Yahoo Sports noted that the sports rights spending spree sparked by the Los Angeles Dodgers TV deal could soon enrich the Philadelphia Phillies. But at least one baseball executive worries that this may simply be the next bubble waiting to burst.
The Phillies are under contract through 2015, and besides being in a large market, may have a built in advantage not available to other baseball franchises. It is located in the home market of cable giant Comcast, the current local rights holder; and at the same time, could be a prime target of Fox Sports. The franchise is expected to get a sweet deal under any circumstances, and the potential for a bidding situation adds who knows how much icing to the cake.
The Dodger deal, reported in the $7B range over a number of years all told, sets a benchmark of sorts. That number, by the way, compares to another number cited in the Yahoo report — $1.2B. That is the number cited as the value of the entirety of Major League Baseball 21 years ago.
The article notes that MVPD subscribers can expect to see an additional $3 per month on their bill when a huge carriage deal is inked.
Speaking anonymously, an exec told Yahoo that some see the potential for a subscriber rebellion, the demand for a la carte channel menus and the forced hunt for a new sports distribution model. He added, “It’s not just local. It’s national. The amount of rights being paid are getting passed to consumers. I’m worried there is going to be a bubble. It seems like there’s a lot of money going out. We don’t want to be dependent on the bulk of our revenue coming through local rights-fee deals.”
Super agent Scott Boras thinks the worries may be overblown, noting that it is much cheaper for media companies to air sports than it is to script, cast and produce other forms of entertainment. He noted in particular the vast number of hours included with a sports package, including play-by-play broadcasts and a variety of easy-to-produce ancillary programs.
RBR-TVBR observation: We understand MVPD’s concerns about rising content prices, so let’s compare sports with local broadcast television.
A minority of an MVPD’s subscribers watch play-by-play sports action on television. Yet every single one of the MVPD’s subscribers is expected to pony up cash to subsidize that minority.
Meanwhile, broadcasters are asking for pennies per subscriber to simply catch up to the compensation paid to little-watched basic cable channels – and they are watched by the majority of an MVPD’s subscribers.
In the event of a local emergency, local broadcasters are going to stop what they are doing, often forgo advertising revenue and incur extra expense in order to broadcast vital information to the residents of the afflicted area.
Sports channels are still going to be discussing the hamstrings of a second-string outfielder or complimenting the wife of a team’s left-handed relief specialist even while local residents are heading for the safest room in their house.
In an a la carte world, a strong minority of MVPD subscribers would opt for the sports channel. Almost everybody would opt for the local broadcast channel.
Sports channels are being rammed down the throats of people who don’t want them and for a high price.
Local broadcast channels are simply asking for equitable compensation for value delivered, and its measured in cents, not dollars.
We do believe that this sports package model is going to implode. We saw a similar thing happen to radio after Telecom 1996, when companies decided to make a big bets on acquisitions, overpaid for stations and watch it all come crashing down in the 2000s.
We think companies taking on these sports contracts will find that consumers will balk at paying, and then they’ll find that there isn’t nearly enough advertising available to even begin to make their investment back.
The bottom line: MVPDs should stop worrying about their local broadcast television partners and start worrying about what exorbitant sports fees are doing to their business model.