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Regional Sports Networks

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By Tim Doehler

Background

The idea of regional cable networks is not a new one. In fact, the first regional cable network, the Madison Square Garden Network, was founded in the New York metropolitan area in 1969 — over 40 years ago. Eventually the idea caught on in other cities in the 1980s, mainly as a way to distribute sports programming within limited geographic areas [1]. Over the years RSN’s (Regional Sports Networks) have provided fans with live broadcasts and consistent coverage of their local teams.

The Players

Click to enlarge

Click to enlarge

The major players in the regional sports network industry consist mostly of FOX Sports Network and Comcast SportsNet, which acquired NBC Universal (including NBC Sports Network) in January of 2011 [2]. Most regional sports networks in the United States are affiliated with one of these two networks, which both feature affiliates that span across the country.

However, a new player might be emerging in the industry. While the company still has a long way to go to reach the heights that FOX and Comcast have, Time Warner Cable made a significant splash in the industry earlier this year when they outbid News Corp. to eventually sign a lucrative, 25-year deal worth $7 billion with the Los Angeles Dodgers and announced that they were starting a new regional sports network, SportsNet LA [3]. It is important to note that the Dodgers — not Time Warner Cable — will program the new channel. Therefore, this network, which will not air until 2014, will only feature the Dodgers, even though Time Warner Cable also has a current deal in place with the Los Angeles Lakers. This deal, which gives Time Warner Cable exclusive regional TV rights to the Lakers, was agreed upon between the two sides in 2011 and is estimated to be wroth $3 billion over 20 years [4]. This network is called Time Warner Cable SportsNet, a name that the company believes is distinctive enough from the new SportsNet LA network being launched for the Dodgers next year [11] . Ultimately it will be difficult to compete with FOX and Comcast, but cornering one of the largest markets in the nation is a move that should not go unnoticed in the industry.

Watch analysts discuss the TWC-Dodgers deal.

Current Events

While the TWC-Dodgers deal is one of the most noteworthy as of late, there have been other important moves made throughout the industry, one also involving Time Warner Cable. In late February the company agreed with FC Dallas to the most extensive television broadcast deal in the club’s 18-year history. This season, Time Warner Cable SportsChannel will air 22 FC Dallas regular-season games with all games being broadcast in HD. Also, it will allow FC Dallas to travel its broadcast team to all 17 road games and provide fans with additional in-depth programming about FC Dallas [5]. This further demonstrates a willingness to expand for Time Warner Cable and get involved in the industry in various ways, such as soccer.

Also in late February, FOX, specifically FOX Sports South, acquired the 45 Atlanta Braves games that previously aired on Turner’s Peachtree TV network. This will be the first time Turner will be out of the Braves TV business since the mid-1970s. In addition, the move means that Braves telecasts are moving from a free over-the-air station to cable [6].

Another major move by FOX Sports came about a month later, when the Big East Conference and FOX Sports agreed upon a 12-year multi-platform media rights agreement beginning with the 2013-14 academic year. The newly reconstructed Big East Conference now features Butler University, Creighton University, DePaul University, Georgetown University, Marquette University, Providence College, St. John’s University, Seton Hall University, Villanova University and Xavier University. The agreement grants FOX Sports rights to all conference-controlled men’s basketball games, select rights to women’s basketball, all Olympic sports and extensive rights for highlights and to produce ancillary programming [7].

The Result

More money are coming out of the pockets of consumers. While these regional sports networks across the country are convenient for fans, they do not come without a price.

“Pretty much everybody in the business agrees that overall costs are outrageous. Nobody has an easy solution,” said News Corp. COO, Chase Carey in light of the TWC-Dodgers deal as he “conceded” that the TV sports landscape is “becoming increasingly tricky — and expensive.” Carey also went on to refer to the business as “invaluable yet complicated [8].”

As a result of lucrative deals such as the TWC-Dodgers agreement, as mentioned by Carey, consumers are being asked to pay more. For example, this particular deal will include an estimated $4-5 per month carriage fee for subscribers throughout the area. In addition, DirecTV, the country’s most popular satellite service and VerizonFiOS have started adding a $2 to $3 monthly surcharge in markets like New York and Los Angeles to pay for regional sports networks [9]. This is a cause of concern for many, especially those who are not avid sports fans, such as David Sirota, as shown in the video below. Sirota, a nationally syndicated newspaper columnist, daily drive-time radio host on AM760 in Colorado, and New York Times bestselling author shares his opinion and some relevant facts regarding these issues…  [10]

What’s Next?

In today’s day and age of rapid technological advancements, distributors and programmers, like ESPN, need to do everything in their power to keep this live programming in the age of digital video recorder and the Internet, sports leagues and organizations know they have leverage in this particular situation [9]. As Brian Stelter, New York Times writer states, “Sports are the television industry’s bulwark against rapid technological change: while the companies fear cord-cutting by customers who can cobble together a diet of TV on the Internet, they rest a little easier knowing that former customers would be hard-pressed to find their favorite teams live online [9].”

Unfortunately, a reasonable solution has not yet been discovered. A potential solution that analysts and industry critics have discussed is an “a la carte” model of pricing [9]. This would mean that customers would be allowed to pick and choose which channels they want to subscribe to instead of being forced to purchase packages. As Gene Kimmelman, a former Justice Department antitrust lawyer says, “The cable industry has done everything it can to bundle programming and force consumers to buy things they don’t want. Finally, one piece of their bundle has become so expensive that it may finally force the cable industry to shift gears and split the bundle out of fear of pricing its own customers out of the market [9].”

There are many options being brainstormed and discussed in trying to fix this evolving issue, and although many feel that a solution is necessary, there is not a strong indicator of exactly what it will be. For now, consumers are going to continue paying premium dollars for these sports networks, especially as lucrative deals such as the TWC-Dodgers deal continue to happen.

 

Bibliography

[1] Blumenthal, Howard J., and Oliver R. Goodenough. “Chapter 2.” This Business of Television. New York: BillBoard, 2006. 16. Print.

[2] Adegoke, Yinka, and Dan Levine. “Comcast Completes NBC Universal Merger.” Reuters. N.p., 29 Jan. 2011. Web. 8 Apr. 2013. <http://www.reuters.com/article/2011/01/29/us-comcast-nbc-idUSTRE70S2WZ20110129>.

[3] Rovell, Darren. “Dodgers Launching Sports TV network.” ESPN. ESPN Internet Ventures, 29 Jan. 2013. Web. 08 Apr. 2013. <http://espn.go.com/los-angeles/mlb/story/_/id/8889859/los-angeles-dodgers-launching-regional-sports-tv-network-sportsnet-la>.

[4] “Time Warner Cable Cuts First Major Lakers Deal.” Yahoo! Finance. N.p., 26 Nov. 2012. Web. 08 Apr. 2013. <http://finance.yahoo.com/news/time-warner-cable-cuts-first-major-lakers-deal-003325369.html>.

[5] “FC Dallas Inks Landmark Television Deal with Time Warner Cable.” FC Dallas. N.p., 25 Feb. 2012. Web. 08 Apr. 2013. <http://www.fcdallas.com/news/2013/02/fc-dallas-inks-landmark-television-deal-time-warner-cable>.

[6] “Braves Move Remaining Local Telecasts To Fox RSNs, Ending Long Run With Turner.” SportsBusiness Daily. N.p., 28 Feb. 2013. Web. 08 Apr. 2013. <http://www.sportsbusinessdaily.com/Daily/Issues/2013/02/28/Media/Braves.aspx>.

[7] “Big East, FOX Reach Rights Agreement.” FOX Sports. N.p., 20 Mar. 2013. Web. 08 Apr. 2013. <http://msn.foxsports.com/collegebasketball/story/Big-East-FOX-Sports-reach-extensive-multi-platform-media-rights-agreement-032013>.

[8] “News Corp. COO Chase Carey Discusses Sports Rights; Calls Dodgers Deal “Too Rich”” SportsBusiness Daily. N.p., 7 Feb. 2013. Web. 8 Apr. 2013. <http://www.sportsbusinessdaily.com/Daily/Issues/2013/02/07/Media/News-Corp.aspx?hl=Serie%20A&sc=0>.

[9] Stelter, Brian. “Rising TV Fees Mean All Viewers Pay to Keep Sports Fans Happy.” The New York Times. The New York Times, 26 Jan. 2013. Web. 08 Apr. 2013. <http://www.nytimes.com/2013/01/26/business/media/all-viewers-pay-to-keep-tv-sports-fans-happy.html?_r=1>.

[10] “David Sirota.” The Huffington Post. N.p., n.d. Web. 8 Apr. 2013. <http://www.huffingtonpost.com/david-sirota>.

[11] Shaikin, Bill. “Dodgers, Time Warner Cable Announce New Channel: SportsNet LA.” Los Angeles Times. Los Angeles Times, 28 Jan. 2013. Web. 08 Apr. 2013. <http://articles.latimes.com/2013/jan/28/sports/la-sp-dn-dodgers-time-warner-cable-sportsnet-la-20130128>.