Kagan Analyst: Sports Costs Not Only Reason for Burgeoning Bills
Says retrans boosts are also taking toll on cable bottom line
By John Eggerton -- Broadcasting & Cable, 1/28/2013 12:12:38 PM
Baine predicts that by 2018, retrans payments cable ops pay to carry local TV stations will have ballooned to almost $5 per sub per month, or about what they pay now for ESPN, the poster-channel for escalating sports rights costs.
Baine says that, in addition, operators have been adding channels, which also adds to the cost. "The bottom line is that there are a lot more moving pieces to the typical cable bill," he says.
The average cost of a sports channel over the last decade has increased at a compound annual growth rate (CAGR)of 3.5%, he says, compared to 2.9% for all channels. CAGR is actually smaller than the average over the past five years, however, due to the launch of lower-priced nets like the NHL Network.
But he says that there is no doubt costs are growing and becoming a growing concern for cable operators. "Given the fact that we think retrans payments will double from about $2 per sub in 2012 to more than $4 per sub by 2016, there are tough times ahead," he says.
I'm disappointed that the FCC lifted the ban on scrambling the lowest tier of service, while not banning cable companies from forcing the lowest tier upon video customers.
If cable companies are now allowed to scramble the lowest tier, I should be able to opt out of getting it. That would certainly help with retransmission costs -- customers with an antenna could get their locals for free, and would be able to spend more on actual "cable" channels.
Cable companies would be less beholden to broadcasters, as any retransmission disagreement would only affect a percentage of their customers. "go ahead and pull your signal, only 60% of our customers rely on our service to get it. When you pull the channel, we will run a instructional video on a loop on how the other 40% can convert to OTA. If we agree to an increased fee, there will then be less people paying it."
FrankM - 1/28/2013 6:31:12 PM EST
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