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Tuesday, March 3, 2015

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Analysis for 'LA Lakers'

  • DirecTV CEO: "Regional Sports Networks' Structure Is Broken"

    Talk to any pay-TV operator executive these days and you'll get an earful on the relentless rise in their programming costs - what they pay to deliver both cable and broadcast TV networks into their subscribers' homes. Programming costs drive up subscribers' rates, in turn exacerbating pay-TV's affordability crisis, which in turn exposes the industry to cord-cutting, cord-shaving and over-the-top alternatives.

    As I've written numerous times, scratch the surface of the programming cost issue and the focus quickly turns to sports networks and more specifically Regional Sports Networks ("RSNs") which have the geographic rights to air their local professional teams' games. One pay-TV executive who's attempting to take a hard line on RSNs' escalating costs is Michael White, CEO of DirecTV, who, on the company's earnings call on Tuesday, once again said that "regional sports networks' structure in the industry is broken" and that "we are taxing most of our customers who wouldn't be willing to pay for that content."

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  • Expensive Regional Sports Networks Are Becoming Pay-TV's Achilles Heel

    An article in the NY Times over the weekend, "Regional Sports Networks Show the Money," highlighted the mega-profitable and symbiotic relationship between marquee sports teams/conferences and the regional sports networks (RSNs) they have spawned. RSNs aren't new, but as the article pointed out, teams and conferences are getting increasingly creative and aggressive about their TV rights, in turn driving up the fees pay-TV operators and ultimately subscribers are required to pay. All of this suggests that RSNs are becoming pay-TV's Achilles Heel especially when it comes to non-sports fans.

    This is a topic I covered back in January, in "Not a Sports Fan? Then You're Getting Sacked For At Least $2 Billion Per Year" and subsequently in "Time Warner Cable-LA Lakers Deal Is More Bad News For Pay-TV's Non-Sports Fans," in each case noting that as sports programming fees drive pay-TV rates ever higher, some portion of non-sports fans will eventually defect for lower-cost entertainment-centric options (e.g. Netflix, Hulu, over-the-air/ antenna reception, etc.).

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  • Time Warner Cable-LA Lakers Deal Is More Bad News For Pay-TV's Non-Sports Fans

    If you live in the Los Angeles area and are not a sports fan, or you are a casual one, Time Warner Cable's new 20-year deal with the LA Lakers is more bad news. That's because, as I explained last week in "Not a Sports Fan? Then You're Getting Sacked For At Least $2 Billion Per Year," virtually all digital pay-TV subscribers in the LA area - sports fans or not - are going to be footing the bill for this massive deal.

    The TWC-Lakers deal is just the latest example of how ever-higher monthly fees pay-TV distributors must fork over to carry sports networks help drive up subscription rates. In this case, TWC, the 2nd largest pay-TV operator, is positioning itself to also be a major sports network owner, just as Comcast has with Comcast SportsNet. TWC's deal will help create an even bigger inequity for non-sports fans and casual fans than already existed. For this group of subscribers, who are primarily entertainment-oriented, and likely more on-demand focused in their viewership than ever, higher subscription rates - tied to a small cluster of very expensive sports networks - are inevitably going to drive them to drop their pay-TV service.

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