As the traditional pay-TV universe continues to shrink, sports fans appear to be the glue that’s keeping the bundle from falling apart completely. But despite these inherent adhesive qualities, the consumers who have been instrumental in preventing the dissolution of the video model are getting squeezed by the high cost of their enthusiasms.
In the last two years, 15% of the legacy cable/satellite/telco-TV base have cut the cord, with the national sub count falling from 83.5 million in the third quarter of 2019 to 71 million today. At present, only 58% of U.S. TV households subscribe to a bundled video service; two years ago, penetration was at 70%.
If those numbers aren’t sufficiently hair-raising, it may be instructive to look at the subscriber data from just a few years back, when the pay-TV industry was still in full flower. At the beginning of 2014, 100.5 million U.S. homes subscribed to the bundle, which translates to a scenario in which 8.8 of every 10 TV households paid for some sort of multichannel package.
While virtual MVPDs like DirecTV Now, YouTube TV and Hulu have helped stanch some of the bleeding (13 million homes subscribe to an OTT service), most of these alternative platforms don’t carry regional sports networks, making them a no-go for serious fans. In looking to avoid paying the fees for high-end RSNs such as YES Network, Spectrum SportsNet LA, MSG Network and NESN, the vMVPDs effectively have made it impossible for sports fans to ditch the bundle … and their reward for sticking around with the old school cable and satellite providers is an annual fee hike.
Fans in the Boston DMA who subscribe to Comcast’s Xfinity service got a heads up that they’d be on the hook for $30 in additional monthly fees come 2022, a hike that includes a 10% increase in what the cable company itemizes as its “regional sports fee.” The RSN increase works out to $1.10 per sub per month, and while that may well fly under the radar in most homes, the 28% increase in the operator’s broadcast TV fee ($24.95, up from $19.45) may be a bit harder to swallow.
The broadcast surcharge became a standard element on your cable bill as soon as the networks began charging operators a retransmission-consent fee. Having watched the cable channels luxuriate in their dual-revenue-stream model for so many years, broadcasters figured out a way to supplement their advertising revenue with a carriage fee of their own. The soaring costs related to televising the NFL, MLB, NBA and other sports leagues have had a trickle-down effect on the monthly broadcast bill, which, naturally enough, gets passed along to the consumer.
Boston’s not getting the worst of it. In Chicago, Comcast subs can look forward to paying a monthly RSN fee of $17.30, up from the year-ago $14.45 and way up versus the $6.20 they coughed up before Marquee Sports Network was added to the channel lineup. The Windy City broadcast fee is not as steep as Boston’s, but it is more dear than it was at the beginning of this year, jumping $3.55 per month to $19.75.
Comcast isn’t alone in looking to extract more cash from subscribers, as all the cable, satellite and telco-TV providers must charge higher fees to defray their programming costs. But the ouroboros scenario is particularly stinging, as it’s the sports fans who are responsible for keeping the lights on. Per MoffettNathanson estimates, of the 84 million homes in the pay-TV universe, 58.4 million, or 73% of all subscribers, are regular sports viewers.
As analyst Michael Nathanson observed in a recent note to investors, “While the number of traditional Pay TV subscribers declined by 12.6 million … we estimate the number of regular sports viewers with traditional Pay TV increased by 0.6 million over this time period.” In other words, 100% of the consumers who walked away from the bundle didn’t have much use for sports in the first place.
It’s worth noting that RSN increases are limited to the areas served by those networks, and that the national price hikes aren’t anywhere near as high as what fans in places like Boston and Chicago are paying. Sources at a number of operators say their overall pricing hikes from 2021 to 2022 should fall within a range of plus-3% to plus-5%.