This piece originally ran on Dave's site What You Pay For Sports. Dave will be writing original pieces on here from time to time in addition to having his work syndicated on occasion.
A bad product is difficult enough to sell as it is. It’s even harder to sell when you tell the public you don’t really care how bad it is.
So it goes for Houston Astros owner Jim Crane. His team has by far the smallest payroll ($24.33 million) in Major League Baseball. Predictably, it has the fewest wins, too, tied with the Miami Marlins. While Crane’s strategy of building up the farm system and bringing up prospects over the long term has supporters, his telling fans they can “write a check for $10 million” if they want a better team isn’t exactly a genius PR move.
It’s also just one reason why Comcast SportsNet Houston, the Regional Sports Network partially owned by the Astros, finds itself on the losing end of a carriage war — one more thing the Astros are losing.
After the Astros and the NBA’s Houston Rockets both fought for years with Fox Sports over network ownership, Comcast struck a billion-dollar deal with both teams last year that gave them the ownership they were seeking. The Astros got 46.384% of the newly formed CSN Houston, while the Rockets got 30.923%. The deal promised to be a $60-million-per-year windfall for both teams.
A funny thing happened, though, on the way to that windfall — nobody wanted to pay for the new network. CSN Houston launched last October in the roughly 1 million Houston-area homes that subscriber to Comcast, which is about 40% of the market, but other major carriers — DirecTV, Dish Network, AT&T, Suddenlink, etc. — all said they wouldn’t agree to Comcast’s carriage demands.
At the heart of the dispute is Comcast’s belief that because Houston sports teams have a large regional fan base, CSN Houston is a truly regional network and deserves to be carried in most of Texas and its surrounding states. The carriers have countered that, no, CSN Houston is a local channel that covers local teams — the Astros, the Rockets, and the Houston Dynamo of MLS — and they see no reason to carry the channel outside of Houston at the rate that Comcast is demanding, which is reportedly as high as $3.40/month per subscriber.
The standoff lasted for so long that Houston Mayor Annise Parker offered to hold a summit last April with carriers and CSN Houston officials in order to reach some sort of resolution. As the mayor wrote in her letter to all invited parties:
The proud followers of our Houston teams – many of whom have paid for the venues where the Astros, Dynamo and Rockets compete – have been patient as your negotiations with Comcast SportsNet Houston have unfolded. That said, as the Rockets push toward the NBA playoffs and the Astros and Dynamo seasons get underway, the situation is intolerable.
The emphasis in that paragraph is mine. The city paid for the arenas for these teams, and now the network owned by those teams is demanding a huge premium to show those games on TV. Add that to the outrageous price — even the YES Network charges a lower fee — and Jim Crane’s screw-winning-now approach to building the Astros, and you can probably guess the fan reactions…
That’s just one comment taken from David Barron’s blog at the Houston Chronicle. Read through the comments on articles like this, this, and this, and you’ll find zero support for CSN Houston and its owners among Houstonians.
This one might be my favorite:
When sports fans in your city are contacting carriers and telling them not to carry the channel that shows their local teams, that should be a sign that you’re doing something very, very wrong.
What we have here is a massive overreach by both Comcast and the Astros to try and wrangle an unreasonable amount of money out of pay TV subscribers. Seven months later, the Rockets are gone till November, nobody wants to watch the hapless Astros, and most anyone who cares enough to watch the Dynamo can probably afford to buy tickets to watch those games in person. As a result, CSN Houston, which was supposed to bring $60 million/year to the teams that owned it, is on pace to make only $40 million in carriage fees in its first year of operations. Even attempts to offer the carriers a “free preview” of the channel this month have gone horribly wrong.
Perhaps this is why George Postolos, the Astros’ president and CEO who kept harping on about “fair market rate” for the channel, resigned from his position on Monday.
Clearly, that “fair market rate” is not $3.40/month per subscriber, and since Houstonians aren’t switching to Comcast in droves so that they can pay that much to watch the worst team in baseball, CSN Houston will have little choice but to give up its hard line and lower its price in order to get the carriage it wants. How soon that happens remains to be seen.
Perhaps the bigger question, though, is this: is the CSN Houston fiasco just one city’s response to a team owner it doesn’t like, or is this a sign of things to come? Could we see this same situation play out soon in Los Angeles, where SportsNet LA promises to drive up the price of TV by $5/month, or in Philadelphia, where a battle for the Phillies between Comcast and Fox Sports seems imminent? Would fans reject those new channels as well? Would non-fans give up on cable in protest? Is the RSN market a bubble on the verge of bursting? What happens to pro sports when it does? We might get to find out before too long.
The mastermind behind CSN (Stros ex-pres) resigning without a deal being done should tell you all you need to know . Hey Comcast: YOU ARE NOT ESPN, AND YOU NEVER WILL BE. You're limited to HOUSTON AREA teams... $3.40/month per subscriber is an absurd price to expect for a channel that features a pair of teams that are years out from being legitimate contenders. I wanted to watch my teams, but your "fair market share" number is far too high and I would be fully content with not giving you a dime of my money.
If the Astros and Rockets were actually championship contenders (I'll give the Rockets credit for giving OKC a minor scare in the first round but they haven't been legit contenders since the Olajuwon days) then MAYBE there would be more demand. The timing was all wrong. As previously stated about the Dynamo, the true diehards will already be at the ball park or arena. The people willing to watch just don't care to watch.
MAYBE if the Texans were involved it would gain traction but luckily for all involved (except maybe the CSN powers that be) the NFL doesn't go the RSN route
There is another group who is getting screwed here: non-sports fans who wouldn't watch even if the teams were good. Why should they be forced ti subsidize this crap? And I say that as a sports fan.
@kkolchack That's one of the reasons I launched What You Pay For Sports in the first place -- to show people how much money they're giving to pro and college sports leagues by merely subscribing to cable and satellite TV. It's a huge racket, and most people who have cable are completely oblivious to it.
@kkolchack My cable sub includes hundreds of channels I never watch, all so I can have access to higher tier sports channels.
It's a two-way street: If I wasn't a live sports addict, I would've cut the cord a long time ago. I deal with blowing past Style Channel and Hallmark Channel in the program guide so I can have access to NHL Network.
@kkolchack it's no different than them being forced to pay for ESPN, FSN Houston, and whatever else is on the basic package based on the provider. To us there's a major difference but to a non-sports fan who doesn't care one bit, it's all the same junk.
I agree with you though.
Dave, while I agree with the overall sentiment of the article, it fails to explain why CSN Houston was a bad idea. Although there is certainly a sports TV money bubble (and regional/ specialty networks are the worst offenders), CSN Houston doesn't have the worthwhile TV inventory to justify carriage agreements.
MLB designates larger local TV areas than the other major leagues, to a point where the Rangers and Astros have the same designated "local" market throughout Texas and Louisiana (along with parts of Oklahoma, New Mexico, and Arkansas). However, the designated local markets for MLS and NBA teams are much smaller.
Fox Sports Southwest gets justifiably higher carriage fees in markets like DFW, San Antonio, OKC, and New Orleans because it also carries other programming in those areas. At this time, CSN Houston can only broadcast Astros games (along with occasional lower-tier Conference USA coverage) outside of Houston. On the other end, every Rangers game broadcasts throughout the region, combined with local feeds that air the Spurs, Pelicans, Mavericks, Thunder, Stars, and Big 12 programming. Jim Crane expects to receive the same carriage fees generated by a channel with a higher quality replacement, the Rangers, and other programming. It's just not going to happen.
One minor quibble as well: Technically, BBVA Compass Stadium (home of the Dynamo) was built with private money. Land and infrastructure improvements were provided through combined funding from the city and county. The Dynamo do not own the land, and while team owner AEG paid all construction costs, they turned over ownership of the stadium to the Sports Authority as well.
@tjleibowitz Thanks for the follow-up info, although it still seems to me like the Astros and Rockets made this deal with Comcast without thinking hard enough about what the ramifications might be. I certainly understand the desire to own your own network, but not everyone can be the Yankees, can they?
You can't trust commenters on the Chronicle site any more than you can anywhere else on the Internet. Houstonians who understand baseball understand that Jim Crane is doing what's necessary for long-term success.
That said, there really is no incentive for anybody to pay for CSN right now. The Dynamo have great attendance, and the lack of TV visibility is probably helping that, actually. Watching a handful of MLS matches per month isn't worth the $3.40 though, and the Astros sure don't add any value to that proposition for viewers.
@_leegreen Even Houstonians who understand baseball would say Jim Crane needs a PR lesson or to. Asking sports fans to write him checks for $10 million if they want a better roster is a REALLY bad idea, and it certainly does nothing to help CSN Houston in the short term.