NCTA's Powell: Escalating Sports Costs Could Invite Government Scrutiny

President Says Operators, Programmers Need to be Careful Not to Blow up Model

National Cable & Telecommunications Association president Michael Powell warns operators, programmers and sports leagues that they need to be careful that escalating sports rights costs don't blow up their business model and prompt government intervention.

In an interview for C-SPAN's Communicators series, Powell was asked by Lynn Stanton of Telecommunications Reports what would happen when sports programming costs exceed the ability of consumers to subsidize them.

Powell called it the "billion dollar question."

He said operators are facing the choice of either absorbing the cost, which he said they have been doing to some degree, or passing it on to consumers still trying to recover from a painful recession--he did not add that they could be facing yet another recession if the fiscal cliff is not avoided.

"Is there a point at which they say we can't handle it anymore? Is there no longer an ability to absorb these costs and the whole model has the problem? I can't control that the NFL has the power to demand a 73% increase for Monday Night Football, which I find astonishingly insane." He also said he couldn't believe that A-Rod made $250 million to play baseball, but that he also had relatives who would pay half their mortgage to see the Yankees in the World Series. "It is just a reality..."

But not an immutable one, he suggested. "We all ought to wake up and be careful, programmers and operators [NCTA members include both], about how we manage our relationship with each other and out of a fiduciary responsibility to the consumer so we don't blow this into smithereens at some point and invite the governemnt to come do it for [us], in which case nobody would be a winner."

Asked how social media would impact the future of TV, he said he thought it was an extension of the conversations that have always surrounded the medium, and that it will be a compliment that is already helping fuel a golden age of TV and would provide opportunities to do TV even better.

But Powell suggested there were limits to designing one's own TV experience through social media and online input from friends--or programmers--about what they should be watching. " I think we shouldn't assume lightly that all of that will be enjoyable to consumers," he cautioned.

Powell said there was sometimes a consumer backlash against being "too intimately tracked," and "too stalked."

He cited the 2012 presidential election, saying he felt creepy about candidates with big databases "hunting his every move," adding: "At some point I believe it crosses a dark chasm in which you feel a discomfort in the degree to which you are being watched and tracked."

His reference to stalking, he said, was essentially talking about advertising. "Whatever the purposes, whether political or selling a product, the ability to track and create a composite of me and my preferences and my travels through digital media, certainly has created a form of advertising that has a high degree of metrics and specificity in a way that television advertising never did," he said.

Powell said there would be no technical concerns about TV advertising following the same trend of tracking consumers. He pointed out that xBox was working on an application that can differentiate people by their skeletal frame. He said that would allow for differentiating between whether he or his son was watching, and could be used to target adds. "But where is the comfort level in that relationship?," he asked.

Powell suggested their remained a philosophical difference between delivering Web and cable content. Facebook and Google come from very different foundational places, he said. "We have a very secure, trusted, expensive relationship with the consumer. We take your money, we send somebody into your home. [we] have to protect that trust relationship to a greater degree than some of the tech companies have to. When you have a subscription model you have a trusted relationship. The Internet has blown past that model.

He said Facebook founder Mark Zuckerberg has made no secret about feeling that information was meant to be free and available to all people at all times.

He pointed to that as one of the reasons they are in a "never ending iterative battle with governmental forces about where the line is because I think they are very comfortable that there is a very thin line. I understand the argument, but I am not sure it is going to comport with most people's view."