A GfK Media & Entertainment study (opens in new tab), shows that more than 19 percent of American households rely on free over-the-air broadcasts as their primary source for television. This translates to more than 22 million households with almost 60 million viewers. In an attempt to recapture that market, cable firms are starting to reexamine cable TV fees and the costs associate with carrying regional and national sports teams/channels that often have lower viewership.
The Wall Street Journal notes, “sports channels such as ESPN and regional sports networks account for 19.5% of fees paid by cable and satellite operators,” despite the fact that the audience for sports stations amounts “to about 4% or less of households on average.”
The Houston Rockets and Astros regional sports channels, carried by Comcast, reach about 40% of its cable homes and the cable company charges all subscribers $3.40 for that channel. But, Said WSJ sports reporter, Mathew Futterman, “People [Houston Comcast subscribers] seem to not be upset at going without the Houston Astros, which is the worst team in baseball and the Rockets which is pretty mediocre this year.”
“What it [viewer pushback] really exposes is of how much people really spend time watching sports and how much the networks and the teams can charge for that..the demand is not as great as you might think."
Futterman continued, “The market for sports [viewers] who are really invested in sports is rather small…on average it’s around 4 percent of the population.” He continued saying that because cable subscription prices have increased 113 percent over the last decade, “people are not as invested in sports as might be believed."
Average cable bill according to Kagan is $73.44. Today’s cable operator’s pays an monthly average of $2.47 for a regional sports channel and $5.17 for ESPN/ESPN2.
Futterman continues, “Basically what the cable companies have done is made this bet..somewhere between $50 and $100 billion say over the next 10 or 20 years, that everything is going to stay the same. And I think history tells us that things don’t necessarily stay the same..especially in technology and especially in media.”
Younger viewers are already refusing to pay for content they don’t watch. Futterman notes that the under 35 year old viewer is very familiar with technology like laptops and tablets. They are no longer saying “ Okay if I can’t get it, I guess I have to pay, the response is you know what, if I can’t get it, I’m going to watch something else. I’m not going to be held hostage to these mega companies.”
So what’s going to happen? Says Futterman, “Increasingly, the pay TV companies are going to sort of push this argument a little further and a little further a little further, and you know how things change very slowly, then all at once.
Class Action lawsuit
Echoing this viewer pushback is a class action lawsuit filed against Time Warner Cable in southern California. According to the Consumerist web site, Time Warner Cable will pay the Dodgers baseball and Lakers basketball teams $8 billion over 25 years and $3 billion for 20 years, respectively for those teams’ broadcast rights. To pay these huge fees, the TWC spreads the cost across all cable subscribers, even those who don’t want—or watch sports. That practice has raised the hackles of non-sports viewers and they have filed a class action lawsuit against TWC, claiming, that viewers who never watch baseball or basketball should not have to pay for that content.
The claim, “[A] very large segment of the consuming public is not sufficiently interested to pay $50-60 per year, but have no way of unsubscribing from either the Dodgers or Lakers telecast, which together add (or will if unrestrained) about $100 per year to the subscriber’s TWC bill."
Said the article, “This lawsuit isn’t just second-guessing Time Warner’s decision to acquire the rights: it questions the entire cable television business model.”
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