“At some point, you hit a ceiling and you can’t keep doing it.”

Giddy.  That’s what the SEC is today over the announcement that it’s distributing a record-high average payout of $20.9 million per school in 2013-14.  The conference members aren’t just fist pumping over revenues almost doubling in a five-year span; it’s what they think is coming down the turnpike that’s really got them excited.

… The SEC’s payouts are expected to eventually increase more after the launch of the SEC Network, which wouldn’t have occurred without the SEC expanding.

The amount of new revenue is dependent upon distribution of the network, which launches Aug. 14. ESPN and SEC officials say they are optimistic the network will have full distribution. DISH and AT&T U-Verse have signed agreements.

“We’re not concerned at this point,” said Justin Connolly, ESPN senior vice president for college networks programming. “If you look back, not just with conference networks but networks as a whole, often times distribution holes are filled toward the end.”

But what if they’re wrong about that?

But come Aug. 14, if DirecTV and Comcast have not signed on to carry the Southeastern Conference’s new regional sports network because of the cost of the programming, the fans of Bulldogs, Tigers, Gators and the rest will not be happy. The fans will lose restraint and demands will become actions: They just might cancel their service.

Meanwhile, the roughly 70% of TV viewers inside the SEC’s 11-state footprint who do not care much about college sports are on the verge of seeing their bills rise again, because of the SEC Network. There will be nothing they can do about it except drop their service. If enough SEC fans threaten, or actually cancel, Comcast and DirecTV, it might force the providers to carry the SEC Network, pay the carriage fee and pass the cost on to its customers. All of them.

It is the latest dust-up between regional sports networks and cable, satellite and telecommunications TV carriers, and follows controversies in Houston and Los Angeles. The Comcast regional sports affiliate in Houston was driven into bankruptcy court. DirecTV is balking at the asking price per subscriber for the Dodgers, which has left millions in the Los Angeles area without TV access to the baseball team.

Sports programming is the biggest reason TV bills have been rising nationally as professional leagues and major college conferences continue to pay higher and higher salaries to coaches, players and executives and improve their stadium infrastructures.

There’s a saturation point, even in a region that’s as crazy about college football as the South is.  Like it or not, we’re still a minority when it comes to the viewing audience, and you have to wonder how long those who aren’t fans are going to subsidize our passion.  And don’t think the delivery people aren’t watching that closely.  It’s their livelihood, after all.

DirecTV CEO Mike White once told Wall Street analysts on a conference call, according to Bloomberg, “If I could wave a wand, the first thing I would peel off is regional sports networks. The cost is just too high.”

John Demming, a Comcast spokesman, would not comment on price other than to say Comcast was in negotiations with the SEC Network. “We’re very optimistic we are going to have an agreement,” Demming said.

Dan York, chief content officer for DirecTV, would not comment on the exact cost of carrying the SEC Network.

“We would certainly wish to carry the SEC Network sooner than later. Timing will depend on at what point do we feel we are getting a fair value proposition from Disney/ESPN to make it available,” York said.

York, however, also said, “As popular as sports content is, the vast majority of consumers will not watch any national, regional or local sports network, yet the networks demand they pay a tax so that those who do want to watch it get access to it.”

So again, what if ESPN is wrong about the business model?

David Preschlack, head of affiliate sales for ESPN and Disney media networks, said the SEC Network is not a regional sports network but a brand strong enough to sell outside the South. Asked if that meant DirecTV, Comcast and DISH would be able to charge an “inner market” price around the country to all of their subscribers, Preschlack would not comment.

The SEC Network will not be available on pay-per-view or on a sports tier but will be sold as part of a provider’s wide package of programming. Preschlack said, “The economics of the pay-per-view model just don’t support the business we’re looking to get into, which is the same for any other programming ESPN owns.”

At a buck-thirty a head in the regional market, that’s a pretty steep tariff to ask everyone to pay (especially for this) for a general programming package.  What happens if the screaming of the 70% gets loud enough? Either the carriers do something, or the politicians make them do something.

“I got a call the other day from a staff person in Congress, and the House is going to look into this stuff. As reluctant as the U.S. Congress is to regulate in this day and age, it seems like this situation is inviting some regulation. It’s not good for the consumers. These sports leagues have a lot of market power.”

A la carte packaging, where the cost of the SEC Network jumps five- or six-fold, would be problematic for Slive and his presidents, to say the least, because the size of the paying audience drops dramatically.  (And just think what that would mean for the Pac-12, which owns its network outright.)  There would be a struggle to figure out a way to justify that sort of cost.  Better games?  More conference expansion?  Those aren’t easy calls to make, as we’ve seen over the past couple of years.  In the meantime, what can they do?  ESPN and the market tell them the marketing strategy works.

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16 Comments

Filed under It's Just Bidness, Political Wankery, SEC Football

16 responses to ““At some point, you hit a ceiling and you can’t keep doing it.”

  1. I Wanna Red Cup

    Unless I am missing something, or completely ignorant( and idea that is entirely possible), I do not think I care one way or another about the SEC network. I am as big a CFB fan as exists. I will be in Athens when the Dawgs are playing. On away game weekends, I think there will be plenty of options to watch good games on other networks. Am I wrong Senator? Will I miss out on some really good SEC games? My thought is folks who do not care about SEC sports should not have to pay the bill for those who do. This is ‘Merica. If you want it then pay the extra bucks for it. Just like I do not want to pay for a special NFL network, I don’t nonsport types should be forced to pay for the SEC network. Enlighten me Senator if I am totally off base.

    • Well, you can always come over to my house to watch the SC-TAMU game. ;)

    • sniffer

      I’m with you, Red Cup. No “pins and needles” here for the launch of a network promising 24 hours of tennis, womens gymnastics, lacrosse and SEC hockey. I would be more interested if they were about to launch the SEC Football Network..

      • Macallanlover

        Agree with you and Red Cup, I would rather have the SEC Network than the Big Zero network on my Direct TV channel list but I have never watched a minute of their programming and expect to watch very little of the SEC’s. If there are any decent football games on that are more interesting than what is available on other channels, I might have to buy it on a game by game basis, or go to a sports bar.

        I don’t see anything else of value for the SEC Network but I know there are folks who will watch many of the non-revenue sports events. The personalities they have chosen to associate with has killed any enthusiasm I might have had about watching discussions of CFB on their network, and there are plenty of competing options.

  2. Mark

    I love a free market. This is a situation where regulation is invited to make the market actually compete. Right now, businesses (including the colleges) want to hide the cost of the product and force non-consumers to pay for it. Congress should force them to compete on their own merits and allow those that do not want the programming to not have to pay for it. Free up the market with appropriate regulation.

  3. Russ

    I think I see a dead goose lying in the middle of the expansion highway.

  4. S.E. Dawg

    With all this revenue going to the colleges, and ticket prices still may go up?

  5. S.E. Dawg

    Also, exactly how much does this translate in dollars to my Dish monthly bill..

  6. SouthGaDawg

    The cable company down where I live doesn’t jump on any bandwagon. If they do decide to carry the SEC network, I fully expect they pass the full cost on the customers. We have had CSS for the past 4-5 year which was a network you could pass by every so often and find something watchable – although I wouldn’t go out of my way to pay extra for it.

  7. UbiquitousGaAlum

    I don’t watch Lifetime, Oprah’s network or about 80 other channels but I pay for them … What’s the diff?

  8. Debby Balcer

    U-verse and other providers have dropped HGTV and other channels while negotiating them. Cable companies are rich and getting richer my cable ready tv’s now have to have boxes again to get any cable. I don’t feel any sympathy for them what us happening is two rich companies fighting over who gets to make more profit. This is about who gets to screw the customer. We don’t have as many options. There are no methods to get tv but they don’t work well for live events.

  9. PTC DAWG

    I have Comcast, I figure they will add it soon enough, if I miss a game or two, life foes on.

  10. stuckinred

    The B1G Network started out with really mediocre games but now they have some of this biggest each season. I suspect we’ll see the same here.

  11. PatinDC

    A quick search on the SEC Network page shows that I will be out of luck this season. No availability on Verizon. This stinks. I pay $120 every year for the ESPN Gameday pkg and it is freaking annoying that now I can’t even do that to see the games. You guys laugh about MSU vs SC games, but my option is UVA vs Duke as the game of the week. I would rather watch ANY ole SEC game while folding laundry than the garbage ACC game of the week. Also the BIG10 network sucks. All Michigan all the time.