The Game to Show the Games

How NBC Gets the Olympics Exactly Backwards

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Another Olympics has come and gone, and with it another round of hand-wringing over NBC’s tape-delay policy, fueled further this time around by NBC’s historically low ratings for its primetime coverage. NBC’s primetime coverage averaged a 14.4 household rating, dominant over the rest of TV but the second-lowest mark for a Summer Games since at least 1968 and probably ever, beating only Sydney in 2000, with declines especially acute among key young-adult advertising demographics. People are still trying to figure out the reasons for the low ratings, especially since everyone expected numbers much closer to London (the highest-rated non-North American Summer Olympics since 1972), but plenty of wags on the Internet and among sportswriters are pointing the finger at NBC’s long-standing and woefully outdated policy of tape-delaying the marquee events for primetime. This, of course, despite the fact that Rio is only an hour off of the East Coast and many events, including the marquee track and swimming events, aired live in primetime, meaning if anything NBC is likely to come to the conclusion that the Games suffered because they were live, not because they were taped. London had no events live in primetime, while NBC pulled strings to get Michael Phelps’ chase for gold into the morning time slot in Beijing, putting it in primetime on the East Coast. The result: London’s completely taped coverage beat Beijing’s mostly-taped coverage, which beat Rio’s mostly-live coverage. It sure looks like tape delay helps NBC’s ratings rather than hurts them, no matter how much people on social media may whine about it.

Further fueling this attitude is the popularity of the Olympics on the West Coast, where even NBC’s live primetime coverage is delayed, and thus where the whining about tape delays reached a fever pitch, but which is perennially the region where the Olympics are most popular, something NBC Sports chairman Mark Lazarus pointed out. But the dominance of the West Coast is not what it used to be; Salt Lake City and Denver were the top two markets, but San Diego was the only other market in the Pacific or Mountain time zones to crack the top 20. In Beijing, those three markets were joined by Portland in the top 10, and at least in the first week (when Phelps raced), four more West Coast markets placed in the top 17 with higher-than-average ratings, including every West Coast market in the top 40 except for Seattle (which gets the CBC’s live coverage on our cable systems). Had that held, it would seem to suggest that, even holding the time slot and specific games constant, tape delay only improves ratings. Instead, it raises the question of whether the West Coast, and indirectly audiences in general, really are souring on tape-delayed Olympics coverage.

Of course, since 2012 NBC has allowed people to stream almost all the events live regardless of where they live, albeit with the Olympic international feed’s announcers, and NBC claims that when streaming and cable are added in (for the first time ever, NBCSN and Bravo aired coverage in primetime that cannibalized some of NBC’s audience), the Rio Games trailed only London as the second-most watched ever. Streaming, however, remains only a teeny-tiny subset of total viewing, with the total amount of streaming for the entire games accounting for as much consumption as an hour 45 minutes of NBC’s primetime coverage.

But even though live sports streaming in general has a fraction of the popularity of viewing sports on linear TV, that only gets to the real problem with NBC’s “Olympics as ultimate reality show” approach, namely that it treats the Olympics as a type of programming that is slowly losing its relevance to linear television. Indeed, as “cord-cutting” increasingly emphasizes being able to watch what you want when you want, leaving live events as the sole area where linear television retains a purpose in the face of the rise of the Internet, NBC’s approach of streaming the Games live and delaying events to be neatly packaged for its linear network seems to be exactly backwards. As I’ve said before, streaming is not and may never be well-suited for airing major live sports events, and while complaints about Olympic streaming seemed to be more about the experience of getting through NBC’s authentication and its insistence on delaying the Opening Ceremony even on the stream than the sluggishness experienced in London, if NBC continues to insist on streaming as the only guaranteed method of watching marquee events live, it will only put themselves under more and more strain, or alternately greatly increase the cost of delivering the Games smoothly, as streaming becomes more normalized as a means of watching content. On the other hand, it’s disingenuous for NBC to insist on packaging the marquee events for showing when everyone is at home and then require that those events be shown at the same time for everyone even when they’re not live; after all, not everyone has a 9-to-5 job where primetime is the most convenient time to watch the Games. There is a place for recorded, prearranged programming on linear television, but that place is heavily reliant on social media, and social media was disproportionately represented by those that didn’t like NBC’s current strategy.

By the end of NBC’s current contract running through 2032, I could see NBC’s linear channel(s) (assuming it still exists as such) sticking strictly to airing the marquee events live, while also offering its traditional packaged coverage for streaming online whenever someone wants to start it for those who want the Olympics as “ultimate reality show”. That NBC does not do this already, instead forcing both the sports and reality fans to watch tape-delayed, packaged coverage at a specific time in order to maximize ratings for that specific time and sell ads at the highest price, is a sign both of how far streaming has yet to go to achieve normalcy, and a sign of how slowly linear television is embracing its true nature and the key to its future.

Will an ACC Network Be Obsolete Before It Launches?

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In 2013, a year after financially-struggling Maryland left the ACC for the greener pastures of the Big Ten, the Charlotte News and Observer obtained e-mails that circulated among the leadership of the University of North Carolina, perhaps the single most important school to the long-term survival of the ACC, showing their reaction to the news. Many of the e-mails expressed disbelief at a Sports Illustrated article that claimed that Maryland would make nearly $100 million more in its new conference by 2020, thanks to the Big Ten Network, than it would have made in the ACC, with UNC officials looking for confirmation that Maryland was going to make that much more money (indeed Maryland itself wasn’t aware of it until it started going through realignment talks). But for many college sports fans following the sports media and college sports realignment worlds, the fact that the Big Ten was making oodles more money than any other conference was hardly news, but something that had been widely reported throughout the sports media and had been fueling the current round of realignment from the start. Ordinary college sports fans and bloggers knew more about the financial disparities between the major conferences than the university presidents within them whose job it was to make informed decisions. As Frank the Tank, one of the bloggers most responsible for exposing the implications of those disparities, put it:

It would have been one thing if these were average sports fans just focused on on-the-field results, but it’s quite amazing that university leaders and athletic department officials didn’t seem to be as informed on college sports financial matters as, say, most of the people reading this blog or those that followed the reporting of mainstream media members like Brett McMurphy of ESPN.com, Andy Staples of SI.com and Dennis Dodd of CBSSports.com. It’s an indication of the insularity of many universities and athletic departments and partially explains why the inertia in favor of the status quo is often stronger than many conference expansionistas would like to believe. What we’re seeing is that it takes a real external crisis for the vast majority of power conference schools to take notice of the information that’s out there and consider switching leagues.

I thought of this upon hearing about the ACC’s move announced last week to try to rectify this disparity, which has only grown to their further disadvantage with the launch of the SEC (and Pac-12) Network, yet the circumstances surrounding it have changed considerably since 2012. The sports-network market has always been built on the con of the cable bundle, where people with little to no interest in sports see large chunks of their cable bill get shipped off to pay for sports networks, and recent years have seen one piece of news after another suggesting that bundle is being increasingly undermined. My generation sees little value in the bundle and has increasingly been “cord-cutting” to get their entertainment from sources like Netflix and Amazon, getting away from bloated bundles that exist largely to subsidize sports networks. Investors are increasingly concerned about what the trend means for the sports-network market and especially ESPN, which finds itself caught between the rock of cord-cutting and the hard place of their desire to keep the cable bundle going for as long as possible; no less an institution than Moody’s has predicted the end of the cable bundle and that regional sports networks are looking like an increasingly dicey proposition. Meanwhile, cable companies, blamed for higher prices even as they struggle to keep pace with the rising price of sports networks, have increasingly taken stands against the launch of more and more new networks, as evidenced by the carriage struggles of SportsNet LA and the network formerly known as CSN Houston, with SportsNet LA remaining uncarried even as Time Warner Cable has reduced its price and even in Vin Scully’s final season.

Against this backdrop, the ACC has been the one major college conference with a substantial number of third-tier games still airing on broadcast television through regional syndication on Raycom. Assuming broadcast stations could get their act together and ensure wide coverage without relying on the crutch of retransmission consent (hardly a sure thing), I felt that, for all the ACC may have looked longingly at the SEC and Big Ten Networks and the revenue they make, staying the course could prove to give them a massive advantage in exposure if the market flipped and the SEC Network and BTN found themselves limited to what could be a distinct minority of people willing to pay relatively large amounts of money for them or for bundles including them, especially among poorer recruits, and especially if the ACC made an aggressive move to distribute their syndication package nationwide.

Instead, last week the ACC and ESPN announced an extension of their existing media rights agreement for the next twenty years, with the launch of a new “ACC Network Plus” digital network this fall leading up to the launch of a full-fledged linear ACC Network in 2019. I’d be shocked if the cable bundle still looked anything like it does today by 2036, and frankly I’d be surprised if it still looked viable in 2019. Reportedly, the long delay for the launch is related to the expiration of ESPN’s carriage agreements with cable providers, meaning ESPN would rather hold off on the launch of the ACC Network until it can tie it in with its established linear networks. But the addition of the ACC Network to ESPN’s bundle could be what causes the bundle to collapse entirely and marks the fall of ESPN’s empire.

Cable operators have been chafing under ESPN’s tops-in-the-industry subscriber fees for a long time, with Dish Network chairman Charles Ergen suggesting in 2011, following the signing of an expensive Monday Night Football deal, that certain companies might decide to go without ESPN and market their service as a low-cost alternative for non-sports fans, and in recent years many such operators have been experimenting with sports-free packages that offer a selection of popular channels at a lower price, resulting in ESPN’s carriage falling considerably. But no cable or satellite company has taken the plunge and experimented with cutting ESPN out of their lineups entirely, instead limiting the availability of their sports-free packages to avoid violating their ESPN contracts, and online “skinny bundles” that have won considerable acclaim for being an “alternative to the cable bundle”, including Dish’s own Sling TV, have made themselves part of the problem by including ESPN and other sports networks. For now, pay-TV providers feel they must have ESPN’s high-value programming such as MNF and the College Football Playoff, even though they know it’s almost single-handedly fueling the revolt against the cable bundle, because even as the cost of sports drives people away from the cable bundle, the presence of sports is the one thing keeping people tied to it, because live events, especially sports, are the one thing linear TV does better than the Internet. The power of ESPN explains why the SEC Network, theoretically a channel of regional interest, had the largest launch in cable TV history, avoiding even the carriage battles that bedeviled the Big Ten Network.

But for as much as the SEC Network benefited from the ESPN connection, it may not have been so successful if it weren’t sufficiently valuable in its own right. The SEC and Big Ten have the most passionate fanbases and bring the most value to any sports network by a significant margin over any other conference, even any other college conference; the ACC is strong in basketball, but their football conference tends to consist of Florida State and not much else, both in terms of quality on the field and in terms of schools with passionate fanbases that can attract large audiences, and football is what drives TV deals and conference realignment. What may be more relevant to what the ACC Network has to look forward to is the fate of the Pac-12 Networks, which remains uncarried by DirecTV years after launch; it was thought the DirecTV-AT&T merger would smooth along talks, but instead it seems more likely that AT&T will drop Pac-12 Networks from U-Verse systems once that deal expires than that DirecTV will add them. According to Washington State AD Bill Moos, Pac-12 schools were hoping to receive $5 million a year from the Pac-12 Networks at this point, but instead are only collecting $1.4 million. Unlike the SEC and Big Ten Networks, the Pac-12 went it alone on their network without selling any stake to anyone that might have helped their network gain carriage (or shared in the network’s expenses), but thanks to the CSN Houston and SportsNet LA struggles – not to mention ESPN’s Longhorn Network, which recently eliminated much if not all of its studio programming – cable operators are a lot more confident in their ability to stand up to sports networks than they were in the late 2000s when they challenged the BTN.

They may not have wanted to alienate ESPN’s many loyal viewers over the SEC Network, but the ACC Network won’t bring nearly as much value to the table, and while ESPN may have largely escaped the bruising carriage battles other large programmers have fought, if they overestimate how much cable operators are willing to pay for an ACC Network, at least one large programmer may just decide they’ve had enough of ESPN pushing them around and go to war (especially since even with the wait, ESPN’s carriage deals with Comcast, Charter, and Dish Network still won’t have expired yet by 2019, meaning the ACC Network will have to stand and fall on its own merits with them). Even if they don’t, the resulting hike in people’s cable bills might just be the spur cord-cutting needs to cross a tipping point and cause large numbers of people to dump their cable subscriptions en masse – and that assumes it won’t have done so already. Cord-cutting has come a long way in just the last three years – HBO went from disdaining the possibility of a direct-to-consumer offering to offering one in less time – and there’s no reason not to assume it won’t go even further in the next three. If ESPN escapes any major controversy surrounding the ACC Network, it may only be because the popularity of the cable bundle will have shrunk enough for it not to matter, to the point that ESPN might just decide to make the ACC Network the centerpiece of their own direct-to-consumer offering. Any of these scenarios would likely result in the ACC making substantially less money than they might have planned (or, depending on the structure of the contract, ESPN taking a loss on the enterprise).

ESPN likely knows all this, and tried for a long time to dissuade the ACC from the idea, preferring to let a clause activate this summer that would have substantially increased its payouts to the conference (and which, apparently, will still activate in the interim) than to launch a network that would not only lose money or fail to achieve the conference’s goals, but would accelerate the larger trend ESPN has been trying to slow down or fight off. But all the ACC sees is the boatloads of money the Big Ten and SEC are making, even though they have no chance whatsoever at making anywhere near that much, despite the conference’s consultant, Dean Jordan, claiming that if it “performs even moderately, it’ll put the ACC in a situation where they’ll be very, very competitive financially with the upper tier of the collegiate industry”. The ACC is deluded not only about the changes sweeping the video industry, but about its own value compared to “the upper tier of the collegiate industry”. There may have been a time when ESPN could ask for any price for an ACC Network and gotten the ACC money on par with the SEC, but that time has been long past for several years now.

ESPN President John Skipper points out that 93 of the top 100 TV programs in the ratings in 2015 were sports, compared to 14 just five years ago, and takes that as evidence that live sports is growing more popular and that the insatiable appetite for it will justify an ACC network, not that linear television is growing less popular among people who don’t watch live sports. The ACC is confident that ESPN will “find a way to make this work” no matter how untenable the cable bundle becomes in the interim. But that assumes live sports will maintain their elevated position, that the economics of the video content market won’t recalibrate themselves to favor video-on-demand services and linear television becomes the specific subset of the larger video landscape delivering a specific type of content, live content of all types, that it should be, that the linear market doesn’t greatly and rapidly contract to the level actually warranted by the provenance and popularity of live events that are out there, that conference-specific networks reliant on subscription revenue and showing lower-tier games don’t become an increasingly dicey proposition when they have to stand and fall based on their target audience alone. In that case, the best-case scenario for the ACC could be that the SEC and Big Ten networks become equally untenable, and if that happens they’ll still be in better shape than the ACC. I don’t know if the ACC will ever realize the scenario they passed up, but I do know they could find themselves cursing their foolishness – especially if their decision turns out to be the proximate cause of exposing its own foolishness.

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Why the Proposed “Hulu Skinny Bundle” Will Be Set Up to Fail

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The Wall Street Journal reported Sunday night that Hulu is developing its own over-the-top “skinny bundle” for release sometime in the first half of 2017. (Note: since the WSJ article is paywalled, most of this info comes from a Mutlichannel News writeup of it.)

According to the WSJ, the bundle would include, at minimum, channels associated with two of Hulu’s co-owners, Disney and Fox, including ABC and Fox owned-and-operated stations and other popular channels they own, including ESPN, FS1, and Fox’s regional sports networks. The reports I’ve seen don’t say whether the service would include channels from anyone else other than the third co-owner, NBC Universal, but one analyst speculated a little over a week ago that it might end up including channels from CBS and Time Warner, both of which have contributed to Hulu’s existing on-demand service (with Time Warner even approached about a stake in the company last year). In other words, it would include the five companies that offer substantial sports content and that, together, keep the cable bundle together. Even if Disney and Fox were only able to get the Turner networks on board, the Hulu service could conceivably be a one-stop-shop for sports fans with every nationally-televised game from MLB, the NBA, and every major college conference, every bowl game of significance, and every NCAA Tournament game not on broadcast television, plus, for fans of local teams, games of any team with an agreement with a Fox network. The main reason to get NBCU on board would be to appeal to NHL, NASCAR, golf, and soccer fans, as well as fans of teams on Comcast’s RSNs. All told, it could well be the biggest step yet towards the breakup of the cable bundle.

Which is precisely why the companies creating it, especially Disney, won’t let it be.

Both the analyst that speculated about this a couple weeks ago and the WSJ report suggest that a Hulu skinny bundle would cost around $40 per month. After slashing the price earlier this year, PlayStation Vue currently offers broadcast stations and a broad selection of popular channels, including ESPN, ESPN2, FS1, FS2, and all three of Turner’s networks that carry NCAA Tournament games, and popular networks from NBCU (but not NBCSN) and all of the non-sports four, for $39.99 a month in the markets where it carries broadcast stations. If you have an antenna and live in one of Vue’s non-broadcast markets, for just $5 more than the proposed Hulu skinny bundle, you can add most of the channels left out of Vue’s base package, including NBCSN, Golf Channel, beIN Sport, ESPNU, BTN, SEC Network, and regional sports networks. Of course, considering PS Vue dropped its price at the same time it added the uber-expensive Disney networks, it may well be operating at a loss in an attempt to spur adoption, and may hike its prices again later. Still, if the Hulu skinny bundle is competing with PS Vue at those prices, not to mention Sling TV currently offering (with the single stream package) all the ESPNs, including SEC Network, plus TNT and TBS for $25 a month or (with the multi-stream package) FS1, the Fox RSNs, and all three Turner networks for $20 a month (suggesting Sling would probably offer all those channels for around $40 once it synchronizes its packages, depending on the effect of adding the Viacom channels), there’s really little reason to sign up for the Hulu skinny bundle unless you really want NBCSN and Golf Channel or you just want to deny the non-sports four your money out of principle.

It’s hard to see who the Hulu skinny bundle would appeal to that wouldn’t be better served with Vue or Sling – which, of course, is probably the point. Disney and Fox don’t really want to do anything that would hasten the breakup of the cable bundle, so it’s not surprising they’d price it to be uncompetitive with Sling and Vue given its selection, even though they could theoretically offer a lower price since they’re not really going through middlemen, potentially setting it up to fail and giving them a reason to claim skinny bundles and going direct-to-consumer doesn’t work. If they did try to competitively price it, Disney likely wouldn’t sign off on launching it unless it had the non-sports four on board, effectively making it the same as Vue, because there’s nothing Disney fears more than cutting the non-sports four out of, and thus motivating them to become independent from, the cable bundle. (Incidentally, that same analyst that speculated about a Hulu skinny bundle, and about a skinny bundle with the non-sports four, suggests that the latter could cost just $9 a month. That’s cheaper than anything I speculated about at the time, though only barely.)

It’s become increasingly apparent that the current batch of “skinny bundles” is more about the Big Nine declaring their independence from cable companies and networks not owned by the Big Nine (not to mention broadcast stations) than from the cable bundle itself, with all of them too scared of the consequences of leaving the others. In that sense, there is some importance to a Hulu skinny bundle that gives Disney and Fox a distribution mechanism independent not only of cable companies but of any middlemen whatsoever. But don’t be fooled by the uncritical pro-cord-cutting media touting it as some sort of landmark development in the breakup of the cable bundle. In the end, a Hulu skinny bundle will do little to benefit the consumer, at least in the short term, only its owners.

Two Types of Station Owners: How Broadcasters’ Inability to Navigate OTT Services Could Be Their Undoing – And Broadcasting’s Salvation

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Ever since the Aereo controversy caused broadcast networks to threaten to pull their signals from the free airwaves, I’ve long accused broadcasters as a whole of being led by retransmission consent to disdain their own nominal medium. But it’s not a coincidence that ground zero of the Aereo controversy was New York, the single largest market in the nation where most of the biggest stations are owned and operated by their networks. The networks are on the front lines of fighting with cable networks for sports and other content, and are deeply aware of the advantages of the cable business model. Many of them have substantial investments in cable networks themselves or would like to have them.

Their affiliates are a lot harder to read. On the one hand, many affiliate owners were pursuing cash in retransmission consent negotiations even before the networks got in on it. The National Association of Broadcasters, which is supposed to represent broadcasters as a whole, has fought hard to preserve the retransmission consent system as it is and to weaken ownership restrictions so station owners can get more leverage at the expense of the overall viability of broadcasting. And certainly affiliated stations aren’t falling over themselves to improve their coverage areas any more than their networks are. So it’s pretty clear that affiliate groups, like their networks, staunchly try to preserve their retransmission consent revenue against forces trying to disrupt it. But are they willing to go so far as to give up their identity the way the networks are?

On the surface, there is reason to think they wouldn’t, simply because if the networks went cable-only they would effectively shut the affiliates out entirely, but during the Aereo affair Fox only threatened to take away the most valuable programming that seemed to most need retransmission consent to support it, and pretty much seemed set to simply insert their programming into affiliates’ feeds they sent to cable companies, allowing them to keep the affiliates in the process, and they seemed fine with that. More tellingly, I don’t think any broadcasters, no matter how small, vouched for Aereo’s argument that they were simply broadening broadcast stations’ reach, nor did affiliates indicate that they were in any way resisting the moves their networks seemed to be making to undermine broadcasting except insofar as it undermined their own access to top-tier programming, and even then in utterly ineffectual ways; certainly keeping the CW and MyNetworkTV alive in their current forms suggested they had no ambitions to improve the relevance of broadcasting as a whole. So my assumption was that the affiliates understood the perceived importance of retransmission consent to their business and to their networks’ ability to compete with cable networks, and so wouldn’t do anything to make broadcast more viable and would present a united front to preserve retrans and keep people tied to the cable bundle, with some potentially bailing in the incentive auction out of a belief that broadcasting isn’t viable on its own (and certainly the fact the FCC’s initial clearing target is the maximum possible suggests broadcasting is being as undervalued as I’ve long feared).

But there was always reason to think the networks were overselling the importance of retrans and their signal-pulling threat had more to do with their cable-network offerings than any actual importance of retrans; after all, contrary to popular belief advertising is sufficient to pay broadcast networks’ NFL rights fees and even Fox’s deal with the BCS, the one it ended up losing to ESPN because they couldn’t pay enough to make up ESPN’s subscription fee advantage and kicking off the retrans mania to begin with, actually made money for them without needing to be a loss leader. At the same time, someone was leading the charge to develop ATSC M/H and ATSC 3.0, technologies that hold (or held) the promise to increase the usefulness and viability of broadcasting as a technology without, by themselves, changing the economic incentives favoring cable, and while the networks seemed reticent to lend their full support behind ATSC 3.0, the largest non-network station groups were pretty much staunchly behind it, and while they’ve never quite fought the forces undermining their industry as strenuously as I might like (and in some cases have doubled down on them), the NAB and several other groups representing broadcasters have made many of the same pro-broadcasting arguments that I’ve made on this blog, even if they’ve come across as more self-serving lip service than actually being reflected in their actual policy recommendations, which suggest they’re more interested in protecting incumbents than in the actual overall relevance of broadcasting. And while they never quite addressed the question, reading between the lines of their FCC filings, by and large station owners seemed fine with over-the-top providers omitting broadcast stations from their offerings.

Which brings me to what really has me scratching my head: TV Everywhere. In the wake of the Aereo affair, the Big Four networks have all rolled out apps allowing you to access their programming and a live feed of your local station, so long as you “authenticate” with a cable or satellite provider. In theory, these apps are a centralized clearinghouse to watch any station associated with the network, regardless of who owns them, and have been explicitly pitched to affiliates this way, with CBS All Access offering most of its affiliates through the service. The ABC and NBC apps, however, still only include their respective owned-and-operated stations, with CBS reaching an agreement with Cablevision for authenticated access to their O&Os a few months ago and Fox offering no stream of any of its stations through the app. The only markets where all the Big Four stations are owned-and-operated are New York, Los Angeles, Chicago, Philadelphia, and the Bay Area, so as a result of this, among other things, those markets plus Dallas and Miami were the only ones PlayStation Vue was operating in. This despite Hearst being announced as a partner with Watch ABC pretty much as soon as the app itself was announced, yet their stations remain absent nearly three years later – supposedly because of the need to reach agreements with the cable companies, but if Hearst was in charge of that there’s little reason for that to be a problem if they were as into it as ABC itself was, and if ABC was in charge of that you’d think they’d have already struck those agreements to begin with, and in any case there’s not much reason to announce Hearst jumping on board if it wasn’t going to actually smooth out the negotiations with cable companies. It does suggest that, on the surface, it’s understandable that three-way negotiations between network, affiliate, and cable company would be difficult to make work, and ABC just announced a “clearinghouse” intended to make it easier for stations to latch on to their existing agreements with DirecTV and PlayStation Vue for streaming, with Hearst stated to be taking part with the former. But other recent developments suggest it may be too late.

Last month, PlayStation Vue, evidently fed up with the slow progress of reaching agreements with non-owned-and-operated stations, rolled out its service nationwide (and to devices other than the PlayStation itself), omitting broadcast networks entirely in the new markets with “Slim” options $10 cheaper than the equivalent full-service options, but not giving customers in its existing markets the ability to sign up for the “slim” packages. This raises the prospect the networks feared with Aereo: people paying for cable channels including ESPN but watching broadcast networks without paying for them if they can get them with an antenna, outside of markets where PS Vue was already offering them. Then, a couple weeks ago, rival Sling TV made that prospect explicit by reportedly introducing a new “AirTV” box that enables broadcast content received over-the-air to be integrated with Sling’s own offerings in Sling’s programming guide, regardless of whether Sling has an agreement with the station or even the network in question. I’m not sure I agree with the implied notion of continuing to treat linear television as something special and separate regardless of its nature, putting all linear television into a single, separate app as though linear television itself is the product, and as such Sling isn’t really doing anything it wasn’t already doing by its own nature, but integration of OTA content on streaming boxes can be hit-or-miss enough that AirTV can still encourage people to pick up broadcast stations over-the-air without paying for them, if they can. More to the point, it sounds like Sling can then deliver the broadcast content to any device, like a legitimate use of what Aereo was doing, actually providing some usefulness to the product.

To put this in perspective, last week Dish and Viacom avoided a potentially nasty and damaging carriage dispute with an agreement that will put Viacom’s channels on SlingTV, to the confusion and disappointment of analysts who felt Dish “caved” in not standing up to a Viacom that Suddenlink and Cable One have already seemed to do well enough without. Coupled with the inclusion of Fox in the new multi-screen bundle and the mutual interest on both sides to add ESPN and the other Disney networks to it as well, explicitly hiking the price and obviating everything I said about its potential impact, it seems like Sling TV is coming awfully close to recreating the entire bloated cable bundle just like PS Vue, putting the lie to all the public statements Dish made at its launch about wanting to keep it slimmed down to provide maximum value, and making me wonder, if they really did mean those things, if the Dish-Viacom deal pointed to ESPN acting as the Godfather of the cable bundle in keeping it together at all costs, certainly in keeping Viacom dependent on it. Putting aside anything else, if Sling TV and PS Vue weren’t going to actually provide anything different from the existing cable bundles, it would seem that the cable companies could pretty easily put them out of business, even without shady tactics, by lowering their prices to make a cable/internet bundle competitive with internet plus Sling or Vue and/or making it easier to watch their linear television content on a streaming device… that is, if they weren’t hamstrung by the need to charge retransmission consent to all their customers. Sling TV and PS Vue’s ability to offer broadcast stations separately or not at all, allowing people to rely on an antenna to receive them, could well be their one major, vital advantage over traditional cable television, what allows them to continue providing value even with a traditional bloated cable bundle. I didn’t agree with Rich Greenfield that retransmission consent was the major factor causing the cable bundle to lose its perceived value, but if Sling TV and PS Vue can continue making it optional, it may well prove to be traditional cable’s fatal flaw.

The funny thing about this is that other companies have felt that finding a way to untangle the thicket of broadcast stations was so vital that Apple outright gave up on creating its own Apple TV service when it couldn’t negotiate with broadcast stations. Indeed, PS Vue itself not only offered broadcast stations in its launch markets but included them in its base packages, forcing everyone to pay for them, and showed every indication of applying the same to any market it expanded to. PS Vue wanted to play by broadcasters’ rules, yet when the affiliates couldn’t get their act together, leaving the service still stuck with just the O&Os, PS Vue decided “screw it” and took its service nationwide without broadcast stations, effectively costing the affiliates their opportunity to make OTT work for them and not against them. If Sling TV and PS Vue prove successful enough without broadcast stations, Apple and other companies that felt they had to offer them may decide that, at the very least, they’re not worth the hassle, and broadcasters will have completely missed the boat, left to see the gap between them and cable networks widen again, and seeing cable operators redouble their efforts to undo or shake up retrans.

Again, it’s possible the affiliates just didn’t grasp the importance of getting some deal, any deal done before Sony decided to go without them… but this has me wondering whether the affiliates deliberately dragged their feet as part of a larger effort to make broadcast the center of the broadcast industry again. Perhaps the affiliates really don’t want to be as dependent on cable-style bundles as their networks want them to be, and recognize that it is killing broadcasting as a medium and that nurturing the creation of a large base of people aware of and exploiting broadcasters’ free over-the-air signals is vital to broadcasting’s long-term survival (even if it might hit their pocketbooks in the short-term), by creating a group of people interested in the fate of the medium and ultimately providing motivation for broadcasters to actually invest in their signals and in technology to make them easier to access on a wider variety of devices. Perhaps they felt all along that they preferred to rely on ATSC 3.0 as their ticket to reach mobile devices and that there was no reason for cord-cutting to work to its detriment rather than its benefit. Or perhaps it’s a combination of both and they haven’t yet grasped that Sling TV and PS Vue haven’t been the threats to the cable bundle they thought they would be (not helped by uncritical media coverage that has treated them as “a boon to cord-cutters” without questioning whether someone signing up to either service is truly living up to the spirit of cord-cutting), or just didn’t anticipate “cable minus broadcast” being the niche “skinny bundles” would occupy so early, before “cable minus sports” or something else that would actually deconstruct the cable bundle… or maybe they don’t even care about that and care more about getting broadcast out of its cable-imposed ghetto.

By goading PS Vue into encouraging customers to pick up broadcast stations with an antenna while still delivering them cable channels, broadcasters may have dealt themselves a fatal blow. But if Sling TV and PS Vue have the effect of encouraging widespread antenna adoption, it may well prove the best thing to happen to broadcasting as a whole.

Sling TV May Have Just Triggered the Beginning of the End of the Reign of ESPN

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“Skinny bundles” have long been an overhyped disappointment. Cable companies offering sports-free packages have been hamstrung by contractural provisions and legal threats from offering them all that widely, when they’ve bothered to promote them at all. And efforts to create over-the-top offerings, like Sling TV, have kept most of the most expsnsive channels, including ESPN, thus preserving, not undermining, the worst parts of the cable bundle.

Last week Sling TV unveiled a new “beta” multi-screen offering, allowing customers to stream Sling TV content on up to three screens, rather than the single screen their existing offering was limited to. But that’s not the only difference between the multi-screen and single-screen offerings. For the first time, the multi-screen offering provides access to the Fox networks, including FX, FS1, and Fox’s RSNs. And perhaps more to the point, the multi-screen offering does not include ESPN or the other Disney networks. For the first time, there is a widely-available linear TV service that can actually free you from paying the ESPN tax.

The new multi-screen offering is not perfect; for one thing, Fox is nearly as much of a contributor to the high price of the cable bundle as ESPN, through FS1 and especially its regional sports networks, though Sling does not appear to be offering Fox News. So subscribers to the new package may not be subsidizing ESPN, but if they have no interest in sports they’re still subsidizing expensive regional sports networks, and unlike with the single-stream product broadcast networks are included so you’re paying retransmission consent (or at least making up Fox’s share of it) even if you can get Fox with an antenna. Sports fans are still hitched to the entire cable bundle, and FS1 offers few sports whose fans can go without ESPN or other sports networks (basically the UFC, NHRA, and that’s it). As a result of Fox’s own high price, the new service’s $20 price tag offers no savings over the single-screen product, so it might seem like someone would only switch to it if they’ve read my book and are dropping ESPN out of principle, especially since the Discovery networks are also missing so anyone who wants any of them will be stuck with the single-stream offering and paying the ESPN tax.

But if you’re someone who’s interested in Sling TV for reasons other than ESPN, if your interest revolves around the AMC, A&E, and Scripps networks (and Turner as well), you’re going to gravitate to the service that actually allows you to stream the content on multiple screens. And for sports fans, local sports is arguably more of a motivator to remain signed up for cable than ESPN is, and while fans of local teams can’t necessarily go without ESPN entirely, since ESPN has a significant number of exclusive baseball and basketball games including Sunday Night Baseball, one baseball wild-card game, and one of the NBA’s Conference Finals, fans of teams on Fox networks can still watch most of their games without paying the ESPN tax, especially if the teams aren’t that good.

A part of me thinks that Disney and Discovery are just the only two companies that haven’t given Dish the right to offer their content on multiple screens and this is just Dish’s way of pushing them to re-do their deal, meaning ESPN will be there to inflate the price of the offering and keep people paying the ESPN tax soon enough (as Disney seemed to imply in a statement), making this not that different from when PlayStation Vue didn’t include ESPN until earlier this year. But Sling is a lot more visible, and provides more cost savings over a more traditional bundle, than PS Vue ever did, and it’s not exactly obvious that ESPN will eventually join the multi-screen offering. Unless and until it does or Dish ends up nerfing it in other ways, people looking to save money on their cable subscriptions now have a viable option that deprives ESPN of their revenue stream and broad reach that allows them to keep high-profile sports hostage to the cable bundle. And if AMC and Scripps find the multi-screen offering attractive enough, they may just decide they don’t need to be propped up by sports networks at all – and that’s when the real threat to ESPN’s business model begins.

Incentive Auction FAQ

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The broadcast TV incentive auction officially kicked off last week with the deadline for stations to declare their participation in the auction. This triggered a number of pieces about what the auction is, how it works, and what the implications of it are. In that vein, I decided to write my own explainer for anyone wondering what this auction thing is they may have heard about.

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Why is the NCAA Basketball National Championship on TBS?

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Tonight, Villanova and North Carolina will face off for the NCAA Men’s Basketball National Championship – but you won’t see it on CBS. For the first time ever, college basketball will crown its national champion on cable, with Jim Nantz, Bill Raftery, and Grant Hill calling the action on TBS (and slanted “team stream” coverage of each team on TNT and truTV). How did this happen? Why was the NCAA willing and able to take the smaller audience of cable? Well, I gave the short answer in my book, The Game to Show the Games:

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, which was paying a larger portion of the rights fee, 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).

The long answer? You’ll have to get the book for that, and for how television money has completely upended the world of sports over the last decade, especially since the BCS blazed this trail with its 2008 agreement with ESPN, how the race for sports rights has changed the TV industry in turn, and how it might all prove to be built on a house of cards that might already be tumbling down. For this week only, until Friday, April 8th, you can get it for Kindle absolutely FREE, or you can buy the paperback at most online booksellers anytime. By the time you’re done reading, you might wish you hadn’t watched the game at all.

What Killed the Cable Bundle?

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I’ve heard it suggested that “recent high school and college graduates“, or just members of the generation uncreatively and corporately termed “millennials”, absolutely cannot fathom why the cable bundle even exists, yet I’m only 27 going on 28 and I remember when cable was an absolutely huge deal, an almost mandatory step up from relying on an antenna, and remained so right straight through the 90s and into the new millennium. (During my lifetime, my family never relied on an antenna except when the cable was out.) Cable was the gateway to an explosion of new options far beyond the limited experience (and chintzy reception) of broadcast, where all the cool channels like MTV, ESPN, and Nickelodeon were. This is what the cable industry tries to evoke when it claims that the cable bundle is the best value in entertainment and expresses confidence that cord-cutting isn’t really that big a problem in the long term and those people that have cut the cord will inevitably come crawling back. What has changed to make what once was cable’s key selling point – the relative smorgasbord of channels it made available – into its biggest liability?

Last Monday BTIG’s Rich Greenfield, whose doomsaying on the state of the TV industry I’ve written about before, gave a presentation at an FCC panel on the shifting video marketplace, where among other things he presented his reasons for the decline of the TV industry, especially that of the “price/value equation” of the traditional cable bundle. You can see the entire four-and-a-half-hour workshop here; his presentation begins at the 30-minute mark, which the link should take you directly to, but what I want to focus on is that, rather than simply pointing to shifting consumer behavior or the shortfalls of the cable bundle and leaving it at that, he looked at how the perceived value of cable has actually gone down since those heady days of the 90s and what forces, specifically the inaction of both government and players in the industry, led to that point. As such, he touches on some of the themes I talk about in my book and on other posts on this site, but in my view, he doesn’t go far enough to the degree I talk about them, and ends up pointing the finger at some inappropriate culprits as a result.

Greenfield claims that retransmission consent is “the chief culprit that has ruined the price value of the bundle”, evolving from the system envisioned by the 1992 Cable Act, where a single station in a market negotiates with a single cable provider, into one where a station group controlling multiple network affiliations in a market, and potentially cable networks besides, is negotiating not only with a cable provider, but with satellite and telco providers as well – a familiar story the cable industry likes to repeat and that I touch on in the book, but not the whole story. He also targets retrans as the ultimate culprit to the bundling issue, claiming that it’s the power of retrans, specifically the earliest period where companies used retrans as leverage to carry cable networks rather than demanding cash payments, that allows the major media conglomerates to demand that cable companies deliver all their channels in inflexible bundles, before admitting that companies that don’t own broadcast stations engage in the same practice and, implicitly, that ESPN is at least as much a driver of Disney’s bundle as ABC. Greenfield also blames pay-TV companies for negotiating clauses into contracts that hinder programmers’ ability to move to online distribution and that prevent programmers from collecting different amounts of money from different distributors, resulting in a situation where everyone is too invested in the traditional, bloated bundle, and takes steps to ensure that none of the others can do anything to distance themselves from it, keeping everyone tied in to the bundle and in turn keeping consumers ensnared in it – so long as a Netflix doesn’t come along to provide an alternative.

The problem with this narrative is that the problems that have developed in the retransmission consent landscape are a reaction to and symptom of the larger bundling issue, not the other way around, and cannot be looked at in isolation, separate from the larger issue of pay-TV programming fees. It’s true that the introduction of satellite and telco providers have tipped the leverage balance towards broadcasters, but what has motivated them to take advantage of that imbalance, to the point of threatening to abandon broadcast entirely if they didn’t get their way with Aereo, is the much larger imbalance between broadcasters and the subscription fees collected by cable networks, the problem that retransmission consent was intended to fix in the first place. If you look at retransmission consent as merely a subset of the larger cable programming marketplace, many of the “imbalances” tipping the scale towards broadcast stations are really just ways to give broadcasters the same tools as cable channels, or ways to keep broadcasters from losing leverage or potential revenue as a result of offering their wares over the air, and in that view retransmission consent has been working exactly as intended, preventing the broadcast industry from losing all their most valuable content to cable networks that charge high prices and muscle their way into the vast majority of homes.

In particular, Fox explicitly cited the desire to keep from losing sports to cable outlets like ESPN and Turner when it began to make a harder push on the retransmission consent issue in 2009 and 2010, shortly after ESPN took the Bowl Championship Series away from it and moved it to cable. Right now the most expensive cable networks by a mile are ESPN and regional sports networks in some order. Other than those, the next biggest contributors to your high cable bill, at least nominally, include TNT, the Disney Channel, and NFL Network, then Fox News, USA, and FS1, then TBS and ESPN2. On a per-station basis for the major networks, broadcast retransmission fees are probably on the low end of the TNT/Disney/NFLN group, so before you get to retransmission consent’s impact on prices you have to go through all the much more expensive RSNs, plus four national cable networks, three of which have substantial investments in sports that both motivate and fuel those high prices. But broadcast stations are in that same exact category, in that like ESPN, TNT, and regional sports networks, it is the need and desire for sports content that drives broadcast stations to set and keep retransmission fees high and to fight tooth and nail against anything that might break up the cable bundle.

More than anything else, it is sports that is driving the high cost of the cable bundle; between highly-distributed national sports networks, regional sports networks, and the major broadcast networks, probably at least $20 of your over-$100 cable bill is ultimately paying for sports. That’s because everyone vying for sports rights knows that nothing motivates people to sign up for and remain signed up for cable like sports, and absolutely nothing motivates people to sit through commercials like live sports. So more networks come along looking for their own piece of the sports pie, passing that cost along to cable companies, and bidding the cost of sports ever higher and passing that along to cable companies and their customers. Add all of that to the non-sports component of the bundle, and you have a recipe for a cable bundle that once brought consumers unprecedented choice and value now being too highly priced to serve anyone well.

The FCC can’t get a good idea of what undermined the value of the cable bundle from a 12-minute presentation, certainly not without appreciating the factors that led the industry’s actors to behave the way they did; for that, they’ll need to read my book, which will help them appreciate not only the plight of broadcasters but why it’s so important to get this issue right. At the end of the panel, at about the hour-53 mark, Greenfield proclaims that he believes the entire medium of linear TV is dying, that what will end up complementing on-demand services like Netflix will be services that offer “live on-demand”. I still have my doubts that the Internet will ever be able to deliver the Super Bowl to 50 million households, or even that it’ll do that well at delivering a regular-season NFL game to 15 million, especially as higher-quality technologies like 4K become the norm, and especially especially to mobile devices with higher bandwidth and spectrum constraints. Linear TV will not die, but only if it recognizes that it is transitioning into a specialized service, one that efficiently delivers content to the largest audiences, especially live content that, precisely because of its unique ability to attract eyeballs to commercials, is most able to be monetized without need to charge subscription fees. That is what the commission needs to keep an eye on going forward: not merely the transition from a video landscape rooted in linear TV to one based in online streaming, but linear television’s own ability to change its role in response to that, without people being blinded by the present-day depredations of the cable bundle to what that role is and how it’s already filling it, and whether broadcast television will survive to take its place as the area of linear TV where that role is most needed without being undermined by its own actions or those of the commission.

TGTSTG Bonus Content: Inside the Future of Video

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Netflix’s push into original content was largely touched off by a desire to insulate itself from incumbents withholding content from their own potential competitor; by enhancing the value of their service beyond simply redistributing movies and TV shows from other services, they could ensure people would continue subscribing even if the legacy players completely cut them off, and perhaps provide an inducement for new subscribers. It ended up greatly accelerating the transformation of the video landscape – and Netflix had some tricks in its arsenal completely unavailable to the legacy players.

Without being tied to a linear television schedule, Netflix touched off heated debate with its strategy of releasing every episode in each “season” of its shows at once, capitalizing on the “binging” strategy that many of its customers used to catch up on old cable series. That also paid off in benefits for creative freedom, as producers were able to avoid the cheap tricks such as cliffhangers used to keep people coming back to traditional television series. Netflix has also capitalized on its ability to collect data from subscribers to aid in development; it signed off on House of Cards after determining their subscribers included enough fans of Spacey, director David Fincher and political thrillers, including those that ordered the original UK series on which the show was based through its original DVD-by-mail service, as well as enough overlap between those groups, to make it worthwhile, and even targeted its advertising of the series differently to different audiences.

Amazon’s own video service, which it originally treated almost as an afterthought and an add-on to its Prime fast-shipping service but which has begun to emerge as Netflix’s biggest rival, soon followed suit, engaging on its own twist on television’s traditional “pilot season” by posting pilots on its web site for a month or so and using user data and votes to determine what to turn into series. Its focus has largely been on comedies, with its first two original series fitting the mold with Betas and Alpha House, the latter starring John Goodman and Bill Murray. At the 2015 Emmys, its Transparent picked up five nominations on the main show and two wins, including Outstanding Lead Actor in a Comedy Series, joining The Daily Show as the only non-HBO shows to win multiple awards on the main show, while Netflix won only its second main-show award, Outstanding Supporting Actress in a Drama Series for Orange is the New Black. Even Hulu, a joint venture of ABC, NBC, and Fox designed as a legal avenue for people to view their content and that of other traditional television networks online, has made strides into original content not originating on a traditional television network at all.

Since Vince McMahon took over the World Wrestling Federation from his father in the 1980s, the WWE has referred to itself as “sports entertainment”, a term that (among other things) reflects its status as a form of entertainment that looks superficially like sport, but isn’t. By the dawn of the 2010s the WWE wanted to get in on the sports cable boom by launching its own network, going so far as to announce a launch in 2012, but as mentioned in Chapter 7 of the book, cable operators are leery of launching new networks when not forced to by media conglomerates. Cable operators were only willing to pay the WWE 20 cents a subscriber for a standard sports network, and even after making it a premium outlet airing most of the company’s monthly pay-per-views that are the bread and butter of its business, the company still found cable operators wouldn’t do business on terms acceptable to them. Stymied by the cable operators at every turn, the WWE took a new route to the launch of its own network, one befitting its pseudosport status but which if anything placed it ahead of the curve compared to what real sports were doing, riding the wave that was changing the landscape of video distribution, and standing poised to change the nature of the business in a way not seen since McMahon took over the company and proceeded to use cable television and pay-per-view to systematically dismantle the network of regional promotions that had dominated professional wrestling to that point.

At the 2014 Consumer Electronics Show, WWE finally unveiled its plans for its network, which gave its subscribers access to the vast array of content in its back library, which pretty much included every wrestling show that mattered from the 80s and 90s thanks to the numerous promotions whose footage WWE had purchased over the years, plus documentaries on wrestling history and replays of WWE’s main shows Monday Night Raw and Friday Night SmackDown, both on demand and on a linear network that also contained live pre- and post-shows for Raw and SmackDown, first-run airings for secondary shows Superstars and NXT, and the crown jewel of the network, all the company’s monthly pay-per-views, including its biggest event of the year, WrestleMania. All this would be available for $9.99 a month; to put that in perspective, WrestleMania cost $55 in HD while other PPVs cost $45, meaning the network would pay for itself if you otherwise ordered just three PPVs. Oh, and it would be available entirely through the Internet, either through WWE.com or on streaming devices such as Roku or Apple TV. WWE felt they were uniquely positioned to blaze a trail in this space; its data suggest WWE fans consume five times more content online than average and are twice as likely to own a streaming device, with 60% voicing their willingness to watch a WWE Network on there.

The project got off to a rocky start. Although cable operators would seemingly still make more money by airing WWE’s pay-per-views than not (McMahon called it “found money for them”), DirecTV announced it was dropping all PPVs while Dish Network decided it would decide whether or not to carry each PPV on a case-by-case basis. Needing a million subscriptions to break even, the company seemed to plateau at about two-thirds of that number, which, combined with a new television deal with USA and SyFy for Raw and SmackDown that fell far short of expectations given the media landscape, sent share prices tumbling. In October, the company dropped a requirement for a six-month commitment. But by the dawn of 2015, the network crossed the million-subscriber threshold and seemed poised to stay there even after a controversial finish to the Royal Rumble event caused #CancelWWENetwork to trend on Twitter and after WrestleMania had come and gone.

For outlets that might otherwise attempt to collect subscription money from cable operators, “over-the-top” platforms such as WWE Network are looking like increasingly viable approaches. Upon leaving Fox News in 2011, conservative political commentator Glenn Beck elected to start his own streaming news network anchored by a continuation of his TV show and a simulcast of his radio show, initially called “GBTV” but later renamed TheBlaze. It proved popular enough to earn a slot on Dish Network and other pay-TV providers the following year, while still maintaining 300,000 customers paying $9.99 a month to stream it directly. YouTube introduced a series of sports-oriented channels carrying niche content in 2011. The UFC launched the “Fight Pass” network carrying not only cards not shown on pay-per-view or as part of its contract with Fox, but even cards from other MMA promotions. The NFL launched its own streaming service, NFL Now, in 2014, boasting a high degree of customization based on customers’ favorite teams, delivering relevant news, highlights, archival footage, and other content. Several other entities, including Sports Illustrated and the NHL, came together to launch 120 Sports, delivering fast-paced news, highlights, and commentary in 120 seconds or less. Even major media companies have taken the plunge. In November 2014 CBS launched CBSN, a 24-hour news network with 15 hours of live anchored coverage per weekday, with the ability to start watching at any point in each hour, and additional content from other CBS properties.

Nor does turning to these streaming services have to mean watching on the tiny screen of a smartphone, tablet, or even laptop. A booming industry of devices makes it possible to stream content from all over the Web to the same television set you might otherwise hook up to a cable box, including “smart TVs” that can connect to online sources without going through any sort of intermediary at all, and indeed most streaming services catering to cord-cutters tend to focus more on these devices than on more general-purpose computing devices. Roku has been the longtime leader in this field, making devices since 2008, with Apple and Google joining them with their own platforms and Amazon jumping into the field with Fire TV in 2014. But the most popular such devices might be game consoles from Microsoft, Sony, and Nintendo; as they have added online capabilities while streaming boxes incorporate the ability to play games, the line between the two has become decidedly blurred and might be in the process of vanishing entirely. Also in 2014, Google shook up the field with the Chromecast, a small device resembling a USB stick with most of the same functionality of existing streaming boxes plus “casting” technology that allows one to access a video on their phone and “cast” it to the device. Roku and Amazon have already since introduced their own similar streaming sticks.

More than any streaming service, it’s this that most exemplifies the change coming over the living room and the existential threat it poses to cable TV as we know it today. Soon your entire entertainment experience will be controlled by a single device that unites video player, game console, and potentially, even desktop computer, and if the FCC gets its way, it’ll serve as your cable box too – one device that serves as the gateway to the entire universe of visual entertainment, with traditional cable TV at best one source of it, potentially presented to the consumer as many sources. Content providers are already maneuvering to take full advantage of this revolution, but it’s an open question how or whether legacy cable and broadcast programmers will adjust to it, or whether they’ll find themselves swept up in its wake.

Breaking down the new Thursday Night Football deal

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Earlier this month the NFL announced a two-year deal with CBS and NBC to split the Thursday Night Football package, pocketing a cool $900 million in the process. CBS will have some games in the early part of the season, with NBC having the later part and NFL Network having some exclusives sprinkled between both parts. The NFL also still wants to sell the TNF package to an over-the-top outlet.

That’s a huge chunk of change, and it’s easy to look at that price and go “what sports rights bubble?” Certainly it looks like CBS and NBC don’t agree with Rich Greenfield that the massive amounts ESPN has paid for sports rights are rooted in assumptions that no longer hold and will end up undermining it, at least within the next two years. As I explain in the book, cord-cutting should actually make sports rights even more valuable, and in fact the forces driving it have arguably been underlying the sports rights boom all along, as one of the few pieces of content guaranteed to keep people watching linear television and keep them signed up for cable. If you look at this deal, you’re thinking it’s a good sign for the Big Ten’s ability to collect a hefty chunk of change from ESPN and Fox (not coincidentally two of the three outfits that didn’t get in on this deal).

That said, I do have to wonder if this is actually that great a deal for CBS and NBC. Analysts at Barclays looked at ad sales vs. rights fees and concluded that CBS lost money on Thursday Night Football last year, though they expect CBS to come out slightly ahead this year with the lower game load; throwing in production costs, Morgan Stanley thinks CBS lost $200 million on the deal and both networks could lose over $100 million a year under the new deal. Of course, ad sales aren’t the only benefit CBS gets from TNF; more NFL games increases the retransmission-consent value of CBS stations, high-rated NFL games increase the lead-in for local news, and CBS gets to use TNF as a platform to promote its other shows. On top of that, under normal circumstances networks do, in fact, make money off ads alone from NFL games. But CBS had to share its Thursday night package with NFL Network, meaning it likely had to share ad revenue with NFLN as well, and might have to share it with whatever OTT partner the NFL gets on board. That also means that, in theory, any retrans benefit from TNF games would be limited if cable operators could still pick them up off NFL Network, though I wouldn’t be surprised if the NFL would require cable operators to pick up CBS to get TNF games on NFL Network.

But selling games to an OTT partner could cripple the amount of money all three networks can get off TNF games from cable operators, even the NFLN-“exclusive” games their deals with cable operators require them to keep. The best-case scenario is that games are sold to Verizon or AT&T under similar terms as Verizon’s existing smartphone deal, where you have to sign up to their existing services to watch the games, meaning subscribers to rival carriers would have to watch on one of the linear networks. The next-best case is if the games are sold to a subscription service, meaning if you aren’t signed up for that service already there’s value in finding a service that carries one of the linear networks or getting an antenna, but by all accounts that’s unlikely. Where there could be a real problem is if the games are sold to an outfit like Yahoo under similar terms as their London game last year, where the stream is free to everyone. Besides making it more likely that Yahoo would want a cut of ad revenue, that means TNF games provide little to no incentive for cable operators to pay more for CBS, NBC, or NFL Network than they otherwise would, with the main incentive to want any of the networks being to avoid seeing Tweets that are as much as a minute ahead of the online stream. It also means some of the suggestions I’ve seen, where the cockamamie scheme where some games air on CBS, some NBC, and some NFL Network leads people to just watch all the games on NFLN, might instead lead people to watch it on the OTT outlet, limiting the amount that any of the networks benefit from the games.

If I’m CBS I’m not sure I agree to this deal without at least securing rights to the games for CBS All Access (and with NBC getting the second half of the season I’d want to find out how much to pay them to get the rights to the season-opening kickoff game, reducing the perception that the balance of Thursday games is tilted towards NBC with that and the Thanksgiving game); if I’m NBC I think long and hard about becoming a party to a scheme that could accelerate the growth of streaming video, potentially at the expense of my parent Comcast’s cable business. I certainly don’t think five games apiece, plus producing four more for NFL Network, with all the games airing on NFLN and an OTT outlet, is worth anything near what CBS and NBC are paying for them.

The NFL is talking about still having an opportunity to “grow the profile” of the Thursday night package, but if the NFL has to come up with this confusing scheme to split the games between two different broadcast networks and sell them to an over-the-top outlet, I think they’re bumping up against the limit of how much value the Thursday night games actually have, and I think this probably puts the nail in the coffin for the notion that the NFL will eventually sell part of the Thursday night package to a cable network like FS1 or NBCSN. The NFL is running up against the inherent limits of the Thursday night timeslot, the questionable quality of the games played on short rest and the need to give every team exactly one game played on short rest, meaning you inevitably have to put the Titans and Jaguars on at some point and you’re limited in how much you can showcase the marquee teams. NBC is salivating over the late-season games they get to show, but the lack of flexible scheduling means they could easily get shafted with dog games involving dog teams; at least early in the season you can put on name teams and people will watch before they know just how good or bad they actually are. (Of course, expect NBC to get the Cowboys the week after Thanksgiving every year, which is guaranteed to pop a rating no matter how much they or their opponents suck.)

Honestly, I wouldn’t be surprised if Thursday Night Football doesn’t last beyond the end of the current long-term deals in 2022. If selling it to a cable sports network is a dead letter – and Fox, NBC, and ESPN are all likely going to be badly hurting from their hefty investments in their cable sports networks by then – and there isn’t the oversupply of linear TV space there is now, then given the constraints on the product TNF really only makes sense as long as the NFL still has its own cable network, and while you’d think if any outfit could justify its own network, even in a future age of linear television contraction and a la carte, it would be the NFL, the limited live game inventory it would have would make it a tough proposition (something that’s not necessarily the case with college conferences like the Big Ten or SEC), especially given the pros and cons of continuing to sell some of it to another outlet. Depending on how viable an option ESPN is looking, I could see the NFL trying to monetize Monday Night Football in much the way they’ve been doing with Thursday nights, where they can offer more consistent, better matchups and better quality of play than what they can offer the networks and over-the-top outlets that have been bidding on TNF. It’s doubtful they can get the kind of money ESPN pays them for MNF, but then it’s doubtful ESPN itself will be able to pay that much by then.

The realities of trying to turn Thursday Night Football into an institution on par with MNF and SNF are coming home to roost, and while CBS, NBC, and an over-the-top outlet to be named later may be allowing the NFL to keep deluding itself otherwise for now, it may be about to bite all of them in the ass.