For the last week or so, I've been tracking the various sports channel distribution battles that are taking place across the country thinking I'd write a post on the status of those various negotiations. We'll get to those fronts, but first let's take a couple of minutes to chew on the lunacy and inefficiency of the cable and satellite industries and think through some of the trickle down anarchy and implications that are tied to these high stakes pissing matches.
Despite all of the PR positioning, posturing, and finger pointing that takes place, for the most part the majority of these things are really a war of attrition and who will tap out first.
Lay Of The Land
ESPN's dominance means a very large and uncomfortable chunk of all cable and satellite revenue is spoken for and there isn't much cable and satellite companies can do about it.
Local sports regional channels are thriving right now as depriving someone of their favorite local sports team is not in play for cable companies that cater to localized audiences.
Now thanks to the Big Ten Network, NFL Network, and many others, everyone wants to prop up their own sports channel. In most cases it makes sense if the scope of the channel is broad and you have the programming and ambitions to do it right. There are already dozens of models and ways to launch and sustain a successful network, but their success means tighter margins for the cable and satellite companies who are attempting to stymie their proliferation under the guise of "keeping content costs down for YOU!"
You know what would ACTUALLY help keep the costs down? Not having to pay for 60 extra channels you don't need would be a start.
That's where the friction lies. Media conglomerates won't package their channels a la carte and the cable/satellite companies don't want to sell them to you that way either. With a finite amount of money coming in, media companies and cable/satellite companies take their sweet time actually getting down to business. They would rather make a big and public stink in hopes to sway perception behind their camp hoping that will break the will of the other side.
Let's say a new channel wants subscribers to pay .75 cents a month and the cable company is thinking more like .70 cents. They likely won't even have a conversation in that neighborhood for quite awhile as they'll start far apart, hire a PR agency, leak info to the media, and then wage a social media campaign screaming everything bad about the other side. At the end of the day the actual contested range for these things is quite small in the grand scheme of things. Both sides know this, but still if you crunch the numbers, playing this drawn out charade and winning can often lead to millions or tens of millions of extra revenue at the cost of pissing off customers who just want the content.
The implications of these negotiations are huge. A job well done can result in more money for better programming, better talent, or to funnel back to schools/league owners.
Muck it up and piss off the other side, and you see yourself screwed over as a point of pride by the side you've offended. NFL Network is still not on Time Warner Cable after almost an entire decade and for months during the NHL season two years ago, Versus wasn't carried by DirecTV.
Win big and it helps you recruit more schools to your conference or gains more leverage in future negotiations. Lose big and you'll see your conference raided or endure contentious labor negotiations because not enough new television money is increasing the friction between owners and players.
In the end, both sides know they need each other, but rather than work together on a solution in good faith, a whole song and dance must be done until the clock hits zero and only then is it time to for real talk.
Sports, television, and politics are now all plagued by this culture of divisive rhetoric, dramatic grandstanding, and a mentality of "win at all costs." This trend of the powers that be spending all of their time, energy, and resources into long drawn out arguments is pointless and does little more than hurt customers and consumers.
Big Ten Network
The Situation: Dish Network is thinking of dropping Big Ten Network. For more info read our article by Joe Lucia here.
What They Are Saying: From the Indy Star:
"The network isn't looking for anything of any particular note. It's just that we're dealing with a company that, so far, is really looking for extreme preferential treatment,'' said Big Ten Network President Mark Silverman after the sides met Wednesday.
"Dish Network released a statement Wednesday night stating it continues to negotiate a deal that offers "customers high quality programming at a good value."
Best guess at what the deal is: Dish Network has balls. They already dropped AMC during a tremendous season of Breaking Bad. They're getting absolutely murdered by AMC in the process. Now this?
Not picking up a new channel is one thing. Dropping a channel that has a passionate and loyal audience is another. I could see them dropping the channel for the first and maybe even second week of the season, but that's just way too many people who are going to flip out and leave. 12 schools with lots of passionate alumni creates an ugly shit storm for Dish. They don't want to pay and are hoping to squeeze BTN for a couple of cents per subscriber.
BTN isn't blinking and the AMC situation works in their favor. BTN is widely available elsewhere. If they give in here, they'll have to give in to other companies who have renewals coming up as well.
Dish Network is basically in a rear naked choke hold and it's just a question of when they'll tap. Will they not want to deal with the turmoil that not having the channel on Saturday will bring, or will they try to endure the storm hoping BTN caves just a little bit before thousands change providers?
While I blame Dish more than BTN here, customers essentially signed up for this. You could have had DirecTV or cable. It's like when you fly Southwest and get mad that you got a middle seat and no meal.
The Situation: After beefing up the amount of regular season games on the channel from 8 to 13, NFL Network was able to land Cablevision leaving Time Warner Cable and BrightHouse Networks as the last two significant holdouts. For the second time, customers of companies that TWC has acquired lost the channel as Time Warner let the legacy contract lapse without renewing or negotiating. TWC handles negotiations for BrightHouse Networks so it's a package deal.
What They Are Saying: From Businessweek:
"Rolapp told reporters on a conference call that the two sides “are not talking, regrettably, so as a result we’re obviously not close.” The calculation for Time Warner, says Barclays’s Ratcliffe, is mostly a matter of pegging how many subscribers are likely to bolt for another carrier to get the NFL Network."
Best guess at what the deal is:
There is a long history here. You would think moving to 13 games would at least get them to the negotiating table. Not so. NFL Network wants a deal that mirrors what they are getting from Cablevision. Time Warner has already had customers leave because of their refusal to budge over NFL Network. The bleeding hasn't stopped but most of the blood has already left.
NFL Network wants the deal, but won't give a special deal to TWC and they are firm on this.
TWC is fine taking it on the chin here and have made the economics work in doing so. This is basically when "keeping it real goes wrong" with no end in sight.
Do you know what the deal is with NBCSN and Dish Network? Is there any idea if NBCSN/Dish are negioiating to get off the highest tier Dish package onto a lower tier one? NBCSN is actually getting some decent programming, but obviously not big enough for me to switch.
Doesn't it seem that the basic negotiating strategy used by the content providers and the cable companies is similar to hostage negotiations. "Give us the money or we kill your football game watching? We're serious. Here let me show. We'll kill off AMC for you first."
This does not seem like an efficient method of marketing or developing any sort of brand loyalty.
There is no single cable or satellite provider who will ever have the perfect mix of channels. So why keep chasing different ones for the Flavor of the Month? Has this ever set in on people in this industry?
So, what's your take on the Pac-12 network? No deal with DirecTV, Dish, Verizon, AT&T, or Charter. Limited distribution outside the league footprint on Cox. First FB game was last night...
@VoxHochuli I think the majority of the providers you listed will have the channel by mid October. It's possible one company might try to sweat out an entire year, but my bet is that DTV will take the plunge In late September and the other will follow.In part II I likened all of the companies to people in a pool trying to hold their breath the longest.