The latest scam: Regional Sports into basic cable tiers

[c1ue]

Re: The latest scam: Regional Sports into basic cable tiers

The Golden rule applies. "Them that has the Gold, makes the rules". The gold in this case being the best athletes in the world playing a game that happens to be a very popular national pastime. I pay around $1000 year for various TV services and watch maybe 30 or so football games along with other programming. The Football alone is what keeps me subscribed, so their little scheme works. But I don't consider myself particularly "ripped off". Not when game tickets are $100+ each. Considering how lame some "entertainment" is today, I consider it money well spent.

Your comment would make more sense if it in fact was true.

In this case, however, it is the addition of unwatched baseball games (unwatched by 99% of the basic cable subscribers) feeding into a huge TV contract, feeding into huge bucks for the Dodgers team, which in turn feeds into the huge contracts for the athletes.

I have no issue with gigantic bucks earned for performances before admiring audiences. Your $1000, assuming it is paid in some form of elective add-on package, perfectly fine.

However, this is a clear case of gigantic bucks earned by fleecing an existing customer base for a service which almost none of them give a crap about. Of course, if you had ready the actual article in question, perhaps you might have understood this.

[DSpencer]

Re: The latest scam: Regional Sports into basic cable tiers

Your comment would make more sense if it in fact was true.

In this case, however, it is the addition of unwatched baseball games (unwatched by 99% of the basic cable subscribers) feeding into a huge TV contract, feeding into huge bucks for the Dodgers team, which in turn feeds into the huge contracts for the athletes.

I have no issue with gigantic bucks earned for performances before admiring audiences. Your $1000, assuming it is paid in some form of elective add-on package, perfectly fine.

However, this is a clear case of gigantic bucks earned by fleecing an existing customer base for a service which almost none of them give a crap about. Of course, if you had ready the actual article in question, perhaps you might have understood this.

This doesn't make sense to me.

If the cable (or dish, etc) can increase the cost of service by adding a service that "almost none" of the subscribers "give a crap about" then why wouldn't they just increase the cost of the service without adding anything at all?

Why would they pay big bucks to the sports networks and in turn the teams and players if they didn't feel they had to? The answer according to "the actual article in question" is:

"not carrying a local team's RSN has been perceived as a serious competitive disadvantage."

So maybe they are just stupid and it's a huge mistake? Or maybe flintlock is right and not having these sports would be a serious competitive disadvantage?

The "unwatched by 99%" is also misleading. That number is really saying that for an average game 99% aren't watching that game. It doesn't mean that 99% don't watch any or even a substantial number of games per year. MLB teams play 162 games per season! And that's before the playoffs. It's a safe bet that even a serious fan does not watch anywhere close to that number. The real question is what percent of the audience watches enough games that they would be willing to switch providers if they didn't have access to those games.

The TV market is an oligopoly (with the consequences of that paid by consumers) although I would say it's getting better for consumers. Bundling in general is certainly a disadvantage for consumers but I'm not sure how that equates into a "scam". Maybe since cable is a government granted monopoly they should have more consumer protections? But could a cable provider survive by offering each channel individually?

[lektrode]

Re: The latest scam: Regional Sports into basic cable tiers

.... But could a cable provider survive by offering each channel individually?

if not, then the 'basic rate' needs to be adjusted, with less channels included and then offer ala carte pricing.

my next move is to see what i can get with rabbit ears - if can get a couple of the 'big4' + PBS, then i'm gonna drop even the basic, as most of TV is now unwatchable due to the constant barrage of commerch interuptions and lack of reasonably intelligent/quality programming - and they can stuff all the 'reality' shows, far as i'm concerned.

my obs of most of the cable operators offerings (basic level) is that they were part of the propaganda/PR effort to convince the local regulatory authorities that "the commuity was being well-served" by the granting of the monopoly - and THEN there was all the 'promise' of less commerch junk, since the rate-base would allow for profitablility with less advertising - and what did we get?

the 'cable' stations are The Worst, far as interuption.

to paraphrase patrick henry:
GIVE ME ALA CARTE OR GIVE ME BACK MY ANTENNA!

;)

[Thailandnotes]

Re: The latest scam: Regional Sports into basic cable tiers

But could a cable provider survive by offering each channel individually?

Yes, but baseball players would get paid less.

Cable has been a scam from the get go. It just keeps getting scammier. Guggenheim Partners buys the Dodgers for 2.15 billion, the most ever paid for a baseball team. (Cubs are second. 845 million in 2009) The mediocre team is a billion in debt. It can't raise advertising prices. Fox had paid the Dodgers 40 million a year for T.V. rights. Now they are agreeing to pay six times as much. If the people who watch the Dodgers were to pay for this, they 'd have to get second jobs to pay their cable bills. Solution is a baseball tax on everyone. The rent seekers win again.

Favorite comment I read....

“The good in all of this is that Rupert Murdoch got fleeced by Major League Baseball an extra 5B dollars. We all forget the pawn on his chess board that was Frank McCourt who was going to sell the TV rights to Rupe at a fraction of this price. All a part of the original stake Rupe made in navigating McCourt’s leveraged swindle to get the team from the O’Malley’s so he could be Rupe’s lackey… Err… steward, until this last contract expired. But the wiley old Selig, and his money hungry partners who have a dying business, never liked the Aussie ownership, and certainly saw McCourt and his trashy wife for the carpet baggers they were. There was no way they were going to allow the 2nd most lucrative market’s TV rights to just get taken off the table. The problem for Selig and his vsionaries was ESPN didn’t need to cannibalize itself at any price, so there were no other buyers out there who could write the check they wanted. What to do, what to do. Why not let Rupe be the one to cannibalize himself; so they take over the team, sell it for a ridiculous price to an ownership group who not only wanted to own a big franchise for its other sports interests, while understanding the value of those TV rights which is what compelled them to make the August trade they did… A trade the Commissioner could easily have stopped in the best interests of Baseball but who certainly saw the concept of ‘best’ quite differently. Rupe was checkmated because he needed the rights in order to take on the Mouse House, even if it would cost him much more than he thought it would. He might be aggrieved by the inconvenience, the owners might be much wealthier because of revenue sharing, and the Guggenheim Group’s strategic play with Bud Selig as their wingman, has come up aces. Everybody gets rich… Except the fan who once again watches mediocre product and pays too much for the privelege. It’s all that’s right and wrong with capitalism in the 21st Century.”

[DSpencer]

Re: The latest scam: Regional Sports into basic cable tiers

Yes, but baseball players would get paid less.

The part I'm missing is why TV execs care about paying lots of money to baseball players. If they don't need baseball why do they give them so much money?

[flintlock]

Re: The latest scam: Regional Sports into basic cable tiers

Your comment would make more sense if it in fact was true.

In this case, however, it is the addition of unwatched baseball games (unwatched by 99% of the basic cable subscribers) feeding into a huge TV contract, feeding into huge bucks for the Dodgers team, which in turn feeds into the huge contracts for the athletes.

I have no issue with gigantic bucks earned for performances before admiring audiences. Your $1000, assuming it is paid in some form of elective add-on package, perfectly fine.

However, this is a clear case of gigantic bucks earned by fleecing an existing customer base for a service which almost none of them give a crap about. Of course, if you had ready the actual article in question, perhaps you might have understood this.

Well when you own your own cable network, then you can charge whatever you like, for whatever you like. Knock yourself out. This is no different than any other business that bundles crap together in order to push it on customers. Its merely marketing. Trying to instill a perceived value on crap programs that most would not pay for if given the chance. Just because you don't like the system doesn't mean its not reality. These shows are products like any other product. They are created and owned by PRIVATE enterprise. Frankly I think that is the real problem you have with the subject.

I may want to buy a car with leather seats, but I'm forced to get a "Package" that also includes Satellite GPS. So the car maker is "fleecing" me according to your standards. Great. What are the alternatives? Would you have the force of government intervene and force BMW to sell us options a la carte? Would you be happier if they just charged
more for the car with no GPS? Because they are going to get theirs regardless. Or perhaps they just quit offering GPS altogether because everyone can't afford it? Because that is exactly what would happen if market forces dictate it. They do not give a damn about what is fair or unfair, only how to maximize their profits. People let marketing BS cloud what is in fact, the way things work today. So they "sell" you a package of crap programming and then try to convince you they are doing you a favor? So what? They know full well exactly what people are willing to pay and for which programs. Would I like to see a system where you pay by the program? Of course. I had Directv back when they first started out and you could add individual channels to some degree like that. That is why I used them. But they figured out really quickly that if everyone only paid for the most popular programs, the programs would have them by the balls when it came time to negotiate fees. We'd probably all be paying more today.

Not a sports fan? Then cancel cable because there really isn't a lot more than sports today to justify cable service in most areas. Hulu, Netflix, HD antenna on the roof, etc. But then cable companies know that some people are basically lazy and won't make the effort to try alternatives. In the long run, if they are making a mistake, the market will let them know it.

Contrast coverage of Sports today vs 30 years ago. There is no comparison. Today I can watch virtually any game any time from the comfort of my home. Profit incentive alone is responsible for this. Frankly if someone can't afford a few hundred bucks a year more for expanded programming then watching TV should be the least of their concerns. A non-issue.

[flintlock]

Re: The latest scam: Regional Sports into basic cable tiers

This doesn't make sense to me.

If the cable (or dish, etc) can increase the cost of service by adding a service that "almost none" of the subscribers "give a crap about" then why wouldn't they just increase the cost of the service without adding anything at all?

Why would they pay big bucks to the sports networks and in turn the teams and players if they didn't feel they had to? The answer according to "the actual article in question" is:

"not carrying a local team's RSN has been perceived as a serious competitive disadvantage."

So maybe they are just stupid and it's a huge mistake? Or maybe flintlock is right and not having these sports would be a serious competitive disadvantage?

The "unwatched by 99%" is also misleading. That number is really saying that for an average game 99% aren't watching that game. It doesn't mean that 99% don't watch any or even a substantial number of games per year. MLB teams play 162 games per season! And that's before the playoffs. It's a safe bet that even a serious fan does not watch anywhere close to that number. The real question is what percent of the audience watches enough games that they would be willing to switch providers if they didn't have access to those games.

The TV market is an oligopoly (with the consequences of that paid by consumers) although I would say it's getting better for consumers. Bundling in general is certainly a disadvantage for consumers but I'm not sure how that equates into a "scam". Maybe since cable is a government granted monopoly they should have more consumer protections? But could a cable provider survive by offering each channel individually?

Of course some people want to watch the less popular channels or they would not exist. Or are we really supposed to believe in some vast right wing conspiracy to create 1000 channels of junk just to "hide" the fact they figured out that people like football more than CSPAN? Or does c1ue not remember the stone ages when we had three "free" networks? That was very FAIR and no one felt FLEECED. You get what you pay for, you'd think people would know that by now.

Is satellite regulated? Because if not that would leave Cable at a huge disadvantage with any attempt to force Cable to play nice.

Even the article mentions that people may not go along with the price hike.

The obvious question is will the L.A. area's pay-TV subscribers - the majority of which do not tune into these games - idly sit by and pay the higher rates, or will they jump ship to cheaper OTT options? The Dodgers' new owners are making an enormous bet that most will stay in place. Given the proliferation of video choices driven by new technologies like the iPad, that feels like an awfully big huge assumption.

If people have choices, how can it be considered a rip off? Did anyone read about the deals the ball clubs were making in the BILLIONS of dollars? What if people opt out at the prices required to pay this back? Has anyone thought of that? Risk/reward, that's how it works. The fact some have figured out how to win at this game doesn't bother me a bit. It's when they stop doing so the real crying will start.

[c1ue]

Re: The latest scam: Regional Sports into basic cable tiers

Well when you own your own cable network, then you can charge whatever you like, for whatever you like.

So then you admit that professional sports players have nothing whatsoever to do with their salaries?

That the real reason why salaries are inflating is because they're chips in the game to screw consumers out of more money?

The article in question also notes that there are Federal regulations on the ways by which costs are passed on to consumers - clearly this isn't even a case of monopoly, but monopoly finding a way to get around consumer protection laws.

I may want to buy a car with leather seats, but I'm forced to get a "Package" that also includes Satellite GPS.

One major problem with your analogy: you can always find a car which doesn't have the package.

The same is not true for cable services - especially since 'basic' cable is the lowest tier possible.

Contrast coverage of Sports today vs 30 years ago.

My that's a powerful argument. Why don't you just bring out the contrast vs. 100, or 1000 years ago.

The technology to deliver sports on demand and at a per-subscriber voluntary basis exists. It is called pay per view - and perhaps you've used it in the past.

Merely spouting that the coverage available today is better than 30 years ago is to repeat perfect irrelevancies.

If the cable (or dish, etc) can increase the cost of service by adding a service that "almost none" of the subscribers "give a crap about" then why wouldn't they just increase the cost of the service without adding anything at all?

Because there are consumer protection laws out there specifically for cable - it being a natural monopoly type of market.

Of course some people want to watch the less popular channels or they would not exist.

Do you actually think before you write? Or perform any research whatsoever?

The lowest rated cable channel is probably Mad Money - garnering 66K viewers nationwide. However, Mad Money doesn't cost $300 million a year.

Cable TV shows like Party Down - which average under 100K viewers nationwide - get cancelled. Party Down cost less than $7M for 10 episodes which breaks down to $7 per viewer.

At $300M for 162 games at 67K/game - Dodgers baseball costs $27.63 per viewer.

In contrast the Yankees draw 329K/game and the team nets about $90M/year - which works out to $1.69 per viewer. The YES network earns a total revenue of $224M/year - which works out to $4.20 per viewer.

Another number: Aggregate MLB TV revenue - that's ALL 30 teams - totaled $923 million in 2011.

Any way you slice it - there is NO straight economic sense whatsoever in this Dodgers TV deal.

[astonas]

Re: The latest scam: Regional Sports into basic cable tiers

Not a sports fan? Then cancel cable because there really isn't a lot more than sports today to justify cable service in most areas. Hulu, Netflix, HD antenna on the roof, etc. But then cable companies know that some people are basically lazy and won't make the effort to try alternatives. In the long run, if they are making a mistake, the market will let them know it.

Well, my tiny segment of the market voted with its feet years ago, and we couldn't be happier to be free of advertising channels laced sparsely with bad content.

Trouble is, now they're trying to raise our internet rates because we aren't bundled with a TV package.

I think at least a part of this problem is the effective monopoly that the government permits data providers.

[lektrode]

Re: The latest scam: Regional Sports into basic cable tiers

....
Another number: Aggregate MLB TV revenue - that's ALL 30 teams - totaled $923 million in 2011.

Any way you slice it - there is NO straight economic sense whatsoever in this Dodgers TV deal.

even worse is when john q public gets the bill to build their stadiums - but here's yet another number...
just imagine - the avg player gets 3million+ while the fans get gouged not only on the price of admission
but then get stuck paying the FIREmen hundreds of millions more to subsidize the cost of their playpens....
and some people think snowskiing lift tickets are expensive???


MLB average salary up 3.8 percent to $3.2 million

bosglobe
NEW YORK (AP) — Baseball’s average salary increased 3.8 percent this year to a record $3.2 million.

According to final figures released Friday by the Major League Baseball Players Association, the rise was the steepest since 2007. The boost was helped by an increase in the minimum salary from $414,000 to $480,000.

The New York Yankees had the highest average for the 14th consecutive season at $6.88 million, rising after consecutive declines from a peak of $7.66 million when they won the World Series in 2009.

The Los Angeles Dodgers boosted their average from 13th to second at $5.55 million, followed by the Los Angeles Angels ($5.48 million) and AL champion Detroit ($4.95 million). Texas went up from 15th to fifth at $4.89 million.

At $684,940, Houston had the lowest average since the 2006 Florida Marlins at $594,722.

The Boston Red Sox and Cubs had their lowest averages since at least 2000. Boston dropped from third to 12th at $3.3 million and the Cubs seventh to 23rd at $2.1 million.

World Series champion San Francisco remained eighth, averaging $4.07 million. AL West champion Oakland was 28th at $1.79 million.

Kansas City rose from last in 2011 to 26th at $2.04 million, and Pittsburgh went up from 27th to 19th at $2.47 million.

The Marlins increased from 19th to 10th after adding free agents Jose Reyes, Mark Buehrle and Heath Bell but have traded them in the team’s latest payroll slashes and will drop next year.

Among regulars at positions, first basemen took over from designated hitters as the highest average at $8.6 million, followed by DHs at $8.1 million. Third base was next at $7.1 million, followed by starting pitchers at $6.1 million, second basemen $4.9 million, outfielders $4.6 million, shortstops $4.2 million, catchers $3.4 million and relief pitchers $1.8 million.

Figures are based on Aug. 31 rosters and disabled lists, with 944 players averaging $3,213,479. Major League Baseball has not yet computed its final averages, which usually differ slightly because of methods of calculation.

[c1ue]

Re: The latest scam: Regional Sports into basic cable tiers

even worse is when john q public gets the bill to build their stadiums - but here's yet another number...
just imagine - the avg player gets 3million+ while the fans get gouged not only on the price of admission
but then get stuck paying the FIREmen hundreds of millions more to subsidize the cost of their playpens....
and some people think snowskiing lift tickets are expensive???

The stadiums - I fully agree that's another massive boondoggle. The majority of taxpayers don't go to these stadiums, yet they all have to pay.

The cable scam above is a similar situation but with a specific market segment, though I do strongly suspect there is some government regulatory (avoidance or circumvention) involved.

Stadium tickets, however, that's pure supply and demand. I don't have an issue with it - after all it is purely voluntary. As for player salaries - while player salaries are the single biggest factor in payrolls, on the other hand players are the core of what the product is.

In an era with ever increasing team revenues, while the average team only clears $14M in net income, at the same time the team valuations have been rising dramatically. The profit being made by team owners right now isn't cash, it is valuation of their team.

Once valuations level off, likely we'll see moderation of player salary growth.

Then again, if the Dodgers are able to continue the path blazed by the Angels, perhaps not.

[don]

Re: The latest scam: Regional Sports into basic cable tiers

The ‘Mad Men’ Economic Miracle

By ADAM DAVIDSON

Three months ago, “Breaking Bad” cut off its fifth and final season on a maddening cliffhanger. Just as the D.E.A. agent Hank Schrader realized that his mild-mannered brother-in-law was actually a coldblooded meth lord, the show’s rabid viewership also realized that it would need to wait until the summer, when the season resumes, to find out what happens next. For fans like me, it has been and will continue to be an interminable wait.

For AMC, the network that broadcasts “Breaking Bad,” it will be a very profitable one. Cliffhangers may have been around for more than a thousand years — since at least the composition of “One Thousand and One Nights” — but no one has monetized them as brilliantly as cable networks. In order to get paid, Charles Dickens had to sell the next chapter of his serialized novels; in order to sell advertising, ABC had to order more episodes of its hit show “Lost.” But for the next several months, AMC is converting our eagerness into millions of dollars without showing a single new episode.

Cable TV has developed one of the most clever business models in our modern economy. Until recently, AMC was a basic-cable backwater known for “Threes Stooges” marathons. But a few years ago, it tweaked its business and began offering two or three hours of original programming on a few dozen nights a year. Starting with “Mad Men” in 2007, the network landed hit shows that developed small but obsessive followings. Soon after, it began making larger financial demands of the cable and satellite providers, like Comcast and DirectTV, that carry the network. AMC now charges these providers about 40 cents a month for each subscriber, including the millions who will never watch “Mad Men” or “Breaking Bad.” These providers can refuse to pay up, but doing so would infuriate legions of vocal viewers. (Last summer, the Dish Network played chicken with AMC and lost.) AMC collects $30 million a month in fees alone on a base of 80 million subscribers, which is pretty good considering that the last episode of “Breaking Bad” had fewer than three million viewers.

This business model, perhaps as much as artistic creativity, is responsible for TV’s current golden age. Networks have effectively entered into a quality war. Basic-cable channels have to broadcast shows that are so good that audiences will go nuts when denied them. Pay-TV channels, which kick-started this economic model, are compelled to make shows that are even better. And somehow, they all seem to be making insane amounts of money. This year, NBC Universal’s cable operations are expected to bring in around $5 billion, half of which is profit. Viacom’s revenue will be more than $8 billion, with 49 percent profit. Apple had one of its best years ever in 2012, but its profit margin is expected to be only 37 percent, which is still well above its 23 percent average over the past five years. An auto company would be thrilled with something in the high single digits.

At first, the cable industry’s ascendance into arguably America’s single-most-profitable big business makes almost no economic sense. Not long ago, three major networks controlled all of our viewing. Now dozens of channels reach a fraction of that audience. According to the basic rule of supply and demand, the revenue and profits should plummet. But those rules break down when an industry operates as a near monopoly.

In 1992, Congress made it illegal for municipalities to grant a monopoly to local cable providers. But it was already too late. Most companies thinking of beginning a new cable system balked after realizing the significant barriers to entry — the cost of digging up roads and sidewalks and hiring a fleet of technicians to draw wire to new customers’ homes. Worse, a new cable competitor would have to entice customers by entering a price war, erasing any potential profit. Verizon and AT&T actually tried this but found that fiber-optic cable was profitable only in the most dense, urban areas. Satellite offers some competition, especially in rural settings, but many people decline a service that fails whenever it’s too cloudy outside.

Secure in their quasi-monopolistic dominance, cable providers have found that they can steadily raise rates and not lose too many customers. The average cable bill has more than doubled over the past decade, and viewers currently pay nearly $90 billion a year for their service. This is more than enough to support a profitable system in which networks can afford to broadcast expensively produced shows. Everybody profits, everybody wins (even viewers).

And yet the cable industry is dying — albeit very, very slowly. Erik Brannon, an analyst at the market-research firm IHS Screen Digest, notes that while few people choose to drop their service, young people aren’t getting hooked up in the first place. When people in their 20s move out of their parents’ house or dorm room, they are less likely to get into the habit of paying for cable. If they get addicted to “Breaking Bad,” they’ll often download it free through file-sharing services like Bit Torrent or wait for it to come out on iTunes.

With their subscriber base slowly dwindling — Brannon says that subscriptions dropped an average of 0.75 percent over the last four quarters — cable companies are forced to make up the loss by charging an ever-smaller audience ever-higher rates. As such, Brannon says he thinks that cable bills will eventually become so high that significant numbers of subscribers will decide to drop the service altogether. He estimates that this should happen sometime after 2016. At that point, the model may collapse altogether.

It’s impossible to know what comes afterward. Perhaps we’ll get a truly free digital marketplace, one in which each program competes on its own without any outsize monopoly profits for whoever owns the wires and the channels. In many ways, that would be a much better system. Cable providers behave like OPEC, a cartel that keeps prices high and limits innovation. With little or no barrier to entry, better ideas and programs would win, while old, monopolistic conglomerates would crumble. If entertainment becomes anything like more competitive markets — cellphones, say — there should more variety and lower cost.

Competition is obviously preferable to a monopoly. Yet without the existing system, it’s hard to imagine that the quality war will rage on. Will there be enough content providers willing to gamble on expensive programs with big stars, lavish wardrobe budgets and huge overhead — only to sell episodes online for less than a dollar? If there are no oligopolistic profits, no cartel monetizing our eager anticipation, will there be as much great stuff to watch? For people, like me, addicted to not only “Breaking Bad” but also “Mad Men,” “Game of Thrones,” “The Killing,” “Homeland” and others, this future is scary because the answer is probably no.

Adam Davidson is co-founder of NPR's “Planet Money,” a podcast, blog and radio series heard on “Morning Edition,” “All Things Considered” and “This American Life.”