Executives have commented that comparing ESPN to HBO isn’t so far-fetched. Consumers can pay around $10 a month or so for the premium TV channel. With growing-more-expensive sports TV franchises, why shouldn’t people do the same for ESPN?
Of course, the big difference is that ESPN sells TV advertising time, while HBO does not.
But consider, higher sports TV rights fees mean an economic change reaction: Higher wholesale prices that pay TV providers shell out to big sports networks; and higher retail subscribers monthly fees. Make that all pay TV subscribers.
A wholesale fee for TV providers for ESPN is some $5 per subscriber per month. So to gain some profit margin on sports channels, a $6, $7, or $8 a month retail price isn’t out of the question. Perhaps packaging all sports-TV-related channels would be a better deal for consumers.
What about advertising? One theory could be to give back to consumers in the wake of a high premium price -- perhaps with limited TV advertising. This wouldn’t appear to be good news for any of the traditional TV sports networks/programmers.
At the same time, there are higher-priced sports programming packages, where you can see virtually all the games of a professional sport, such as the $250 cost for an NFL Sunday Ticket from DirecTV. Other sports -- Major League Baseball and the NBA -- also have multi-team, multi-game, pricey season-long packages.
Cable operators moan about a la carte programming packaging, saying that converting basic cable ad-supported sports services to separate pay sports tiers would hurt their business.
Traditional big cable networks, which cover 95% or more of U.S. TV homes, might drop to perhaps coverage of 55% or 45% -- all of which would dissuade national marketers who demand and have been accustomed to more reach.
ESPN has some leverage here, since it was the second-most-viewed cable network in the first quarter of this year after USA Network, averaging 2.13 million prime-time viewers. For others, this isn’t enough of an argument.
Those not looking for an exact a la carte system overall -- nor an HBO or Showtime financial model -- cable operators would consider putting sports channels just on a slightly higher programming tier. Perhaps $3 to $5 a month for a package of sports networks in some cases.
One marketing line still resonates: “It’s not TV. It’s HBO.” Now for some sports TV channels it could be “It’s not just sports TV. It’s just another pricey TV premium network.”