Why Dish Has Become a College Sports Fan

SATELLITE PROVIDER DOUBLES DOWN AFTER DROPPING PRICEY PRO-TEAM RSNs
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As sports costs continue to soar, one major multichannel video-programming provider is fighting back by giving it the old college try.

Satellite-TV provider Dish Network, which has resisted price increases from networks dedicated to TV coverage of professional sports leagues, is instead embracing college regional sports networks. Those channels speak to its largely rural customer base and charge lower prices, Dish said.

Most recently, Dish agreed to launch the SEC Network, ESPN’s college network that features games from the Southeastern Conference. This fall, Dish is promoting its multi-sports package (including 35 sports channels like NFL Red Zone, NBA.TV, MLB Network and most of its RSNs, depending on customer location), making it available fre of charge. The promotion also includes a slew of college RSNs, like the SEC Network, scheduled to launch on Thursday (Aug. 14), and a free college flag depicting the customer’s favorite team.

The promotion takes advantage of the much-hyped launch of the SEC Network — which will be the largest launch of any regional sports network ever — but also highlights Dish’s strategy regarding sports networks: It wants to be the go-to provider for college sports fans.

SUBSCRIBER APPEAL

In an interview, Dish CEO Joe Clayton said that strategy makes sense given Dish’s mostly rural subscriber base.

“Our existing customer base is in a lot of non-metropolitan markets,” Clayton said. “Look at the Southeastern Conference for example. The majority of that area doesn’t have a lot of pro teams. We are trying to make our offering as the destination for college sports.

“We’re the only provider today that has the SEC and the Pac-12, and the Big Ten and the Texas Longhorn Network, all of the above,” Clayton added. “Other providers have pieces, but not the whole enchilada.”

In fact, Dish has been much more aggressive in carrying college sports networks as opposed to channels dedicated to professional teams. For example, in the New York area, the satellite behemoth (it has 14 million subscribers nationwide) has refused to carry MSG Network and MSG Plus since 2010 and dropped SportsNet New York (SNY) in 2011. It hasn’t carried the Yankees Entertainment & Sports (YES) Network since its launch in 2002.

Clayton said Dish evaluates every network, but the underlying tenet is giving customers what they want.

“The bottom line is, if people want to watch it and are willing to pay for it, we’re going to carry it,” Clayton said. “We’re not going to offer something that we can’t get a return on. There have been certain regional networks that we have elected not to provide. The L.A. Dodgers is probably the best example — it’s too pricey and it’s too limited, and we’re not the only pay TV provider not carrying that service.”

Dish chairman Charlie Ergen said what has forced Dish’s hand in the past are networks that demand huge increases despite a precipitous drop in ratings.

NO VALUE PROPOSITION

“As a consumer, where you would like to see that go is regional sports would be an a la carte item that you pay for if you’re interested in sports,” Ergen said recently in a brief interview. “It’s really hard to take a fairly narrow set of sports rights — it might be just one NBA team, it might be one baseball team, it might be one hockey team — and allocate several dollars a month to all your customer base when only a very small minority watch that channel.

“We’ve seen cases where viewership might have dropped 50% and they want a 50% rate increase,” Ergen added. “That doesn’t make any sense. The right answer is to have the Dodgers available for, maybe it’s $10 per month, but you have the Dodgers available for people who want to watch it. That’s the fair way to do it.”

Despite its hardline stance on RSNs, or perhaps because of it, Dish has been able to avoid implementing a regional sports surcharge, something that was pioneered in 2012 by DirecTV, Dish’s satellite rival. DirecTV began adding a $3 sports surcharge in areas that have multiple RSNs, such as Los Angeles, New York and Denver.

At the beginning of this year, DirecTV increased that surcharge in Los Angeles and New York to $3.63 per month, company spokesman Robert Mercer said, adding that the increase “doesn’t come close” to covering DirecTV’s sports costs.

Los Angeles has seven RSNs — Time Warner Cable SportsNet, Time Warner Cable Deportes, SportsNet L.A., Fox Sports West, Prime Ticket, and the Pac-12 Network’s national and Los Angeles feeds. New York has about four RSNs — SportsNet New York, YES Network, MSG Network and MSG Plus.

“In L.A., a market that was already expensive, the addition of TWC’s two Lakers channels pushed RSN costs to a new high,” Mercer said.

Los Angeles has been a hot-bed of RSN controversy with Time Warner Cable SportsNet and SportsNet LA, which each reportedly charge distributors carriage fees of about $4 per subscriber per month. DirecTV does not carry SportsNet LA — only Time Warner Cable, Bright House Networks and a few smaller operators do — and political leaders have attempted to resolve the situation by getting the parties to agree to binding arbitration. So far, no progress has been made on that front.

BIG HIKES ELSEWHERE

While Los Angeles has grabbed all the press attention, New York has also seen some hefty increases, if Cablevision Systems is an example.

Cablevision, which offers service to about 3 million customers in parts of New York, Connecticut and New Jersey, raised its sports surcharge in the second quarter by $2 per subscriber per month to $4.98.

Cablevision vice chairman and chief financial officer Gregg Siebert recently said that the reason behind the hike was “a renewal of a regional sports network in the marketplace that was very significant for us.”

Siebert did not reveal which RSN renewal he was referring to, and added that Cablevision had managed to keep its basic video and high-speed Internet rates stable during the period.

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