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How 100 Million Cable Subscribers Are Forced to Subsidize Professional And College Sports
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By Warren Grimes
The pay TV system is broken. Over a 100 million US households face subscription rates increasing at twice the rate of inflation. To obtain programming we wish to watch, we are compelled to buy an elephantine bundle containing hundreds of channels we have no interest in watching. Sports TV is the largest cause of increases that are expected to drive the average monthly bill from $90 to $125 over the next few years. In desperation, some consumers are cutting the cord and resigning themselves to broadcast TV and the Internet for video programming. The choice is a tough one because, except through pay television, much popular programming is unavailable or offered only on a time-delayed basis.
The source of the problem is that programmers who control access to popular programming all insist their channels, even their scarcely watched channels, be included in the expanded basic bundle subscribers purchase. Programmers do this because they can and because it is highly profitable. The more widely a channel is distributed, the more the programmer receives in subscription fees and advertising revenues. Time Warner Cable TWC +0.96% is using the popularity of its Dodgers baseball channel to force other Los Angeles area distributors to include the Dodger channel in the expanded basic bundle, an inclusion likely to raise the viewer’s monthly cost by roughly $5 a month. That’s fine if the viewer wants to watch the Dodger games. But for the roughly 80% of viewers who have no interest in watching – this is a $5 tax forced upon us without any right to vote. As Senator John McCain has put it, this practice gives consumers “all the choice of a Soviet election ballot.”
Precisely the same tactics that the Dodgers and Time Warner TWX +1.05% Cable are using are employed by professional teams and leagues in all regions of the country. All subscribers to the expanded bundle pay ESPN ESPN roughly $5 a month. There is no choice in the matter. Then there are the college teams. Take the Pacific 12 conference. The members are ten prominent public universities, many with worldwide reputations as preeminent educational institutions, and two very distinguished private universities (Stanford University and the University of Southern California). Both the public and private universities receive substantial tax-payer support in various forms. Now they are also getting a subsidy from pay television subscribers throughout the West where the Pac-12 television network is charging every subscriber to the expanded basic bundle an additional $2 a month. Is this collective exploitation of the broken TV delivery system tolerable behavior from our nation’s elite and publicly supported educational institutions?
Whatever dismay this might occasion for the Deans of Cambridge or Oxford, we Americans have grown accustomed to accepting the money-making role of major sports in our colleges and universities. But the greed to make more money out of sports television at the expense of consumers is not acceptable for ESPN, not acceptable for the Dodgers, and it is particularly offensive when the money grubbers are prominent, publicly supported educational institutions.
To be sure, the sports industry is doing the same thing as any television programmer who has a channel likely to be popular with a significant number of viewers. That is why the problem ultimately must be addressed through antitrust litigation, legislation, or FCC regulation.
The solution to broken TV distribution is to end the forced bundling and allow each distributor to package television programming in a manner responsive to consumer choice. The Canadians have long since moved to address this problem, ensuring that Canadian viewers have meaningful choices that include smaller, more customized bundles. The average TV bill in Canada is roughly $30 a month lower than in the United States.
The current system of bundling large numbers of channels is ultimately doomed. When it falls, both college and professional sports teams will have to adjust to lower revenues. College football coaches may have to accept cuts in their multi-million dollar salaries. Genuine fans of these teams will have to pay more to receive telecasts. But the system will be fairer, the average TV bill will be lower, and university presidents will sleep at night with a cleaner conscience. Instead of paying a forced sports subsidy, millions of Americans will have $30 a month or so to spend on a cappuccino, a theater ticket, or a donation to starving children.
Warren Grimes is Professor of Law at the Southwestern Law School in Los Angeles.
The source of the problem is that programmers who control access to popular programming all insist their channels, even their scarcely watched channels, be included in the expanded basic bundle subscribers purchase. Programmers do this because they can and because it is highly profitable. The more widely a channel is distributed, the more the programmer receives in subscription fees and advertising revenues. Time Warner Cable TWC +0.96% is using the popularity of its Dodgers baseball channel to force other Los Angeles area distributors to include the Dodger channel in the expanded basic bundle, an inclusion likely to raise the viewer’s monthly cost by roughly $5 a month. That’s fine if the viewer wants to watch the Dodger games. But for the roughly 80% of viewers who have no interest in watching – this is a $5 tax forced upon us without any right to vote. As Senator John McCain has put it, this practice gives consumers “all the choice of a Soviet election ballot.”
Dodger Stadium (Photo credit: Wikipedia)
Whatever dismay this might occasion for the Deans of Cambridge or Oxford, we Americans have grown accustomed to accepting the money-making role of major sports in our colleges and universities. But the greed to make more money out of sports television at the expense of consumers is not acceptable for ESPN, not acceptable for the Dodgers, and it is particularly offensive when the money grubbers are prominent, publicly supported educational institutions.
The solution to broken TV distribution is to end the forced bundling and allow each distributor to package television programming in a manner responsive to consumer choice. The Canadians have long since moved to address this problem, ensuring that Canadian viewers have meaningful choices that include smaller, more customized bundles. The average TV bill in Canada is roughly $30 a month lower than in the United States.
The current system of bundling large numbers of channels is ultimately doomed. When it falls, both college and professional sports teams will have to adjust to lower revenues. College football coaches may have to accept cuts in their multi-million dollar salaries. Genuine fans of these teams will have to pay more to receive telecasts. But the system will be fairer, the average TV bill will be lower, and university presidents will sleep at night with a cleaner conscience. Instead of paying a forced sports subsidy, millions of Americans will have $30 a month or so to spend on a cappuccino, a theater ticket, or a donation to starving children.
Warren Grimes is Professor of Law at the Southwestern Law School in Los Angeles.
