While the Internet usually gets all the blame for inspiring the scary-for-cable-companies cordless future, the NFL, too, will dictate television's fate. In theory, rising cable costs coupled with the ever-increasing availability of free or cheaper shows and movies online will push people away from "cords" and onto the Internet. In practice that actually hasn't happened -- yet. The streaming options offer some things, but not everything. And the data show that people are still very much leashed to cable packages. But the Internet isn't the only force at work here. Sports, football specifically, is pushing cable to new price levels that could make potential subscribers cut the cord. At least that's how fearful cable executives put it.
Worried that ESPN's pricey deals with the NFL are pushing people away from cable altogether, cable executives like Viacom's Chief Executive Philippe Dauman noted that ESPN alone "is double the cost of all our networks combined." Dauman said this at a conference on Monday, reports The Wall Street Journal's Sam Schechner and Martin Peers. Dauman is joined Greg Maffei Chief Executive of Liberty Media Corp., which owns the Starz Network, who described the sports mega-network as "tax on every American household," at that same conference, according to Schechner and Peers.
Sports are indeed expensive and push up the cost of cable packages. The NFL is about to close a deal with cable, satellite and network providers for distribution through 2021 for $6 Billion-a-year, reports Deadline Hollywood. Not all of that comes from ESPN. "Broadcast network share of the yearly fees will amount to about $3.2 billion," writes Deadline. "ESPN’s share will be about $1.9 billion per season under the league’s separate $15.2 billion deal with the cable network for 'Monday Night Football' which also lasts through 2021." And that's just the NFL. Don't forget about all the other sports, including college football, which as The Atlantic's Taylor Branch explained is also a billion dollar industry, including coverage on ESPN and its own separate channel ESPN U.
Cable executives worry that these high fees will lead to de-bundling, as younger people want cheaper à la carte packages. ESPN is the obvious target for cable execs, given it charges the highest per-household subscription fee of any cable channel. SNL Kagan estimates its monthly per-subscriber fees for the flagship channel have risen 42% to $4.69 since 2006, compared to the average cable channel fee, which rose 24% over that same period to 26 cents a month, report Schechner and Peers.
ESPN defends its prices, arguing that its valuable programming draws more cable subscribers. "ESPN is consistently ranked by cable operators as the most compelling and comprehensive driver of their businesses, offering more total value in a multiplatform world than any other basic cable network by far," a spokeswoman told the Journal. And, as of a year ago, 27 percent* of people asked in a survey by Needham & Co. analyst Laura Martin said that they would not cut the cord without ESPN's offerings online.
And ESPN presciently released data a year ago today, proving that just .1 percent of households had cut the cord. A year later, and pay TV still has a high penetration rate of 83.2%, reported AdAge's Dan Hirschhorn.
Yet, the fear still lingers. Maffei worries that as the prices go up -- thanks to ESPN -- some will opt-out of cable, or a sparser package. And it's not totally unfounded. Many new households aren't signing up for cable at all, continues Hirschhorn. "While there were 1.8 million households formed, according to Census data estimates cited by the report, only 16.9% of them signed up for pay-TV services," he writes.
This post originally said 31 percent of people would not cut the cord without ESPN online availability.