Will Coronavirus Break the $50 Billion Sports Media Industry?

As sports leagues weigh when to restart their seasons, they are talking to health officials, players, talent agents, TV networks, local governments and hotel workers. One group not part of the talks? The fans.

Tens of millions of people are paying for basketball, hockey and baseball that isn’t being played. Some are paying for tickets, which are just starting to be refunded. And many more are paying for TV networks, which are not being refunded. At least not yet.

The Attorney General of New York this week demanded cable and satellite operators stop charging customers for live sports programs. Many of those companies, including Charter and Comcast, have said they would love to provide a refund.

There’s just one problem: they are still paying for sports too.

The sports media business is like a jenga stack. Sports leagues and teams fund their operations with money they get from TV networks. The TV networks can afford the rising cost of live sports by charging pay-TV operators higher fees to carry them. Pay-TV operators then pass along the costs to the customer.

There is little desire to upend a business worth an estimated $50 billion. The NFL alone generated about $5 billion from its TV deals in 2018. ESPN is the most expensive cable network in the U.S., and has charged higher prices, even as people leave cable for streaming.

If one person in that chain stops paying, somebody gets left with a big bill. Right now, it’s the consumer. The average cable bill has more than tripled since the mid-1990s when it was just $25. ($25!) Now it’s in the $80 range. Live sports isn’t the only reason, but it accounts for about 40% of the average cable bill, per analyst Rich Greenfield.

People who don’t like sports have always paid for cable networks they didn’t watch. The nature of a cable or satellite package is you pay $80 or $100 for a bunch of channels, some of which you like and some of you don’t. While a growing number of people have decided this bundle doesn’t work for them — cord-cutters! — more than 80 million households still pay for some kind of cable or satellite package.

When the events are still happening, people at least have the option of watching Major League Baseball. Now games are on hold for the foreseeable future, and it’s not clear when they will get going again.

But for cable operators to refund customers, they would need to convince networks to refund them. Otherwise, they lose a fortune. If the networks refund the cable operators, they would then need to ask the leagues to refund them.

The leagues remain adamant that they are going to play this year. The National Basketball Association would love to host playoffs over the summer, and the National Football League swears it will be up and running by the fall.

The media business has never anticipated a world in which no games would be played for an extended period of time. It’s anticipated strikes, and work stoppages. Contracts have conditions stipulating leagues need to deliver a certain number of games to get paid (and the same goes for networks). But these contracts all have what’s called a “cure provision” that gives the leagues time to make it right.

The longer this drama goes on, and the longer we don’t have sports, the more pressure will be placed on leagues, networks and operators. My local baseball team is now offering to refund fans for tickets to games that won’t happen – but only for the month of April.

Come June and July, the odds increase that a pay-TV operator stiffs a network, or a network stiffs a sports league. If that happens, I have three words for you: call your lawyer. – Lucas Shaw

Subscribe to our YouTube channel: https://bit.ly/2TwO8Gm

QUICKTAKE ON SOCIAL:
Follow QuickTake on Twitter: twitter.com/quicktake
Like QuickTake on Facebook: facebook.com/quicktake
Follow QuickTake on Instagram: instagram.com/quicktake
Subscribe to our newsletter: https://bit.ly/2FJ0oQZ
Email us at quicktakenews@gmail.com

QuickTake by Bloomberg is a global news network delivering up-to-the-minute analysis on the biggest news, trends and ideas for a new generation of leaders.

Leave a Comment