By Jordan Kobritz
Growing up in the family business – wholesale meat and groceries – I was always looking for ways to improve operations. Every time I made a suggestion my father couldn’t or wouldn’t support, his standard response was “It sounds good.” I learned early on those were his final words on the topic. There was no discussion or explanation. Nor did he ever indicate whether he didn’t like the idea or had tried something similar in the past without success and didn’t want to hurt my feelings.
This brings me to the concept of a la carte cable television, the option to purchase only those channels we want to watch. The cable industry prefers the concept of bundling where we are forced to buy a package of channels, most of which we never watch. It’s frustrating listening to a cable representative explain their offerings, none of which truly mirror our viewing preferences. If it was available, most of us would instinctively choose the a la carte option. But would that result in a lower cable bill? Maybe, or maybe not.
The world of cable television can be complicated, but fortunately there are experts who understand the system. Michael Nathanson of MoffettNathanson Research is such an expert. To estimate the costs associated with an a la carte world, Nathanson looked at “reach,” which is defined as the percentage of viewers who watch a particular channel over a specified period of time, and current “subscriber fees,” the price per subscriber, per month that cable companies such as Comcast pay to a network to carry their programming. What he found should give sports fans reason to fear a la carte pricing.
Nathanson concluded that in an a la carte world the cost of the most popular sports network, ESPN, which currently charges cable operators $6.10 per month, would increase to $36.30 per month. That’s because ESPN is unique. The World Wide Leader charges far and away the highest subscriber fee of any network. Even among sports networks, ESPN stands out. The next most expensive sports channel is FOX Sports Net, which charges less than half what ESPN does. Sports channels in general average around 75 cents per subscriber and the median price for all individual channels is 15 cents per subscriber.
ESPN’s projected cost could rise or fall depending on a number of factors, including which cable company you subscribe to, whether ESPN is bundled (there’s that word again) with its sister networks such as ESPN2, ESPNU, other ABC-Disney offerings or other sports programming. And ESPN isn’t alone. The cost of other sports networks would also rise substantially. What Nathanson’s estimate suggests is what every non-sports fan suspects: They are subsidizing the glutinous appetite of sports fans.
But hold on a minute. The reverse is also true. With bundling, sports fans who have never tuned into any of the C-SPAN channels nonetheless pay a minimum of a nickel each month for access to the news network. If a la carte pricing becomes a reality, sports fans would no longer subsidize the news freaks. The result: The cost of C-SPAN would increase astronomically, probably more, percentage wise, than the increase in the cost of ESPN. That’s because many channels, like the aforementioned C-SPAN, only charge pennies per month per subscriber.
The bottom line is when a la carte pricing becomes a reality, what we will end up with is a shifting of fees from one consumer to another, rather than an overall reduction in the cost of cable television. In short, someone has to render unto Caesar (i.e., the networks) his due (the revenue level they currently enjoy).
So who would pay $36.30 for just one channel? The answer is probably lots of sports fans. ESPN has its tentacles firmly lodged in virtually every major sport around the globe. It broadcasts games for the NFL, MLB, NBA, NCAA football and basketball, soccer, golf and tennis. Noticeably absent from the list is the NHL. Hockey fans have lived without ESPN for a decade. But as a niche audience, they never contributed substantially to ESPN’s reach or revenue.
The take away is to be careful what you wish for. While almost every consumer instinctively recoils when they hear the word bundling, an a la carte system is unlikely to deliver utopia.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor in the Sport Management Department at SUNY Cortland and maintains the blog: http://sportsbeyondthelines.com Jordan can be reached at email@example.com.