Padres Fans Finally Get Team On TV; Dodgers & Astros Fans, Not So Much

Two years after signing a new local television contract with Fox Sports San Diego, the Padres will have their games carried by all the major cable and satellite operators in the team’s viewing area. The same cannot be said for the new Dodgers network called SportsNetLA, or for the year-old Comcast SportsNet Houston, which broadcasts Astros games.

In their inaugural season with FSSD in 2012, Padres games were broadcast only on Cox Cable and DirecTV. Last season, DISH Network and AT&T U-verse came onboard, which still left Time Warner Cable customers — more than 180,000 households or approximately 40% of the market — without access to the Padres on TV. TWC finally cut a deal with FSSD last month. Come Opening Day, anyone in San Diego or Hawaii with service from Cox, DirecTV, DISH, AT&T U-verse or TWC will be able to watch Padres games.

FSSD’s slow rollout reflects the economic realities of sports on TV. Advertisers love live, DVR-proof programming that’s watched by 18-to-45-year-old men, and they spend wildly on commercials during those programs. Sports networks — regional and national — see the money the advertising generates and bid obscence amounts for the broadcast rights. But the ad money isn’t nearly enough to cover the fees paid to the leagues and teams, and still turn a profit. For that, the networks turn to the cable and satellite operators that would like to offer the sports programming to their customers. The two sides negotiate the carriage fee — the price the cable and satellite operators will pay, per customer, in order to “carry” network as part of its sports programming packages.

The Padres-FSSD contract is valued in the range of $1.2 billion to $1.5 billion, putting average annual payments to the Padres in the $50 million to $75 million range. It’s thought the initial payment for 2012 was closer to $30 million. Before the 2012 season, Cox and DirecTV reportedly agreed to pay FSSD $5 per subscriber, but TWC, AT&T and DISH balked at that fee, leading to the impasse. It is not clear whether the holdouts eventually came around to a $5 per subscriber fee or if FSSD agreed to a lower fee to get those cable and satellite operators to join on.

The battle over carriage fees isn’t limited to regional sports networks, as I explained in this post last July. But when it comes to local sports programming, cable and satellite operators are digging deep — beyond the ratings reported by Nielsen — to understand who watches the local sports teams, when and for how long. Based on that information, many pay-TV providers simply have decided that paying carriage fees in the range of $5 per subscriber doesn’t make financial sense for them or for their customers.

SportsNet LA launched in February with around-the-clock Dodgers programming, but only customers with TWC or Bright House can view the network in their homes. Every other cable and satellite operator in the Los Angeles market has balked at the network’s carriage fee demand. And TWC hardly counts as an arms-length agreement, as it is the Dodgers’ broadcast partner in SportsNet LA. Indeed, TWC will essentially pay itself the carriage fee for SportsNet LA, and then pay the Dodgers their monthly rights fee as part of the 25-year, $8.3 billion megadeal. TWC CEO Rob Marcus apparently isn’t worried. He recently told a media conference that Opening Day has a way of making these deals shake out.

But according to the Wall Street Journal, DirecTV is pushing for an a la carte pay structure with SportsNet LA; that is, DirecTV will pay the carriage fee only for those customers who specifically subscribe to the network. The Dodgers have rejected that proposal, and for good reason. The economics of their deal don’t make sense if customers can pick and choose whether to pay for the network.

Bad economics are precisely what unfolded in Houston, where the Astros are embroiled in several lawsuits and a bankruptcy proceeding involving CSN Houston and the Astros’ broadcast rights. I explained what led to the legal mess in this post from last November. In short, CSN Houston couldn’t reach carriage fee deals with any cable or satellite provider other than Comcast. Disputes arose between and among Comcast, the Astros and the Houston Rockets — which collectively own CSN Houston — over how to negotiate the carriage fee deals and at what price. Comcast forced the parties into bankruptcy court. The Astros sued former owner Drayton McLane, claiming he misled new owner Jim Crane on the financial viability of the new network. Four months later, nothing’s been resolved.

There is a glimmer of hope for Astros fans, though. The Houston Chronicle reported this week the Astros are hoping to make their games available in the Houston area through the MLB Extra Innings Package. Typically, local games are blacked out on Extra Innings or MLB.tv, as a way of protecting the regional sports networks’ economic interests (often called their monopoly). It’s difficult to imagine a scenario in which CSN Houston willingly allows games to be broadcast on Extra Innings, as that would further undercut the little leverage the network has in trying to reach carriage deals and work its way out of bankruptcy.

At some point, you’d think sports networks would stop dolling out huge rights fee deals.



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Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and NewYorker.com. You can find her work at wendythurm.pressfolios.com and follow her on Twitter @hangingsliders.


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James
Guest
James
2 years 6 months ago

Wendy, I know I am an exception to the rule, but live sports are not DVR-proof to me (and I am a 35-year old male I’m sure they would love to have watching their ads). I will never watch a game live. Not even the Super Bowl, I hate those commercials too. I set the DVR to record, go do something else for an hour, and then sit down and watch with a nice commercial buffer. If I ever catch up to live, I pause and go do something else for a while. When they are “digging deep-beyond the information provided by Nielsen…” can they identify what fraction of the people are watching live vs. DVR, or are there just not enough people with my viewing habits for it to make a difference to them?

dang
Guest
dang
2 years 6 months ago

I’m sure you’re in the minority, James. Sports are much more DVR-proof (or since you seem to balk at that term, DVR-Resistant) than say an episode of the Walking Dead or some other TV series.

cass
Guest
cass
2 years 6 months ago

You’re in the minority. Most people want to watch the game live in case something happens that they might want to text a fellow fan (or fan of a rival team) about. People also like to know the status of other games and if you watch on delay, you have to put yourself in a media blackout.

It’s possible, but not the best option for most people.

In an ideal world, of course, fans would pay the team directly to watch the team and there would be no ads. Games could be played quicker that way as well as you’d need much less time between innings.

DodgersKings323
Guest
DodgersKings323
2 years 6 months ago

I hear ya, people would get super pissy if i ever had the super bowl even slightly delayed (Which is funny because it’s already delayed to begin with from the network)

Bill
Guest
Bill
2 years 6 months ago

I watched the Super Bowl time delayed this year by half and hour or so as well. It was nice. I usually listen to games on the radio, but if I did watch them, I think I would do what you do. I’m also in MLB’s target demo.,

dl80
Guest
dl80
2 years 6 months ago

James,
I do the same thing. I’m 33. I don’t have 3.5 hours to spend on a baseball game or a football game. I don’t watch much baseball anymore because a) they are just too long (not only between innings but also between pitches) and b) I care more about my fantasy players than any one individual team.

That said, I did DVR the Australia games and watch them the next day. I didn’t find it that hard to avoid seeing the scores. I don’t know if there is any team that I care enough about to DVR and watch a full game, though. (I live in Ohio and get the Indians, but am a transplant here and don’t really care about them that much).

Deelron
Member
Deelron
2 years 6 months ago

I’m 34 and do the exact same thing when watching sports on the TV, except for MLB/NFL playoff games my team is involved in, I just can’t take not watching it live. A contributing factor is that I have a small son and while I don’t mind him watching the baseball games proper, I do have a problem with him watching the commercials (particularly the MLB ones that repeat every break, I get it already, Frank Sinatra loved Jack Daniels). It also helps I’m not interested in Twitter or other social media communication during an actual game.

The only regular season thing I actually watch live is MLB.TV through a set top box (which doesn’t include commercials for whatever reason even though using my tablet for the same thing does). I actually like the 2 minutes of silence in between the innings.

DodgersKings323
Guest
DodgersKings323
2 years 6 months ago

I still DVR at least 1.5HR in to the game and skip the commercials. This year i really wanted to head to a theme park during the Super Bowl as i’ve always wanted to do that………..but dangit i couldn’t miss the Seahawks D against Peyton Manning.

tylersnotes
Member
2 years 6 months ago

This is the wrong question to ask. If you care enough about sports to DVR them, you’re exactly the type of customer that Cable is fine with having. You are still paying the carriage fee to bring the sports into your house in the first place, so that you can DVR them.

DVR-proof is maybe an outdated term. What sports are, really, is “streaming proof.” The cable company doesn’t particularly care if you DVR something, except that if enough people do this it can have an effect on the cost for a commercial. The cable company DOES care if you cut service with them entirely and can still get the exact same quality product for much cheaper/free.

I’d wager that most people who are DVR’ing live sports are paying cable not only for the package and carriage fees, but also the cost to use their DVR service. Even if you were a vanishingly small minority of “live sport viewer” (which I’d bet dollars to donuts you are, you’re still an attractive customer to the cable company.

Brad Johnson
Member
Member
2 years 6 months ago

I’ve never heard anyone else with your specific use case. I view baseball one of two ways. I either read a book and look up for the pitch (I’ve been doing this since I was 6 (27 now) so I have plenty of practice not missing much).

The other way is to tile 4-8 games on various screens and put audio on the one or two most interesting. Granted I use MLB.tv for all but the home market game, but I only ever have audio on non-commercials. This may sound ADD-tastic, but I generally focus on one or two games only. But if something crazy starts happening in another game, I’ll be there to see it. This year I have the in-laws, scarcely used 60 inch screen to tile.

Hurtlockertwo
Guest
Hurtlockertwo
2 years 6 months ago

The problem is who actually wants to watch Padres games? The on field product sucks.

tylersnotes
Member
2 years 6 months ago

Even if I wanted to watch them, how can I when they wear those camouflage uniforms?

Observer
Guest
Observer
2 years 6 months ago

Fox Sports West carried Dodger games through last year, were on 100% of cable systems in the market, and still averaged <200k viewers per telecast. Granted this largely overlapped with the McCourt ownership era, but even given a healthy bump to those numbers you're still looking at the vast majority of subscribers subsidizing the viewing habits of a very small minority.

My echo and bunnymen
Guest
My echo and bunnymen
2 years 6 months ago

This is true, and I know that it isn’t an apples to apples comparison but I am already paying for those other crappy stations (looking at you History Channel, TLC, Spike, and more) as part of the package. I guess I better hope the Angels do well because I won’t see the Dodgers.

My echo and bunnymen
Guest
My echo and bunnymen
2 years 6 months ago

Tell me about it, I wanted to watch the opening series between the Dodgers and D-backs. Nope… no bars carried it either.

Anon
Guest
Anon
2 years 6 months ago

DirecTV is pushing for an a la carte pay structure with SportsNet LA

That is bad news for the televised sports contract bubble, but great news for the general TV watching public. I might actually pay for TV if I could pay a base price for local channels and pay a la carte for other channels I want.

Ben
Guest
Ben
2 years 6 months ago

As a San Diegan and TWC subscriber, thanks for letting me know why my tv/internet bill suddenly jumped by 15% this week.

robb
Guest
robb
2 years 6 months ago

if $5 is 15% of your cable bill, you sir, are a lucky man. id be thrilled if $5 was 5% of my cable bill in NYC

Johnny Ringo
Guest
2 years 6 months ago

I own a non-nude female wrestling company called the Female Wrestling Channel. We stream our matches online, and we are very small, I’m sure big MLB teams will go this way in the next 5-20 years.

There are obvious benefits and detriments on both sides, but I think most teams can make it work long term. Especially if they get creative with the packages and perhaps allow more fan interaction like we do.

Peter Litman
Guest
2 years 6 months ago

I would disagree that advertising drives regional sports. For most RSNs, the revenue model is much more license fees from affiliates than advertising — two-thirds to three-quarters of the revenue is usually affiliate fees. If the price quoted to advertisers, is too high, the advertisers can always reach people when they watch other programs on other channels. Advertising can also be shaved; the advertiser’s spending on the RSN can be reduced if the price is unattractive and the advertiser can spend that savings elsewhere. Advertising deals are short-term and advertisers often enter and leave the market.

The same dynamic doesn’t really apply for the distributors. If AT&T or DirecTV or Time Warner decides not to carry FSSD because it is too expensive, that money isn’t spent on equally attractive other kinds of programming. The carriage decision is an all-or-nothing one, too; FSSD won’t offer a distributor a package with just half the games, for example. The carriage decision is also a multiyear commitment. The times it is most attractive for a distributor to hold out are if the price is OK, but the team is lousy (Houston) or the team is good, but the price seems to be setting a new, high bar for all the other RSNs (Dodgers). Either way, it is understandable, but it isn’t pretty.

As for carrying the RSNs on an a la carte basis, it is not in the RSNs’ interest to do so, so it won’t happen. In the early days of cable a la carte RSNs were common, but all the ones that were premiums (e.g., NESN) converted to basic and made much more money. In a market with multiple competitive distributors, the RSNs have the leverage to stay on basic and a strong incentive to do so.

The Red Barron
Guest
2 years 6 months ago

The Astros need to get in there and solve that thing. Not being on t.v. in most of Texas is killing them.

Adam Martin
Guest
Adam Martin
2 years 6 months ago

Is it just me, or does making people who don’t watch your product pay a carriage fee is a bad long-term strategy?

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