News

Too Big a Price for Big Game

2/06/2012 12:01 AM Eastern

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Outdated federal policy is partly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.


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