"Fox Sports 1 And The Importance Of Live Sports Programming In Rising Cable Prices"
Fox Sports 1, the fledgling sports network that came on the landscape proclaiming it wanted to challenge ESPN’s perch atop the sports media landscape, registered its biggest numbers yet in the first week of November, averaging 630,000 prime-time viewers for the week ending November 10 and drawing an average of 2.1 million watchers for its broadcast of Baylor and Oklahoma’s Thursday night football game. In addition to the football game, FS1 saw large audiences from other live broadcasts, particularly the Ultimate Fighting Championship and NASCAR racing.
FS1 is still miles from challenging ESPN, which averaged 3.5 million viewers in prime time over the same week. That’s not really surprising, and it doesn’t mean FS1 can’t turn into a success that eventually outshines its peers on the second-tier of sports networks. The last week is indicative of how it might do that, not with “jockularity” and a mentality different from ESPN’s, but through increased live programming that brings in viewers and drives the network’s growth. That isn’t exactly a secret, but it is further evidence of larger trends in the media landscape that could have major benefits for sports leagues, teams, and college conferences — and major implications for cable customers.
ESPN has been buying up rights for live broadcasts in recent years to bolster its position against other networks, including FS1. But the proliferation of networks is only going to increase competition for those rights and drive up the costs of securing them. Look around the landscape, and rights fees keep going up, whether for college leagues like the Southeastern Conference, leagues like the NBA and NFL, or individual events like the World Cup, U.S. Open tennis tournament, or Olympics. Even on a regional level, broadcasting rights are getting more expensive as networks attempt to secure deals with local teams (that’s particularly true in Major League Baseball, which has made regional sports networks a major part of its business plan).
That competition, which will only increase as online companies like Google, Apple, and maybe even Netflix enter the fray, is great news for teams, leagues, and conferences. A study released last week from PwC found that rights fees will grow 38 percent to a total of $17.1 billion in 2017, making it the fastest-growing source of revenue for teams (and thereby their leagues).
On one front, that’s also good news for consumers who watch sports. They’ll have more and more live options, and the competition will drive innovation that improves the way they watch sports. Consider increases in ESPN’s live-streaming programs online and through its smartphone and tablet apps, CBS’ March Madness on Demand streaming options, NFL RedZone, and the way Turner and CBS will broadcast the 2014 men’s basketball Final Four on three separate networks with team-specific broadcasters and differing camera angles. All of that has made watching sports easier and better.
But that doesn’t come without a price. The focus on live sports and the increasing prices of putting them on TV is only making cable more expensive, and as more sports go live on more networks, those prices will only escalate. That’s because cable networks charge providers a monthly fee to carry them — ESPN, for instance, charges more than $5, which it makes every month from every cable subscriber it reaches. That fee is passed directly to consumers through monthly cable bills, and because ESPN reaches about 100 million homes, the fee nets the company about $6 billion a year.
Most of the networks charge far less. Fox Sports 1 charges just $0.23 per household, the same rate it charged in its previous incarnation as the Speed Network. Until just before its launch date, FS1 held out for a carriage fee nearly four times that high, but it agreed to the lower rate as cable companies and satellite providers balked at the higher price.
But the lower fees likely won’t be around long. The network has expressed interest in acquiring NBA rights when the league’s deals with ESPN and Turner end after the 2016-2017 season, though ESPN and TNT seem headed for renewals instead. Next year, Fox will move much of its existing Major League Baseball coverage to FS1. Fox is also reportedly interested in acquiring rights to broadcast Big 10 football after the 2016 season, adding to a lineup that already features deals with the PAC 12 and Big XII. It has already secured the rights to the World Cup in both 2018 and 2022. As it acquires new rights, shifts programming from the rest of the Fox family to FS1, and renews already-existing Speed Network deals, it will have the opportunity to demand higher carriage fees, and it will likely get them.
Sports channels already make up more than half of the cost of a monthly cable package, according to The Atlantic‘s Derek Thompson. Fox Sports 1 isn’t going to command anywhere near ESPN’s $5 price any time soon, but it doesn’t have to for costs to increase. It just has to focus on live programming, and because live broadcasts bring droves of viewers, that’s exactly what it will do. And without drastic changes to the way television is delivered to consumers, the cost of cable will continue to increase, even for those who don’t watch sports at all.