The reason is the sheer impact of sports programming on the overall cost of a typical video subscription. Sports programming might be 20 percent of the viewing on a day-to-day basis but it may be 50 percent of the cost that the consumer pays, according to Dish Network Chairman Charlie Ergen.
Consider the business from the standpoint of a sports programming network. In most markets, any single content provider has four different customers buying an important sports channel. Once streaming services take hold, there will be additional providers buying sports programming.
As great as that is for the sports programming network, it isn’t so great for distributors or consumers.
The sports providers often require, for example, that sports channels are packaged on the tier with the most buyers. But not every video subscriber, or even every household, is populated by sports enthusiasts who value sports programming.
In theory, a daring video provider could make a decision to segment an audience, essentially choosing to give up “sports enthusiasts” by refusing to carry expensive sports programming.
That might cut distributor content costs a substantial amount. Ergen suggests as much as 50 percent. Such a provider would risk losing perhaps 20 percent or 30 percent of the sports enthusiast audience.
But such a provider would be significantly more attractive to the other 50 percent, or 60 percent or 70 percent of the customers who might willingly give up ESPN and other channels, to get a serious break on recurring monthly subscription fees.
Here’s the “money” quote: “If the economy continues to struggle along, that’s probably a valid long-term strategy,” says Ergen.
“We almost went there last year with FOX Sports,” Ergen says.
In a daring bit of strategic thinking, Ergen says “I think that there’s a limit to where sports cost can go and at some point, it’s not going to be in 90 percent of the homes at some point if the costs go too high.”
Consumer demand for video programming really is not completely elastic. At some point, the value simply will not match the retail price in a satisfactory way.
To be sure, given a choice, every service provider would prefer the widest possible variety–“something for everyone.” But if push comes to shove, and price begins to be a barrier, a “sports free” service, offered at significantly lower cost, is going to be attractive to a significant portion of the audience.
“And there certainly becomes a time when a deal doesn’t make any sense and a sports offering might not make sense, and that’s been the case for us in New York,” says Ergen. “It could happen in other places.” Sports programming could drive change