was more than anything about preventing the ACC from having an undisputed claim to the Northeast and putting the BTN on cable systems in the big markets of Washington, DC and New York City respectively.

ESPN has had near-monopoly status over the sports landscape for a long time – and by the mid-2000s, it had reached the point that the Justice Department began looking into it. At issue was the notion of “warehousing” inventory with college conferences: ESPN was signing deals left and right with just about every collegiate conference, taking in way more inventory than they had space to air it on ESPN and ESPN2, but refusing to sell their excess to anyone else. Many smaller conferences accused ESPN of hoarding inventory to keep it away from potential competitors and limit conferences’ exposure.

The issue was brought to a head by a fledgling network named College Sports Television, or CSTV, which had launched in 2002. CSTV, the first network dedicated entirely to college sports, was too small to have any shot at any rights from the major conferences, but it hoped to pick up some rights from the better mid-majors – only to find that ESPN had all the rights they were looking for and weren’t giving them up, and threatened any conferences that looked to do business with CSTV.

In 2004, CSTV took their case to the Justice Department. Though then-President George Bodenheimer recently dismissed the importance of the investigation, ESPN’s lawyers took it seriously and cautioned executives to tread lightly. ESPN was in the midst of negotiations with the Western Athletic Conference at the time, whose commissioner wanted to make a deal with CSTV that would yield more money and TV appearances, while the school presidents wanted a deal with ESPN that could offer wider exposure. Reportedly, when the commissioner asked an ESPN executive, how ESPN could continue its warehousing practices in the wake of the Justice Department’s investigation, the executive dismissed the idea.

Clearly, though, the investigation had an effect. CSTV would soon lure the Mountain West Conference away from ESPN, and ESPN agreed to share rights to Conference USA and the Atlantic 10 with the upstart network. Shortly thereafter, CSTV would be acquired by CBS, giving it big pockets and a major media corporation to help it make inroads on cable systems; it has since metamorphosed into the all-purpose CBS Sports Network. And the following March, ESPN would launch a new network, ESPNU, that would be its answer to CSTV but – more than that – would provide more space for ESPN to show content it had under contract and thus reduce warehousing complaints. The fact that it would provide more fuel for Disney’s bundle and a new revenue stream certainly didn’t hurt.

Today, ESPNU is in 75.6 million households and collects a 20-cent subscriber fee, putting another $15 million in ESPN’s coffers every month, or $181 million a year. CBS Sports Network, meanwhile, only recently crossed the 50-million mark and collects a slightly lower subscriber fee, netting just over $10 million a month or $120 million a year – and it doesn’t have the deep pockets ESPN has from its myriad of other networks.

No sport has been influenced more by television, and specifically ESPN, over the last few decades than college football, and the proof is printed right on the tickets – or rather, it’s in what’s not printed: the kickoff time. The dates and opponents may be scheduled months or years in advance, but for most of the season, nearly every Saturday game in a power conference has its kickoff time up in the air, waiting for its TV partners to inform them what games will air when and on what networks, which occurs twelve days before game day, in some cases only six. Other sports and leagues have embraced this notion of “flexible scheduling”, but none have taken it as far as college football, where fans (and coaches, and players, and school officials) have literally no clue when their game will kick off until less than two weeks in advance.

College football, in other words, has become a made-for-TV event. After the Board of Regents decision, ESPN convinced smaller conferences to break from tradition and play games on Thursday; today, Thursday is a destination night populated mostly by the biggest conferences, and ESPN has populated most of the week from Tuesday to Saturday with college football. ESPN has even gotten into the business of playing matchmaker, finding schools with holes in their nonconference schedules and booking matchups between them to create attractions people will watch every week of the season. In an age where schools are constantly maximizing their wins in order to increase their chances of qualifying for bowls or playing for the national championship, such ESPN creations are just about the only place where quality nonconference matchups happen in the regular season outside of regularly scheduled rivalries. ESPN even owns the software used by virtually every school – and even competing networks – to schedule games, known as the Pigskin Access Scheduling System (PASS).

The “BCS busters”, such as TCU and Boise State, could owe their success to ESPN and their willingness to play games when ESPN asked them to, even if it fell in the middle of the week and heavily inconvenienced fans. Those games meant exposure, exposure that could be golden for a school that couldn’t otherwise count on it. TCU was mired in the dumps a few years after being left behind by the Southwest Conference’s collapse, but it built its way back up by accommodating ESPN and playing all throughout the week, even playing on Friday and thus competing against high school football, a religion in Texas. It paid off: even after the Mountain West left ESPN in 2006, TCU had such success it made repeated trips to BCS bowls, even the vaunted Rose Bowl, and eventually made it back to the big time, rejoining several of its fellow Southwest Conference-mates in the Big 12 in 2012, where they scored a Thanksgiving-night upset win over mighty Texas.

Boise State followed the same formula upon joining the Western Athletic Conference, a conference that had weekday slots to fill on ESPN, in 2001, just five years after entering Division I-A. Before long, Boise State scored a landmark victory over Oklahoma in the 2008 Fiesta Bowl, and the WAC’s rights payments from ESPN were the envy of most other non-BCS conferences. But once Boise State decided to make even more money in the Mountain West, it was the beginning of the end for the WAC. Its rights fee from ESPN plummeted to less than a third of its former value, and as the Mountain West lost teams to other conferences, it repeatedly raided the WAC’s best schools, and soon the WAC became almost unrecognizable. With only seven football-playing schools left, 2012 was the WAC’s last year even sponsoring a football conference, and now as a non-football conference it’s populated by such schools as Seattle University, which only recently even returned to Division I.

Louisville was one of the first to boast of the benefits ESPN provided it. In 1995, it had just joined Conference USA, and decided to construct a new, state-of-the-art football stadium to replace one that was pushing 40 years old. After finishing 1-10 in 1997, it hired a new coach that brought a television-friendly pass-happy offense to the football team, a ticket Boise State would also use to attract ESPN’s attention. Conference USA signed a contract in 2001 that made it the first conference to colonize Tuesday and Wednesday nights for football, but most of its schools balked at the notion of going so far against tradition, at a time when even Thursday night games were only grudgingly accepted. Louisville, then mostly a commuter school, was not one of them. They played as many as five or six games in the middle of the week the first two years of the contract, or half of their entire schedule. The school effectively had to blaze its own trail for how to prepare with such an unusual schedule, but it paid off in exposure and in wins. Louisville became a national name in a way it never had been before, and by 2006 it not only found itself in a BCS conference (the Big East), it wound up going 12-1 and playing in (and winning) the Orange Bowl. Two Thursday night games against other national-caliber opponents that year became some of the highest rated college football games in the history of ESPN, convincing more prominent schools Thursday nights were worth the disruption.

This year Louisville will join the vaunted Atlantic Coast Conference, and with it will come much more television money – but even beyond that is the ability to hit up local businesses and alumni for more donations to improve the athletic department’s facilities off the back of its national-caliber programs. And on-field success has also built Louisville into an academic power as well: better students and professors, more students living on campus, more scholarships, more academic achievements.

ESPN has also gotten into the business of owning many of its own bowls, because it knows how important bowl games are to filling up its December schedule, no matter what teams play in them. The nine bowls it owns are some of the lowest-rated of the season, and many might not exist without ESPN propping them up. But prop them up it does, because even the lowest-rated bowls still attract millions of viewers, viewers even ESPN would struggle to attract any other way, viewers drawn to the live programming that is ESPN’s biggest strength. Those millions of viewers are now one of the biggest rewards of trips to bowls, which can help a mediocre program draw recruits and stay where they are or even move further up the chain. They help explain why a school whose team goes 6-6 leaps at the opportunity to go to a bowl, even a tiny one, even if the vast majority of schools end up losing money on the enterprise.

In general, success in college sports has become a high-stakes game of blackjack for schools increasingly facing tight budgets and rising tuition costs. Every school seeks to match the rise of Boise State in football or Gonzaga in basketball, becoming a national name that makes money directly for the university and gets their name into the minds of potential students. Most end up losing money on the enterprise. Of 340 Division I schools, only about 23 end up making a profit and sending money back to their schools’ general fund.

With so much at stake, academics is increasingly left by the wayside. The NCAA’s insistence on referring to its players as “student-athletes” – and its incessant commercials during the NCAA Tournament that proclaim that “most of [them] will go pro in something other than sports” – increasingly rings hollow. Conference realignment and weekday games increasingly means longer travel-times and less time to attend classes and take tests. Once a way to help build healthy bodies as well as healthy minds, college athletic departments are now professional sports teams within academic institutions – except they don’t have to pay their players.

It’s becoming increasingly difficult to defend the amateur status of student-athletes, once considered the core principle of collegiate athletics, when seemingly everyone else is making money from the system hand over fist. Not that student-athletes are necessarily coming away empty-handed; these days it seems like a program and its alumni should be assumed to be paying its players under the table until proven otherwise, and the NCAA seems to be a bunch of Keystone Kops, seemingly helpless to enforce its own rules (if not actively looking the other way) and its punishment seemingly arbitrary and capricious, if not completely random, when it does come. The notion of paying for a student-athlete’s “full cost of attendance” above and beyond a player’s scholarship, room and board, is enjoying increasing popularity among college athletics’ gatekeepers, but for many, it’s far from enough.

Ed O’Bannon was a star player on UCLA’s 1995 national championship team before having a short NBA career. One day, he discovered that his likeness was being used on NCAA-branded video games, yet he wasn’t seeing a dime in revenue from them. He brought a class-action suit against the NCAA that could have a tremendous impact on the NCAA’s money flow and how college athletes are treated. So could the National Labor Relations Board’s ruling last month that Northwestern football players meet the definition of “employees” and so are allowed to form a union – implicitly allowing the same for all private universities. (Student-athletes at public universities would have to go through individual states’ labor boards.)

Lost in the increasingly heated debate over the treatment of student-athletes is the fact that the entire reason the NCAA’s claims of being an educational, amateur enterprise ring so hollow, and why the whole issue has come to a head to begin with, is because of the millions if not billions of dollars pouring into collegiate athletics that have already wiped out the purity of college sports the NCAA claims to be defending in the eyes of all but the most idealistic, deluded, or self-interested observers. That money is coming in partly to fill time on ESPN and other networks, but it wouldn’t be nearly as much if college sports weren’t so incredibly popular, with college football providing America’s most popular sports programming outside the NFL and Olympics.

Similarly, the NCAA will point out that if football or basketball stars were really so exploited by not being paid beyond the costs of their scholarship, they could play in minor leagues or, in the case of basketball, abroad, or if they wanted to, the NFL or NBA could start their own developmental leagues akin to the minor league baseball system. But players don’t go to those leagues, and the NFL shut down its developmental league, NFL Europe, not that long ago, because no one cares about them – nor do they really care all that much about minor league baseball, for that matter, despite its own history and tradition. But they care mightily about their college teams, and in turn, those audiences allow players to build their brand and starpower and grow their exposure in ways nothing else out there can.

And the reason that people care so much about college sports is the connection between the team and the school that inspires people to root for “their school’s” team regardless of who the players are and in spite of the fact all the players would much rather be in the NFL or NBA. That passion has inspired, and continues to sustain, a multibillion dollar industry that has severed the very connection that built it. Big time college athletes don’t care one whit about the school they attend beyond the team that represents it and only go to class because the conditions of their scholarship demand it. They are only there to develop their game and their brand for the professional leagues. In essence, big-time college sports consist of developmental teams for the NFL and NBA (that those leagues don’t have to pay for) that have sold their naming rights for a fanbase. Jerry Seinfeld’s crack about how professional sports fandom, especially in the post-free agency era, amounts to “rooting for laundry”, is all the more apt in modern college athletics.

That professional sports leagues have managed to survive and thrive in the post-free agency era in spite of Seinfeld’s observation suggests the same could be true of college athletics if the players were acknowledged as paid employees. Still, what could happen if the façade were lifted on the system and college sports became, if they weren’t already, professional teams whose only difference from the actual professional teams were the quality and limited career of the players and the mostly arbitrary connection to the school you attended? (At least professional teams have to have some sort of connection to a location; many college teams play well off-campus and some share arenas or fields with pro teams.) The NCAA – and ESPN – might not want to find out.

Tomorrow: How other media companies are trying to copy ESPN’s lucrative business model.

The Nexus of Television and Sports in Transition, Part I: The Worldwide Leader in Profits

May 6, 2014 by Morgan Wick

Situated on US 6 about 20 miles southwest of Hartford, the town of Bristol, Connecticut, was one of the early New England industrial towns. Incorporated in 1785, a few years after the end of the American Revolution, its economy took off as it became known as a clock-making town, eventually becoming home to the American Clock and Watch Museum, and later became known as the “Bell City” for its role as a center of doorbell production. As you approach the town from New York along quaint two-lane Route 6, the 19^th-century style of architecture New England is so famous for gives way to forests and then a large reservoir, until you cross a railroad track and begin seeing rows of strip malls and small houses on your left, nothing to distract you too much from the Connecticut foliage and fields. Approaching from Hartford on Route 6 in the other direction, the four-lane highway slows down and shrinks to two, then as soon as you hit the line you’re slammed with gas stations and car dealerships as the road widens again through modern suburbia. Approaching from Providence and other southeastern points (or even Hartford) on Route 72, the expressway seemingly isolated from all civilization comes to an end just short of the town line, but the road continues as a four-lane divided parkway, avoiding the Forestville area and continuing not to engage with the surrounding, though visible, community until after it passes Malones Pond, beyond which it speeds past apartment buildings and incongruous houses.

Approaching from New Haven, which is almost due south of Bristol, Google Maps recommends taking Interstate 91 to Meriden, then turning onto I-691. As I-691 approaches its west end, a single lane splits off to form an on-ramp to eastbound I-84, leaving the other two lanes to continue west. A sign welcomes you to Bristol’s neighbor Southington before the ramp even reaches I-84, and scenic vistas speed by along the long ramp as various roads pass underneath; by the time you finally reach I-84 only the single-lane nature of the ramp tips you off that you weren’t on it already. The freeway remains fairly straight but abruptly turns left as you hit Exit 30, then swings right and remains relatively straight again, but prepares to curve to the right as you take Exit 31 to route 229. As the off-ramp rises to meet the road, a collection of signs on the left informs you what awaits in Bristol if you turn that way, none of them mentioning the most salient feature of this road into Bristol. After the initial spurt of gas stations and a turn-off to a Target near the I-84 interchange, Route 229 settles down past some relatively nondescript houses and other businesses; though initially a four-lane highway, the southbound side soon shrinks to a single lane as the highway becomes lined mostly with trees, eventually opening up to more houses and a few churches, which, punctuated with occasional spurts of businesses, remains the general character of the highway for some time.

And then, before you even get to the town line, you see it. Until recently, the first thing you saw was just a mass of brick buildings, only different in height from any other office park, stretching off into the distance; then the road turns left, widens back to four lanes, and hits a stoplight at a dead-end road. Then you see the massive parking lot, the humongous artifice (most of it all one building) of brick and glass, a satellite dish facing the roadway. More satellite dishes face the dead-end road you passed up, where you could see the full majesty of what lies before you. This is the headquarters of ESPN, the most powerful brand in American media, once a plucky underdog in the American sports landscape, now a seemingly unstoppable multi-billion dollar juggernaut that has become the profit engine of the Walt Disney Company, far more important to the House of Magic than Mickey Mouse. Here, in a random town in the middle of Connecticut, is the capital of the American sports universe, a place that now finds itself at the epicenter of an increasingly heated debate over the increasingly important role of sports to the cable TV industry, the many millions of dollars flowing into Bristol and from there to leagues and conferences across America and the world and its starting point in the pockets of cable TV consumers, and even the future of the television business itself.

The Free and Open Internet: 1989-2014?

May 4, 2014 by Morgan Wick

This is the way net neutrality ends: not with a bang, but with a whimper.

That’s my takeaway from the FCC’s unveiling a little over a week ago of its proposed new net neutrality rules, the replacement for the rules the courts threw out this past January, that effectively undermine the core premise of net neutrality by allowing ISPs to charge content providers for “priority” service to their customers. While ISPs could not outright block service, and FCC Chairman Tom Wheeler says he would not allow any company to use the rule to quash potential competitors or otherwise discriminate, such a rule would still advantage moneyed interests and make it harder for newer, smaller content providers to compete, especially those engaging in bandwidth-intensive services like video, which already have high capital and maintenance costs.

The truth is, though, this is the culmination of a series of moves that have slowly chipped away at the open Internet. AT&T has already flirted with making certain sites effectively cheaper for its customers, and the Comcast/Netflix deal may have been a bellwether for ISPs to impose such tolls with or without new rules. Moreover, over the past decade the Internet itself has undergone numerous changes as people have been increasingly filtering their Internet experience through social media and apps, both of which have the potential to undermine the open Internet and thus degrade support for it. We’ve reached the point where people within the industry are openly trying to argue against net neutrality – sometimes claiming in Orwellian fashion that ending or degrading net neutrality will somehow help preserve Internet freedom – and for “smarter” networks, with the chief of staff for an FCC commissioner arguing for networks that can “discriminate” between “vital healthcare info” and “a YouTube video of John Travolta mangling Idina Menzel’s name at the Oscars.” Of course, it should not be the place of ISPs or government to determine what is “vital” or not, but we may fast be approaching the point where that is precisely what they do.

Earlier this year, we marked the twenty-fifth anniversary of the World Wide Web. Before the Web came along, the Internet consisted primarily of expensive terminals at college campuses, and a series of walled gardens that effectively represented the Internet to the few people able to access it at home. Over the course of the 90s the Web effectively crushed all the walled gardens that had been built up and became synonymous with the Internet in most people’s minds. Now we may be drifting back towards an Internet landscape of walled gardens, under the aegis of ISPs, social media sites, and apps, where independent voices become harder and harder to be heard.

If one image could explain how we got to this point, it would probably be the one that accompanied Chris Anderson’s infamous 2010 Wired piece declaring “The Web is Dead”. It didn’t quite say what he wanted it to, but it did show that by 2010, video made up 51% of all Internet traffic in the United States. Keep in mind, this was over a year before Netflix’s Quikster fiasco, when the company tried and failed to split off its DVD distribution service, let alone Netflix’s major venture into original content with House of Cards and the like; YouTube was probably the biggest engine of all that video traffic in 2010.

As Anderson’s critics pointed out, this wasn’t because people were spending half their time on the Internet watching video, but simply because of the massive amount of bandwidth video consumption chews up. Now imagine video consumption double or triple, or even more, what it was in 2010 – that is to say, imagine all the other uses making up half, a third, or even less what it was then relative to the rest of the Internet. Imagine every ounce of video consumption that currently takes place on traditional broadcast and cable television moving to being carried over the Internet – a future that looks increasingly plausible. It’s easy to see how the Internet could become, from the perspective of the ISPs, first and foremost a video delivery service, even as all the other uses could easily make up half or more of its popularity, with the vast majority of the traffic on its wires coming from a small number of services. At that point, charging those services for the traffic coming down their pipes would make too much sense (even if ISPs were more willing to upgrade their networks on their own than they are now). Net neutrality would seem a quaint notion ill-suited to the realities of the modern Internet. (Better compression technologies will help, but those gains could be wiped out by demands for 4K and other high-end video technologies.)

The Internet may technically be able to absorb the intense demand for video coming its way over the course of the rest of the decade, but it’s looking likely that net neutrality will suffer greatly, if not be an ultimate casualty – unless we have some way to take some of the demand for video off of the Internet, or at least reduce the strain it might cause. The answer to that could come from a surprising source – a blast from the past flirting with its own complete obsolescence. This week I’ll have a series of posts on how sports is increasingly traditional linear television’s main reason for being, and how that’s warping both industries – and what that says about the Internet-centric future video is starting to transition to, as well as the role different technologies could have in saving net neutrality… if it isn’t killed off first.