Too Big a Price for Big Game

By MCN Guest -- Multichannel News, 2/6/2012 12:01:00 AM

Like millions of Americans, I have a deep love affair with professional football and eagerly tuned into this week’s Super Bowl. But my passion for the game has a limit.

In my role representing small and midsized cable television companies, I am quite troubled by the soaring price of monthly cable and satellite TV bills fueled by hyperinflationary increases in TV rights fees won by the National Football League and many other sports organizations. The trend is disturbing because it is contributing to a pay TV affordability crisis engineered mostly by sports programmers, who are happy to let cable and satellite-TV companies take the heat from angry consumers.

Let me share some facts to put things in their proper perspective.

In recent months, the NFL has announced $42 billion in new cable and broadcast TV deals struck with ESPN, NBC, CBS and Fox, representing a 60% jump over current contracts. Inarguably, these new transactions mean that huge pay TV fee increases are coming soon and will hit family budgets hard. Why? Because the nine in 10 U.S. households that subscribe to pay TV service do not have any opportunity to opt out of paying for the channels on which these NFL games will appear. It’s either pay the bill or surrender your remote and set-top box at the local business office.

Outdated federal policy is partly to blame for the problem. The NFL, for example, is permitted to act like a cartel in negotiating TV rights under an antitrust exemption in the Sports Broadcasting Act of 1961. This grant of immunity gives the NFL the leverage to reap much higher returns on the sale of TV rights than member teams could by bargaining on their own. Because the NFL’s windfall is blitzing consumers with higher costs, Congress needs to modify or repeal an antitrust exemption that is no longer serving the public interest.

For some, the creation of a sports-programming tier would represent a prudent step toward taking financial pressure off non-sports fans. According to Bernstein Research analyst Craig Moffett, ESPN and ESPN2 alone, on average, account for about 20% of the wholesale cost of cable programming but attract slightly less than 2.5% of total viewership. What’s going on is painfully clear: Non-sports subscribers are massively subsidizing sports viewers by an estimated $3 billion annually. A sports tier designed to reflect actual consumer demand for NFL games, golf tournaments and baseball doubleheaders has the potential to allocate programming expenses more fairly within the pay TV universe.

There is no industry consensus on this issue. ESPN, which renewed its Monday Night Football contract with the NFL for $15.2 billion, refuses to allow its marquee channels to migrate to a sports tier.

Under ideal conditions, channel bundling works: It is efficient for consumers, distributors, programmers and advertisers. Unfortunately, the pay TV bundle isn’t working today because sports channels have grown far too expensive and their owners stubbornly cling to a status quo business model at war with a Steve Jobs-invented micro-media climate saturated with apps and options.

Industry needs to huddle and fix the problem soon before powerful people in Washington, D.C., decide they know how to block sports channels from sacking the consumer.

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Matt Polka is president and CEO of the American Cable Association.