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 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.