If you haven't noticed the migration of marquess sporting events moving over to cable, let me help you out. Over the past couple of years we've seen the Stanley Cup, Monday Night Football, BCS bowls, and now the NCAA Tournament all move over to cable television. The Final Four and Championship game will also make the move in 2016.
Johh Ourand has a great writeup on the trend over at SBD and the cliff notes version goes like this:
"But those deals come at a cost. Network and league executives say that cable channels still have to pay a healthy premium if they want to pick up the rights to bigger sports events. Leagues have not yet placed as much value on the broadband services and added shoulder programming that come with cable networks, as they do on the broadcast universe of 114 million homes. ...
For the BCS, an expected 10 percent viewership decrease was worth about $25 million per year.....
ESPN makes more than $4 a subscriber a month. With 100 million pay-TV homes, that equals $4.8 billion a year, even before ad sales are factored in. Thanks largely to the NBA and MLB playoffs, TNT pulls in around $1 a subscriber a month. With the NCAA tournament spread across three Turner channels, Levy expects to get healthy increases from distributors that can't afford to lose NCAA tournament games in March"
The summary is this. Premium events increase ratings. Those ratings allow the cable channels to renegotiate their carriage contracts with your cable or satellite provider as well as boost their ad sales. Network television primarily monetizes via advertising.
Every month you're paying somewhere near $10 bucks if you have TBS, TNT, Versus, ESPN, ESPN 2, Big Ten Network, and a local sports regional network. As more events move over to those channels OR if more sports channels emerge, you're goign to see that amount go substantially up. Suddenly we may be at $15 a month for all the good sports channels which would be $180 a year and for 100 million households, you'd be looking at a total of $18 billion a year. Again that number doesn't even take into consideration advertising revenue.
A lot of that growth potential is up for grabs and we're seeing the networks go to war to procure sports programming rights so their respective cable channel can grab a larger share of that money.
Here is where it gets ugly though. If you watch Storage Wars, you've seen how the bidders on auctioned off storage lockers often jack up the price on each other regardless if they have interest in the storage locker in question. The rationale is simple and is that of a cold blooded capitalist.