The Political Economy of Sports Television

William M. Kunz

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9780367352264
• eBook ISBN: 9781000060447
• Topic: Business
• Subtopic: Business General
• Index: Business

Drawing from theories of the political economy of communication, this book offers readers a comprehensive data-rich assessment of contemporary sports television and its evolution.

Providing an in-depth look at the ownership and regulation of sports television in the United States, William M. Kunz analyzes a range of platforms, networks, and sports, with particular focus on the way ownership has become concentrated in five conglomerates: AT&T, CBS, Comcast, Disney and Fox. The end result of years of media consolidation is that broadcast networks are now married to cable and streaming services under a single conglomerate, which has implications for the cost of contracts and the negotiation of distribution deals. Examining multiple platforms, networks and sports in an all-inclusive manner, this volume documents the evolution and current state of affairs of sports television.

With historic and current data on rights fees for sports television leagues and events as well as carriage fees and subscription levels for sports-related cable and satellite services, this comparative study offers critical information for students and scholars conducting research on sports television.

1
Introduction

In the preface to Moneyball, the 2003 book on which the 2011 film starring Brad Pitt was based, author Michael Lewis argues that many within Major League Baseball (MLB) had concluded that “the game was ceasing to be an athletic competition and becoming a financial one.”¹ After spending a year observing the Oakland Athletics front office and general manager Billy Beane, Lewis wrote of a willingness within the A’s organization to “rethink baseball” and create “new baseball knowledge” and concluded that “in professional baseball it still matters less on how much money you have than how well you spend it.”² In 2001, the A’s posted the second-best record in the game with 102 wins and the second lowest opening day payroll in baseball, just $33.8 million, compared to $109.8 million for the New York Yankees. That difference in payroll was attributable in large part to local media rights, as the Yankees collected $56.8 million in local television and radio deals compared to just $9.5 million for the A’s.³

The presence of the small-market A’s in the 2018 American League Wild Card Game against the Yankees would suggest that the premise of Moneyball still holds true, but the game had changed over the previous 15 years. First, the use of advanced analytics, an area in which Beane and the A’s were at the forefront, is now embraced to one degree or another by most MLB teams, so the reliance of so-called sabermetrics is no longer unique. Second, the gap in local television revenue has expanded dramatically, changing the balance sheets to a significant degree. In 2001, the season before Lewis was embedded with the A’s, the difference in local media revenue among US-based teams was around $50 million between the highest and the lowest; in 2018, the difference in local television rights alone was over $300 million, between $334 million for the Los Angeles Dodgers and $18 million for both the Miami Marlins and Pittsburgh Pirates in 2018.⁴ Such deals have made many MLB owners and players wealthy and made most regional sports networks cash cows, all at the expense of cable, satellite, and telco subscribers which face ever-increasing bills.

The challenges that such deals present are evident from coast to coast, but nowhere more so than Los Angeles. The $8.35-billion deal between the Dodgers and Spectrum SportsNet LA that began in 2014 and extends through 2038 brought the franchise even greater riches, but it also became the opening act of an ongoing melodrama. Regional sports networks, or RSNs, are programming services that hold rights to televise sporting events in a specific geographic region through multichannel video programming distributors (MVPDs) via cable, direct-broadcast-satellite, and telco services. Some regional networks began as premium channels, services that charged a higher price per month to households that wanted that specific content, but the business model has evolved over the last 25 years to one in which RSNs demand carriage on expanded basic programming tiers so that revenue is generated from most television household. In most markets, RSNs rank among the most expensive services on the expanded basic tier, behind only ESPN, but the price of such networks tends to be local issues rather than national ones since there is great variance from market to market. These services are also now significant revenue streams for most teams and collegiate conferences, and oftentimes a point of demarcation between the haves and the have nots, as documented previously with the New York Yankees and Oakland A’s.

The proliferation of services in Los Angeles illustrates the potential impact of RSNs on local markets. In April 2012, there were two Fox Sports regional networks in Los Angeles: Fox Sports West and Prime Ticket. Those two services held the rights to six professional teams in the major professional sports: the Dodgers and Angels in baseball, the Lakers and Clippers in basketball, and the Kings and Ducks in hockey. The combined fee for the two Fox services, moreover, was about $5 per month. When the Dodgers signed the deal with Time Warner Cable to create SportsNet LA in January 2013, it came just three months after the launch of another new service, TWC SportsNet, to feature the Los Angeles Lakers. The debut of that service was a relative success, as TWC SportsNet was in an average of 2.4 million households in the Los Angeles-designated market area in 2013, its first full calendar year. That was within shouting distance of Fox Sports West and Prime Ticket, both of which were in 3.2 million households, on average, in the same year. The entry into the market for SportsNet LA in February 2014, however, was far more turbulent. Time Warner Cable could feed the service to the estimated 1.3 million subscribers it had in Los Angeles at that time, but most other operators balked at the per month carriage fee, including DirecTV, Dish, AT&T, and Verizon, and SportsNet LA averaged just 1.5 million households per month in 2014. As the service observed its fifth anniversary in 2019, Charter Communications was its new parent corporation and its name was Spectrum SportsNet LA, but it was still in an estimated 1.5 million households in the Los Angeles-designated market area with 3.64 million multichannel video subscribers. The options were rather limited for Charter, for while it could add SportsNet LA to the systems it controlled in Los Angeles, the cable MSO held few bargaining chips in negotiations with other MVPDs through ownership of other programming services or local televisions stations. And in the 2010s, such leverage meant everything in these negotiations.

The fate of SportsNet LA is a microcosm of issues and debates that were prominent in the sports television marketplace at the end of the 2010s. First, the Dodgers represent the migration of sports from free over-the-air broadcast stations to pay television platforms. The launch of SportsNet LA eliminated the broadcast of Dodgers games on local broadcast stations for the first time since the team moved to Los Angeles in 1959, although the last six games of the 2014 regular season were carried on local stations as the carriage impasse continued, with a handful of games on broadcast stations in most seasons since then. Second, the ongoing stalemate represents the battle over the inclusion of sports programming in large bundles. Time Warner Cable, and now Charter, sought carriage for SportsNet LA on expanded basic or similar services rather than on a sports tier or on an à la carte basis. The resistance to that approach was evident in a “promise” DirecTV made to its subscribers, which stated “anyone with no interest in sports should not be forced to pay a huge premium for something they don’t care to watch.”⁵ Third, the connection between SportsNet LA and Time Warner Cable contributes to ongoing debates over horizontal and vertical integration and media conglomeration. The merger between Charter Communications and Time Warner Cable was announced in May 2015, and just two weeks after that deal was struck, Charter, which did not carry SportsNet LA in 2014, launched the network on its Los Angeles area systems on Spectrum TV Select, its most widely distributed subscriber tier. Those three topics are recurring themes in the analysis that follows.

The dawn of the new decades provides an important point to consider such questions. First, the AT&T merger with WarnerMedia was completed in 2018 and the Disney acquisition of 21st Century Fox assets and the creation of Fox Corp. closed in 2019, which included the mandated divestment of the Fox regional sports networks that was part of the Department of Justice approval of the sale. While there will no doubt be other deals in the offing, most national sports television assets now reside in five media conglomerates – AT&T Inc., CBS Corp., Comcast Corp., Fox Corp., and Walt Disney Co. – so it is appropriate to evaluate the path to concentration and conglomeration. Second, while there will likewise be some minor properties open for bidding over the next year or so, most major television contracts are locked up until at least 2021, including Major League Baseball (2021/ESPN and Turner), National Football League (2021 ESPN and 2023/CBS, FOX, and NBC), National Hockey League (2022/NBCUniversal), and National Basketball Association (2025/ESPN and Turner). The rights for one of the most valuable international “football” properties was also locked up into 2022, with the contract between the Premier League and NBC Sports extending through the 2021–22 season. To be certain, there are deals that are locked in place for much longer. At one point in time, Fox Sports and Telemundo deals for the FIFA World Cup were set to expire after the 2022 tournament, but that deal was quietly extended in 2015, without open bidding, through 2026, in part to avoid a lawsuit for moving the 2022 World Cup to the winter because of the sweltering summer heat in Qatar.⁶ The Fox contract with Major League Baseball was set to expire in 2021, but that was extended through 2028 in November 2018. Moreover, NBCUniversal has the Olympic Games, and the team of CBS and Turner has the NCAA March Madness basketball tournament through 2032. That said, there remains an important moment to consider the evolution of the marketplace before a new series of deals are negotiated.

The great unknown in those negotiations is whether there will be a true migration of sports properties to direct-to-consumer streaming services. In the early 2010s, Brett Hutchins and David Rowe argued that the “case presented leads to the conclusion that the ‘digital revolution’ is so far proving less than revolutionary in the context of sports.”⁷ They concluded that “major sporting events are becoming more so because of human, financial, and media resource advantages.” There is no question that there was a significant increase in sports content available on direct-to-consumer services in the United States over the last decade, most notable with the launch of ESPN+, B/R Live, and DAZN in 2018. Those services, for the most part, have thus far focused on supplemental content as well as secondary rights in the U.S. market, such as European football. When marquee content is carried on such services, it is in sports with a pay-per-view tradition, such as boxing and mixed martial arts. It remains to be seen when, and if, major events will migrate to such services.

Sports Television and Critical Political Economy

The drama that followed the launch of SportsNet LA touches on the cornerstones of the critical political economy of the media, the most important of which are the allocation of resources and shifting interactions between government and industry. On July 25, 2014, U.S. Representative Tom Cárdenas and seven other Los Angeles area representatives called on Federal Communications Commission (FCC) Chairman Tom Wheeler to mediate the negotiations between Time Warner Cable and television service providers. A few days later, one of the signatories on the letter to Wheeler, Brad Sherman, and five other representatives sent a letter to Robert Marcus, CEO and chairman of Time Warner Cable, and Michael White, CEO, president, and chairman of DirecTV, calling on the parties to enter binding arbitration. Wheeler entered the fray before the end of the month, sending a letter to Marcus and Time Warner Cable stating that he was “troubled by the negative impact that your apparent actions are having on consumers and the overall video marketplace” and promising to “intervene as appropriate” to bring relief to consumers.⁸ The l...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• List of Tables
• Acknowledgments
• 1 Introduction
• 2 Conglomeration of Sports Television Networks and Services
• 3 National Multi-Sport Networks
• 4 National Single Sport, League, and Conference Networks
• 5 Regional Sports Networks
• 6 Streaming and Out-of-Market Services
• 7 Conclusion
• Index