The Sports Bubble Is About to Pop

http://www.thedailybeast.com/articles/2015/12/06/the-sports-bubble-is-about-to-pop.html

by gabbo • 11 years ago

153 159 11 years ago

howeyc• 11 years ago

Doubtful. ESPN is not synonomous with Sports. People may be becoming aware of the amount of their cable bill being sent to ESPN, but there are two problems blocking change. 1) They (the cable subscriber) can't do shit about it, they either accept the whole packege or not. 2) Why would the cable companies go for it anyway, I'm sure they know they can get more by forcing HGTV lovers to pay for ESPN, and ESPN lovers forced to pay for HGTV.

Also, let's say this author is right, ESPN dies a slow death. How does that stop sports? ESPN doesn't have much (of the main sports) on it anyway. Sports games are on other networks. NFL - CBS,FOX. MLB - FOX,TBS. Soccer - NBC. NHL - NBC.

I'm sure the sports that are on ESPN can find an home elsewhere. I'm not sure the dog shows are raking in huge TV money from ESPN that some PETS CHANNEL can't cover.

brianlweiner• 11 years ago

For baseball at least, the same points are valid for each area's RSN (regional sports network). MASN (Maryland / DC / VA area) gets something like $8-12 per subscriber. YES (NY Yankees network) I'm sure is able to charge even more.

This has allowed MLB teams to spend a great deal of money in the past 5-10 years as teams have signed ever-more-lucrative television rights deals with FoxSports and others. If non-cable media packages are luring more and more cable subscribers (HBO, Hulu+, SlingTV, Netflix, etc) the pool of non-sports watching people subsidizing these networks shrinks - this will force either prices to rise for actual sports watching customers, or it'll lower revenues for teams.

Rumor has it that MLB has been trying to push the RSNs to accept universal MLB.tv access for all regional markets, this at least makes the costs explicit - $100-140/season for each subscriber.

Nelson69• 11 years ago

There is more synergy there though. RSNs show more games with the team you like. It only makes sense to charge more and the fans are more than willing to typically pay it.

michaelbuckbee• 11 years ago

I think a summary might be that:

1. ESPN historically was making way more money than they should due to bundling.

2. ESPN is passing along a large percentage of this money to the sports teams in the form of media rights (aka they pay the NFL teams to show Monday Night Football).

3. ESPN is now on a downward path due to people opting out of bundles.

4. Sports teams will make less money overall after this shakes out as ESPN artificially bid up the market.

myNXTact2• 11 years ago

It seems to me that the "death of ESPN" is more evidence of the death of the cable TV model than the death of sports.

ssharp4• 11 years ago

This is probably true but I think ESPN is leading the pack because of how bloated they are.

They run multiple channels 24/7 and a ton of their content is studio analysis-type shows, most of which I find absolutely terrible. I'm sure they have reasons for how they select and utilize the talent they have, but aside from a few writers and commentators, I have a hard time watching or reading anything they produce.

I was hoping they'd eventually figure out a way to do more Grantland-produced television, where someone with some journalistic and creative taste, as well as more creative freedom could develop, but that obviously did not happen. Maybe Bill Simmons will be able to do that with HBO and finally create a legit competitor to ESPN's non-live sports programming.

VLM• 11 years ago

The other death of sports issue was very carefully not mentioned in the article... look at the median age of baseball fans over the past decades. Its literally a dying sport, as in the fans are aging and dying and not being replaced. Obviously not an issue for some of the other sports. However being a sports nerd in the sitcom stereotype sense is definitely a boomer and pre-boomer generational thing, not so much with younger people, and old people have a way of dying off.

The biggest mistake the article made was conflating sport related spending with the housing bubble. The housing bubble blew because the last entrants into the ponzi were tapped out. The cost of sports is microscopic in comparison and very few people give up cable because they're completely and utterly tapped out. They just spend the $100 on something else. Probably a smartphone and some subscription services. Certainly the last entrant into the ponzi of paying a billion bucks for a team on the assumption you'll sell to a greater fool at two billion has not been reached, nor has the very last new sports fan been born yet.

The biggest oversight in articles of this type is no one wants to discuss bundling. The kind of business that forces all video subscribers to pay $30/mo for sports even if they're not sports fans, could, with just a couple clicks on a keyboard, change the bundle so all the cablemodem subscribers pay the same $30 extra for their cablemodem, but now it comes with free ESPN video or some kind of web access deal. There are, after all, only a handful of monopoly providers. So either pay $30 for ESPN, or disconnect yourself from the internet.

Trying to avoid paying for sports is like trying to avoid paying for organized crime. Or disorganized crime, for that matter. Unfortunately you can either pay up, or leave the geography and culture entirely. The government and corporations certainly are not going to help us because they are the organized crime in this analogy.

drumdance3• 11 years ago

I think the main difference is (or at maybe was) that ESPN shows lots of live games. You can't just binge watch at your leisure like with Netflix.

I'm a huge football fan and while I still watch live games on ESPN and the major networks, I find most of my analysis and commentary online. At the moment a substantial percentage of that is from ESPN, but more and more I'm getting it from Reddit, sports-specific web sites like Pro Football Talk, and -- the channel most ready for the future -- NFL Network.

bluedino• 11 years ago

I can get quality streams of any NFL game online without much searching. Almost all the sites have donation buttons.

Sure, I'd pay the NFL $99 for the Sunday ticket package. Take DirecTV out of the picture. That's only a couple bucks per week.

osi2• 11 years ago

My takeaway point was the nearly $40/mo each cable subscriber pays towards sports programming in aggregate. One of the reasons I cut the cord was the transparent fee Comcast had added (and hiked) related to Chicago-area local sports.

As people that don't care about sports on TV ditch cable for streaming, that will just increase the budget pressure on all sports networks.

jonknee5• 11 years ago

ESPN is certainly synonymous with sports. They also show a ton of sports, including the NFL (Monday Night Football) and MLB (multiple nights a week), NBA (multiple nights a week), NCAA basketball (almost every night), NCAA Football (every week and a ton of bowl games).

maxerickson• 11 years ago

There is presumably a level of demand for smaller bundles that would cause the cable companies to make changes.

If there is, the change probably happens incredibly swiftly.

bradleyankrom• 11 years ago

Plus, most of the major sports leagues have developed their own cable networks (MLB Network, NFL Network, etc.).

spo81rty2• 11 years ago

I never have understood why we pay for cable channels to then watch ads on them. They should be able to make some decent money just on the ads.

mikegioia• 11 years ago

Not only that, but have you ever counted the commercial minutes for an NFL game? I had to turn the game off mid-way through because I couldn't take it anymore. Something like 60-70% of the 3.5 hours are spent on commercials.

dbot• 11 years ago

Try NFL Redzone, that's a great experience. No commercials, just cutting from game to game and showing the action. I had it the past few years but didn't get it this year (due to frustrating bundling issues), and I agree that watching a single game is pretty terrible.

drumdance3• 11 years ago

This is what Reddit is for. :-) The live game threads offer hilarious commentary on the commercials and announcers.

JustSomeNobody• 11 years ago

NFL is just awful. From the commercials as you mention to making it all video game-like with the wooshes and whoops and graphics all over the screen. I just can't watch it.

The commercials that are aired during sporting events make me feel like my IQ drops 30 points just watching them.

No, can't do it. No NFL for me.

drumdance3• 11 years ago

Waaaaay back in the late seventies or early eighties, can't remember exactly when, I remember reading an article about how cable would get rid of commercials altogether and people would be able to vote via interactive TV for what show they wanted to watch. It only took 35 years but here we are.

smackfu• 11 years ago

Companies make as much money as they can.

spo81rty2• 11 years ago

I also like the model of paying for the sports we want. I don't mind paying $50 a year to watch all MLS games and I can watch them on any device.

alistairSH• 11 years ago

Agreed. The only sport I watch with regularity is professional cycling. Aside from the Tour, there was little to no coverage on any cable network (in the US).

So I cancelled cable TV, saved $100/month. Put some of that money into Netflix. And pay for streaming coverage of cycling events as-needed.

jmnicolas• 11 years ago

Here is my prediction for 2016 : the bubble of bubbles is about to pop !

ssharp4• 11 years ago

The NBA just entered a massive television deal that kicks in next year. Since player's salaries are tied to the amount of revenue the league makes, a lot of players stand to make upwards of 50% more than they make now. It's a massive deal, so it's hard to swallow any impending doom. I just think viewership will continue adjusting where they get their content from.

I haven't seen anything about changes to streaming in the new deal other than the contract leaves the issue open for negotiating a joint-partnership that could supersede previous limitations, which included teams in your local market, nationally televised games, and the playoffs.

I absolutely love NBA basketball and although I don't watch a ton of it, it probably makes up for 90% of my television watching while it's in season. But I have to pay a cable bill upwards of $100 / month to do so. I really hope professional sports follows the decoupling model and offers higher-value streaming options in the future.

The NFL's online offering is equally restricting, but local NFL games are generally broadcast over-the-air, so you can pick them up with an antenna, making cord-cutting easier.

harryh• 11 years ago

You should look into NBA League Pass. $200 for everything.

ssharp4• 11 years ago

In the US, League Pass doesn't get you your local team, the national games, or any of the playoffs.

I know outside of the US, they offer an international version that has it all and seems great, but they can't do that because of television deals in the US.

fredleblanc3• 11 years ago

The current problem with all of these deals is blacked out games. I subscribe to the NHL GameCenter (same thing, different sport) and for the money you pay, the things you can't watch are ridiculous (it's worse than the NBA one). Only out of market games are allowed, no nationally televised games (always considered "in market," even if they're showing on obscure channels), and the NHL doesn't give you any of the post season. I follow an out of town team that's bad, so it works for me.

It's the weird straddling of "old model" and "new model," and the big players trying to catch up while keeping contracts happy. Up until this year, for example, when I watched my team play on their home channel, I'd get all the commercials too. So, same as being in-state. Now I just get a message about a commercial break.

The weird crux of it all is that you can watch many of the games if you want to wait 48 hours after the broadcast ends. However, in a world so connected, even not being on social media, even following a team 2,000 miles away from me, it's still hard to be purposefully oblivious to what's happening.

I was sorta hoping the next round of contracts would leap the content divide and make streaming a first-class citizen along the rest (I don't mind watching commercials while streaming, I'd assume that would just make those spots even more lucrative.) But it looks like we're still a couple years away from that.

e40• 11 years ago

Except for locally blacked out games, which are the most interesting to people. So, that $200 deal is not that interesting to many people.

Also, for the less technological among us, a cable subscription is required, which adds quite a lot to the price tag.

aczerepinski2• 11 years ago

There's no way to watch every basketball game for less than $500. LP even blacks out games that it airs on the NBA's own TV network.

nitelord• 11 years ago

I don't have League Pass, but I looked into the option last season. It turns out they black out the local team's game based on your IP geolocation. Aside from that annoying limitation, the general consensus on the Internet is that the paid pirate services can be much cheaper and have better quality streams than League pass.

joezydeco• 11 years ago

It's a massive deal, so it's hard to swallow any impending doom.

To me the deal seems more like the deals major A-list movie stars make: a cut of the up-front box office instead of a fixed salary. It's risky, but a massive upside if the movie is a hit.

If the NBA's revenue slides because of falling TV revenue, won't they be pulled down as well?

kriro2• 11 years ago

Sports packages are already unbundled if you look closely. There's NFL, NBA and I'm sure NHL and MLB streaming packages for European customers. They are pricey compared to what we are used to but if that 40/month for ESPN is accurate it's a decent deal. I pay 280 Euro/season for the all access NFL package. Nice HD streaming with lots of extras, access to all archived games etc. NBA is 250 Euro iirc.

[And no blackouts etc. for Europeans...eventhough I'm not sure I think UK customers had some blackouts since the NFL is a pay TV option there...blackouts are a silly concept, glad we don't have them]

ccozan• 11 years ago

I am also in Europe ( Germany ) but couldn't find this kind of deal you have ( 280 euro / season ).

Can you share it? I am a NFL fan and quite hard to see the games live except pirated streams in low quality.

cletus• 11 years ago

Your comments remind me of what happened in the music industry in the late 90s and early 2000s. Several of the big name artists (eg Mariah Carey, REM, Robbie Williams, even Prince) signed huge multi-album recording deals. I guess the sentiment was that these artists with a proven track record were a safe bet, even a sure thing.

Pretty much every one of these deals turned into a financial disaster. The biggest of these was probably Mariah Carey, who ended up being paid $28m not to sing [1].

My point is that the presence of massive deals doesn't guarantee continued growth or success.

The most ominous part of this article is the loss of 7m subscribers. ESPN has managed to shake off--so far--the overall trend that cable TV is dying. The average age of TV viewers is increasing [2], which is bad for advertising and thus bad for revenue.

In the US, the more subscribers a cable or satellite TV company has, the more bargaining power they have, which translates to lower per-subscriber content costs. This is why Comcast wanted to merge with TWC. It's all about reducing TV costs. It's also why cable companies will practically give away TV (ie your cable Internet is under $20 with a TV package or $60+ without).

So for the last 10+ years, ESPN has managed to thrive in a market where demographic trends are ultimately against them. The flood waters are still rising and eventually you run out of dry land.

[1] http://www.nytimes.com/2002/01/24/us/record-label-pays-dearl...

[2] https://www.washingtonpost.com/news/business/wp/2014/09/05/t...

GurnB• 11 years ago

Pretty much every one of these deals turned into a financial disaster. The biggest of these was probably Mariah Carey, who ended up being paid $28m not to sing

I worked in the entertainment industry during this time.

Great point to remember specific to Mariah Carey was that she was originally signed by Tommy Mottola who she eventually married WHILE he was the head of the label (Columbia) & Music division. This 'business' decision had a very personal side. It was more than just a financial disaster.

SixSigma• 11 years ago

In Other News

Discovery expects Eurosport app to reach one million subs in two years

Discovery Communications Chief Executive David Zaslav said he expects its Eurosport Group's player app to reach one million subscribers in two years and that it will bring an additional $100 million in revenue.

"It's a big initiative," he said about the Eurosport app.

Discovery took a controlling ownership position in the European sports broadcaster last year. The app currently counts about 200,000 subscribers.

http://www.reuters.com/article/us-discovery-eurosport-idUSKB...

Disclosure: I have been a subscriber since 2012, it costs about $5 a month. It is the only "tv" I watch. You get 2 regular sports channels. At the moment it is mostly Winter Sports: Alpine Skiing, Biathlon, Ski-jumping etc. With Snooker & Tennis. Summer is two wheeled action: Tour de France, World Superbikes plus World Touring Cars, Tennis, and a whole host of sports you can't get anywhere else.

We even had minority sports like American Monday Night Football ;)

http://www.eurosportplayer.co.uk/tvschedule-month.shtml

Practicality• 11 years ago

Sorry, Eurosport Player is not available in this country.

drpgq• 11 years ago

Canada is switching to a la carte pricing for cable channels soon. Personally I'm planning on keeping a fair number of the sports channels and ditching a lot of the cruft that has built up over the years on the typical Canadian bundle.

petercooper2• 11 years ago

Here in the UK, sports channels are always an optional (and quite expensive) extra - it seems to work. Same with movie channels.

robk• 11 years ago

Yeah but in the UK consumers are used to public viewing in pubs. The USA has a far less developed sports bar market.

osi2• 11 years ago

Sports bars are very alive and well in Chicago. Atypical for the US as a whole.

mark-r• 11 years ago

That's probably changing. The falling price of TVs means any bar that wants can have them wall-to-wall. It's getting hard to escape them.

ascagnel_2• 11 years ago

The same is true in the US. You have your "free" terrestrial service (BBC, Channel 4, et al. vs the "big four" of ABC, CBS, FOX, and NBC funded by ads) that show a few sporting events on weekends, but for anything beyond that you'll need to have an expensive cable or satellite bundle.

For example: the BBC shows some F1 races in their entirety and the rest are aired as highlight packages after-the-fact, while all races are shown on Sky Sports F1. In the US, NBC airs a select few races in their entirety (Monaco, Canada, and the US GP), while NBCSN shows the rest of the races live as well as tape-delay full-race repeats. NBC can be accessed over-the-air for free, but NBCSN is typically an add-on to a cable bundle, so you're paying $60+/mo to have access to that channel for (if you're only an F1 fan) at most 12 hours of content a month.

petercooper2• 11 years ago

Yeah, but I have every satellite channel /except/ the sports and movie channels.

It seems like ESPN gets bundled in as default with any extended package in the US. In the UK, sport is something you quite specifically have to sign up for - it doesn't get bundled with anything else because they assume not everyone is into sports.

brianwawok2• 11 years ago

Sports is the main reason I don't have cable. Would I pay $20 for a few HGTV channels, and a few Discovery channels, and HBO? Sure. Would I pay $50 for the same + 20 sports channels? Nope, sports have 0 value to me.

Not a huge loss though, netflix helps make up for missing content.

jonknee5• 11 years ago

And you can get HBO without getting cable.

jdmichal3• 11 years ago

Are you referring to HBO Now? Because no, I cannot just go online and order HBO Now because I am not a Verizon nor Optimum subscriber.

http://help.hbonow.com/app/answers/detailHBO/a_id/172

hackerboos• 11 years ago

I can't speak for the US but in the UK the primary driver for satellite television is sports. People don't pay almost $200 a month for what can be had on Netflix and NowTV.

In fact I remember the panic from Sky when courts forced Sky to basically give up some of the EPL games. Sports is huge in the pay tv arena.

http://www.ft.com/cms/s/0/170d365a-97ec-11e3-ab60-00144feab7...

caractacus• 11 years ago

$200 a month? I'm not aware of anyone paying an amount even approaching that. The Sky Sports bundle - which is 7 sports channels, Premier League, etc - is £45 per month at face value and cheaper with negotiation.

kodablah• 11 years ago

Conversely sports is the only reason I do have cable. Maybe these dinosaurs are realizing that the casual sports watcher (i.e. not me) aren't willing to be forced into a specific delivery system.

btrautsc4• 11 years ago

Same here. (and I have the most basic package).. Right now, for me dedicated streaming NBA/ NFL are too expensive or tied to specific cable subscriptions.

zeveb3• 11 years ago

Nope, sports have 0 value to me.

Honestly, sports have negative value to me, like ads. The manufactured excitement, the soap opera lives of the players, the constant assumption by the media complex that I must care about who plays and wins are draining. If I could pay for some sort of sports blocker which would prevent me from having to know about what sports season it is and what athlete is doing what, I would throw my money at it. Likewise for actors pontificating about science and politics…

dopamean• 11 years ago

There's a difference between sports and sports entertainment. ESPN (and many others) sell sports entertainment. What you have described as having "negative value" is sports entertainment.

rconti2• 11 years ago

What's funny is, I felt the exact same way -- I cut the cord SPECIFICALLY to choke off ESPN. I want unbundled content so I can pay for the channels I value.

But, ironically, I realized the main reason I watch video content is for sports. It's just sports that the ESPN world doesn't value. I watch every Formula 1 qualifying and race session, but ESPN doesn't care, and anyway, F1 coverage in the US virtually died with the death of Speedvision/Speed Channel.. it's only now coming back, but it sure ain't on ESPN.

About the only other thing I care about these days is the occasional NHL game and live football game, but I follow an out-of-market team and ESPN doesn't help me much there anyway. 99.9% of their content is drivel -- I simply don't care about the analysis or talk shows or sports center.

So, I guess I do value sports, but I sure as hell don't value ESPN, and I'm happy to cut off their funding.

Bring on unbundled content so we can vote with our dollars.

skrowl• 11 years ago

I cut the cord 5 years ago now. I haven't looked back. Live sports is really the ONLY thing I miss, but you can go out to dinner at a bar a couple times a month for what cable was charging you.

merpnderp• 11 years ago

Same here. And the best thing about it is how little time I spend watching crappy TV. What I do watch, I watch on purpose at the time I choose. And even buying TV shows to watch current seasons, I still only spend about 50% of what I used to spend on cable, including Netflix and Amazon subscriptions (and Amazon shouldn't really count since I don't buy it for the video access).

btrautsc4• 11 years ago

There is a major logical error in this post.

"Sports" is not about to pop. Anecdotally, I would assert sports (NFL, NBA, futbol/ soccer) seem to be growing more popular to every day people.

What is potentially about to pop is the "entertainment" apparatus around Sports. Ie ESPN's programming the majority of hours per day that sporting contests are not airing.

It feels like ESPN is going the way of MTV. I doubt that music is less popular than it was in the 90s, but the one of its strongest previous consumption channels was disrupted by dozens of access/ consumption points - and simultaneously instead of dedicating themselves to airing music videos, MTV began to divert a lot of their airwaves (and I would assume resources) to reality TV and non-music video content.

ESPN (specifically) is in a similar position. On one hand, they appear to be working hard to offer streaming options - but they haven't gone all in on any type of consumption based or bulk access (to my knowledge)...

Instead, they put "characters" like Mike&Mike or Stephen A Smith to put on shows that are related to sports.

Unfortunately for ESPN there are too many content options (as well as competing sources for contract rights) for them to skate on thinly veiled sitcom characters and _very_ poor quality highlights in a world where we aren't locked in to 1 or 3 "channels" to access what is happening in the Sports world.

gniv• 11 years ago

The comparison with MTV is insightful. But what do you see as the equivalent of "dozens of access/consumption points" in sports? (I'm not following any organized sports)

binxbolling• 11 years ago

Not sure about dozens, but: you can get push notifications to your phone about teams you follow; scores & updates available right within your fantasy sports app; highlights endlessly replayed on Vine etc; blogs and analysts on Twitter to provide insights without need for a bloviating ESPN pundit; endless ways to identify with your favorite teams, non-score updates & behind-the-scenes stuff via Facebook and Instagram; near real-time sports news on any number of sites.

btrautsc4• 11 years ago

Just thinking out loud, there are a few angles to it.

#1 is that ESPN doesn't own the rights to air all sports (1), they have rights to certain events or leagues to air games on certain nights. For example, ESPN only airs 1 NFL football game per week, which is on Monday night. CBS, Fox, & NBC air games (which are subject to localized markets) on Sundays at various times.

Another example, DirectTV (a satellite provider) offers a content package called NFL Sunday Ticket which gives subscribers the ability to stream any game live in any market (which is in many NFL fans opinion, the superior option).

... which brings another note to the parent topic - I would assert Sports (specifically the individual sport leagues) are effectively monopolies. The NBA is the professional basketball league in the USA. Its largely considered the best league in the world. It's product is very difficult to replicate. So those specific "properties" will continue to try to maximize their value as well as grow their audiences - and its not like you know Seinfeld is super popular so you can just write a new show and call it Friends.

2. When I was growing up, Sports highlights were ESPN's bread and butter. You couldn't watch every game the day or weekend before, so you watched ESPN that morning or night to see what happened and the spectacular plays. Well, now twitter or youtube or reddit are better sources of highlights than ESPN. They are on demand, close to real time, and (IMO) often higher quality.

3. Lastly, the "analysis" and ancillary Sports content that ESPN works hard at, is very competitive now. There are great podcasts and blogs for every sport and most teams. Those channels can be accessed almost anywhere - and they are often more "targeted" than what ESPN is offering.

For example, I am a Memphis Grizzlies NBA fan. Let's equate that to I'm an Enterprise SaaS fan. Well, r/MemphisGrizzlies is kind of like Jason Lemkin's SaaStr - a site dedicated primarily to my specific niche. ESPN would be more like TechCrunch at large.

1: https://en.wikipedia.org/wiki/List_of_ESPN_sports_properties

bryanlarsen2• 11 years ago

Where's the logical error? If ESPN switches to an MTV type model to survive as you assert, then they're going to stop paying tens of billions of dollars each year to the leagues. The leagues and sports will survive, of course, but the transition will be very painful.

MeVfm• 11 years ago

ESPN is a big company.

arbitrage• 11 years ago

... a major logical error ...

followed by

Anecdotally ...

Perhaps you should rethink the flow of your argument, here?

crabasa• 11 years ago

Not a logical error at all, much less a major one. The obfuscated "taxation" of American households led to higher bids for airing games which led to salaries for players and higher valuations for teams. The cost to ESPN of the entertainment (Mike & Mike, Bill Simmons, etc) is a laughable fraction of the cost of broadcast rights.

So I believe the author is possibly correct in his assertion that cutting off the money from non-fans (since fans will presumably pay in some way) will materially affect the valuation of these leagues.

Dwolb• 11 years ago

One could argue the non-fans do not substantially subsidize NFL programming - Disney is able to capture most of this value internally as opposed to the specific leagues.

i.e. the value from bundled programming profits don't get passed on to the NFL

VanillaCafe• 11 years ago

To be precise, I'd say the article's core argument is something like: The obfuscated upper bound of $40/mo/subscriber cannot be recovered since the transparent pricing upper bound is $20/mo/fan. ESPN currently accounts for approximately half of all revenue for major league sports teams. The internet is driving unbundling which is forcing a move from obfuscated to transparent pricing.

With that premise and those numbers from the article, the crash will be something like a 35% drop in revenue (bounded by 25% and 50%) for sports teams when the transition from obfuscated to transparent pricing is complete. That seems like a big deal.

wtvanhest3• 11 years ago

To answer some of the questions you are getting about the logical error:

The logical error is assuming that sports franchises are overvalued just because the entertainment options that report on sports (ESPN) may be overvalued.

The OP is saying that reddit/r/cfb, reddit/r/nba, bleacher report, twitter, youtube etc. all now actively compete against ESPN's cash cow, highlights / analysis.

People are tuning in to live sports more than ever, and sports are the only consistent option for TV advertisers to capture viewers due to the importance of watching sports live.

Several major college football conferences will be renegotiating their TV rights over the next 36 months, including the Big 10. Most people expect it to be the highest price ever paid for TV rights because there are so few 'live' options left for advertisers and the Big 10's viewership is increasing rapidly. At the same time, less and less people think ESPN is important.

btrautsc4• 11 years ago

This is not only a more concise but also a clearer explanation.

well put!

austenallred• 11 years ago

Especially considering ESPN is tied into cable TV, which is a huge bundle of channels, 99% of which are garbage.

chrismcb• 11 years ago

Is it really the case that fewer people think ESPN is important or is that more people think cable is useless and dropping it. Many of which didn't watch ESPN to begin with. The real issue is the non sports watchers are no longer subsidizing the sports watchers. B

Deregibus2• 11 years ago

Agreed, this seems to conflate sports in general with the specific issues faced by sports-entertainment complex that is ESPN.

The dramatic increase in the valuation of sports is largely due to it being one of the few remaining forms of entertainment that can still reach people with advertisements. Most people watching games want to do it live, which means they cant block or skip through commercials like they would with an everyday TV show.

waylandsmithers• 11 years ago

I couldn't agree more. And when you look at ESPN's actual sports programming it's mostly SportsCenter and talking heads, ie, non essential viewing to sports fans. MLB and NBA are all on local affiliates or TNT/TBS, and NFL has one game per week on ESPN and the rest on Fox, CBS, and NBC (and NHL is somewhere not on ESPN). Basically ESPN has a nice hodgepodge of college and pro sports, but isn't really necessary to any one fan base.

zeveb3• 11 years ago

Anecdotally, I would assert sports (NFL, NBA, futbol/ soccer) seem to be growing more popular to every day people.

Are they? As average IQ continues to rise (the Flynn Effect), I would expect to see fewer and fewer people being as heavily devoted to sports as previously, not because sports fans are stupid, but because intelligent people are capable of enjoying more than just sports. The folks in my D&D game like to talk about the game sometimes, but they have other fun things in their lives too.

wall--e• 11 years ago

Please tell me you're not suggesting that D&D is a game of higher intelligence.

baldfat2• 11 years ago

Cord cutters will not be Sports Fans for the vast majority. Some will pay for online service but MOST are not able to watch sports.

As cord cutters increase the sports fans will decrease.

The money can only go up if the prices continue to go up to attend the games or watch live.

Personally I watch basketball and more and more esports have been more my focus. I don't watch football, baseball nor hockey which I did when I was younger.

dpark5• 11 years ago

not because sports fans are stupid, but because intelligent people are capable of enjoying more than just sports

So it's not that sports fans are stupid. It's just that non-stupid people aren't so interested in sports. Got it.

There has been and still is something of a shunning of sports among the "intelligentsia". There have been studies about it, and how people who wish to be perceived as smart tend to avoid the things viewed as common. That still continues but I think it's reducing in frequency at least with respect to sports.

I work with a lot of really smart people. A big chunk of them are invested in sports and discuss games at work, wear jerseys on Friday, etc.

Also, if the average person is really interested in sports, then generally rising IQ wouldn't change the number of people interested in sports. The number of average people is still the same when everyone's IQ rises.

saturdaysaint2• 11 years ago

I agree, and there's a world of "high intelligence" entertainment options opening up every day - deep videogames, compelling serialized TV, hyperniche social media content. The old model of sports entertainment - mostly passive spectating - seems counter to the richly interactive, highly social trend that software is leading us toward.

orthoganol• 11 years ago

Another dimension here, the millennial sports fans I know don't like ESPN (TMZSPN). I feel like they're digging their own grave especially with stunts like the terrible treatment of one of the Millennial Gods, Bill Simmons and their dismantling of Grantland. You can feel out this ESPN sentiment on various sports subreddits too, like r/nba, a community of 300K users, who from time to time will collectively pile on disdain for ESPN, usually for their often sensationalist (terrible) coverage, dramatizations, politics, and censorship of important issues like ones that make the NFL look bad. Not entirely sad to see ESPN on the wayside.

Maybe a new request for startups could pop up, "Kill ESPN".

nickstinemates• 11 years ago

The future of twitch.tv, maybe.

Rugoretto• 11 years ago

This is the same publication that "found" bitcoin's Satoshi a while ago. I'll hold off believing this until some other news organizations start reporting this. Meanwhile I'll be tuning in to watch the Golden State warriors tonight.

saturdaysaint2• 11 years ago

I'm interested to see if sports' cultural cache experiences more of a perceptible fall. For a long time, sports fandom provided a uniquely immersive experience - a world of interesting play styles, strategies, stats, and exciting shared experiences in the big games.

My sense is that the hardcore fans are still there, but a lot of casual followers are slowly being peeled away into other immersive experiences - well written TV, social media communities, deeper and deeper gameplay experiences. Additionally, gathering a bunch of people into a room to watch something isn't as much of a draw with the constant connectivity of smartphones. My girlfriend is a

When you add the dinosaur economic model controlling the medium and the rising sensitivity to the brain damage that football causes, I wouldn't be too surprised to see a more perceptible downturn.

gz5• 11 years ago

The TV bubble has popped. For sports and all entertainment. But to use that evidence that all of "sports" is about to pop is a stretch.

I suspect we will see much more direct interaction with teams & athletes, off-season live events, AR & gaming tie-ins, etc. We will move from passive, centralized TV consumption to more distributed, interactive interaction.

Sports, as entertainment, is still very healthy, even if the mediums and peripherals are changing.

bryanlarsen2• 11 years ago

To replace the loss of the current $30-$40 per month from casual fans would require hundreds per month from hard core fans. I don't think that's going to fly.

lordnacho• 11 years ago

One interesting comparison I didn't see in there was tube porn sites.

You can get the highlights of pretty much any event with a simple search, so why pay to watch the whole thing? Sure, now and again a Champions League match could be good, but if people are like me, they'll mostly just have a look at the highlights. And I'm guessing there's a lot more marginal consumers than massive fans.

saiya-jin• 11 years ago

i might be a very odd ball, but i find it strange that in 21st century, people in the west pay relatively huge amounts for passively watching sports while sitting on the couch (to make picture complete, imagine some junk food lying just in front of them).

popular sports became filthy moral dump where elite tries to outsmart doctors in doping tests, cares primarily about PR and chasing sponsors, and the sport itself sits somewhere out there, like a necessary, but not that important part if it all. honest, pure sportsman doesn't stand a chance in such a crowd.

I choose not to support these "sports" anyway, ignore them and couldn't be happier. I focus on activities where athletes are doing it without massive cash incentives, because they love it.

And since my sports include climbing, alpinism, ski touring etc. which at any point hold small risk of major injury or death, fear is semi-constant part of whole experience and overcoming your fear is necessary for any success at all... these sports discussed look very "meh" compared to it.

Some real-people example - this Lebron James guy mentioned here today vs say Ueli Steck, or Alex Honnold.

anoonmoose• 11 years ago

This was posted on HN a while back:

https://mako.cc/copyrighteous/cultivated-disinterest-in-prof...

I'm a nerd and I'm not big into the NBA (although I am into other sports) and I think if you can't figure out what is impressive about Lebron James then I think you're maybe not really trying to.

warfangle2• 11 years ago

On the other hand, no industry shields more rapists and abusers than major sports franchises.

talmand2• 11 years ago

I don't see the claim that Lebron James is not impressive, but I have no problem with imagining someone having little idea of who he is. Besides, he's nothing compared to Michael Jordan and if you don't know about him then you're just not alive.

whatever_dude• 11 years ago

It's a different kind of entertainment. There's a social aspect to it - it's more fun when you're watching with friends - as well as an attachment kind of thing, when you identify with a team. We all have our own tribalism.

Remember that just because both your passion and someone else's passion are vaguely related to "sports" does not mean they're the same. There are other things people get out of it.

As another example, no one can quite explain the allure behind "Let's Play" videos, for example. Why would someone watch someone else playing videogames?! But they're still growing in popularity.

panglott2• 11 years ago

It seems like (at least in the US) that there's no overlap between the spectator sports, where people just watch the game and almost never play them casually, and the participation sports, which have almost no spectator component. What are the exceptions—basketball, golf, tennis? Maybe soccer outside the US?

arethuza• 11 years ago

Rugby and cricket do well on the spectator side and pretty healthy participation levels.

ISL• 11 years ago

A beauty of the outdoors is that the outdoors can be whatever you need them to be. Alpinism can be risky, but it needn't be risky nor scary. For many, the right friends, the right view, the right goal, or the right sunrise might define success.

The one thing that does differentiate the mountains from organized sport is that there are situations, both obvious and subtle, that will harm or kill the uninformed without warning or recourse.

Steck and Honnold are absolutely getting paid; they're under intense social and fiscal pressure to perform. I hope they're both still climbing thirty years from now.

Alex Lowe's, 'The best mountaineer in the world is the one having the most fun,' is still true today. At some point, perhaps after an injury or losing a friend, risk for risk's sake loses its appeal, and the search for sustainable joy begins.

But, to reach my real point, if you stroll past a church-league softball game, you'll discover the soul of American sport. It's fun.

panglott2• 11 years ago

"When ESPN was adding subscribers, the $6.50 per-month-per-subscriber it charges to every cable operator meant $78 of additional annual profit for each new subscriber. This is a wonderful thing until a network starts losing customers, at which point all the revenue from every lost subscriber is chopped right out of that same network’s net profits."

This sounds like a "collapse of complex societies" in which the Roman Empire can expand as long as there are increasing returns to complexification, but collapses when the yields of complexification plateau and there is instead declining marginal productivity. http://www.historytoday.com/christopher-chippindale/collapse...

padobson3• 11 years ago

Don’t buy ESPN’s PR talk that its 7 million-household dip in subscribers is just a blip.

When ESPN was adding subscribers, the $6.50 per-month-per-subscriber it charges to every cable operator meant $78 of additional annual profit for each new subscriber.

7,000,000 * $78 = $546,000,000

Yeah, that's definitely not a blip.

The reason this affects sports leagues is because a huge chunk of their revenue comes from TV.

ESPN pays the NFL nearly $2B per year[1] just for Monday Night Football - or roughly 16 games a year. That's more than $100mm per game.

It's becoming pretty clear that ESPN isn't going to be able to afford TV rights deals like that for much longer. Which means the NFL is going to have to find someone else (there is no one else) or reduce its prices. When the sports league revenue drops, collective bargaining agreements will be disrupted and the result will be labor unrest and (potentially) team bankruptcy.

It's going to be entertaining to watch the entire industry implode before our eyes. When it's all over, we'll be able to enjoy sports as they should be - any game, streaming for a reasonable price, no blackout dates or other restrictions.

It's a shame an entire industry has to collapse to get a good user experience.

[1]http://www.nytimes.com/2011/09/09/sports/football/espn-exten...

Deregibus2• 11 years ago

Which means the NFL is going to have to find someone else (there is no one else)

Except NBC, CBS, FOX, Yahoo (hah), and the NFL itself via NFL Network, all of which already have contracts with the NFL which are worth more combined than ESPN's. For the NFL, having ESPN drop out would probably be a blip.

DeBraid• 11 years ago

For the NFL, having ESPN drop out would probably be a blip.

Perhaps, but worth noting that when NHL ended their relationship with ESPN business suffered.

While NFL is much larger, w/ greater and more diverse revenues, NHL suffered all sorts of unintended consequences, like reduced exposure when ESPN deprioritized hockey highlight packages.

padobson3• 11 years ago

NBC, CBS, and FOX are all as reliant on cable subscription revenues to pay for their NFL contracts as ESPN.

ESPN isn't losing subs because people are calling their cable companies and saying "I don't want ESPN". They're losing subs because people are cutting the cord.

hannob• 11 years ago

This is interesting in light of another trend: Just recently the citizens of Hamburg rejected having the Olympics in the city in a referendum. And they weren't the first, a number of cities have rejected major sports events when the people were asked.

What's going on there is imho quite similar: By default it's expected that the costs of major sports events are largely payed by the public. But a large part of the population has no interest in that and asks why they should pay to make people rich that they don't care about.

It seems the sports complex is in large partsdepend ing on income payed by people that don't care about it. It's only good if that's going to end. Sports events should be payed for by the people who like it, not by everyone else.

leviathant• 11 years ago

There was a time that I felt the same as you. As the years passed, my view shifted: Thank goodness for stadiums and sports franchises. Where would all those particular assholes (and I'm not saying all, or even the majority of sports fans are assholes) congregate if it weren't for sports bars and stadiums? The price we pay is definitely inflated, but I've come to appreciate the societal separation it provides.

Rudism• 11 years ago

The Olympics are particularly notorious for being a complete money sink. The host city builds all kinds of infrastructure to support them which become useless eyesores after the Olympics are done. You can find photos of abandoned and unused Olympic venues from as recent as the 2004 Athens and 2008 Beijing Olympics.

tallanvor• 11 years ago

The issues with the Olympics are a bit different. Cities and countries are looking at the costs and realize that, for the most part, there's no way for them to recoup the money they'd have to spend on the infrastructure. Plus, at least in Norway, people were really unhappy with the demands of the IOC - among other things, there were silly demands such as a cocktail reception with the king, and a bunch of other perks that don't sit well with people.

ricksplat• 11 years ago

Go Piggers!!!

vinceguidry• 11 years ago

This is why we can't have nice things.

The argument for bundling is that it subsidizes production of the long tail of TV programming that would never exist if each production had to stand on its own feet.

But cable providers can't be satisfied with the status quo. They want more and more money, so they are killing the golden goose. Americans were perfectly willing to pay $30-50 a month for cable. Industry greed has kicked that up to $70-80.

It boggles my mind how utterly stupid they were to, not just negligently let this happen, but to work as hard as they can to force consumers to look for cheaper alternatives.

wfo• 11 years ago

The scenario is as follows: ESPN is the reason people buy cable. Without it cable is dead. Cable companies MUST have ESPN so ESPN has an enormous amount of leverage and use it to extract as much cash as possible. In this case cable providers are just the middlemen; either they say no to ESPN and lose all their subscribers, or raise the rates to untenable levels slowly and eventually lose all their subscribers while making a boat load of cash on the way. They unsurprisingly chose option B.

cjf44• 11 years ago

Yeah, cable TV is ESPN and vice versa. Cable TV was basically invented by ESPN and ESPN will die (at least as it currently exists) with cable.

overgard• 11 years ago

A couple of things that are misleading here:

1) Most of the high profile ESPN personalities departing had little to do with finances. Some of it was internal feuding (ie, the Bill Simmons departure), some of it was firing loose cannons for boorish statements that don't fly in our hyper-PC culture, and some of it was people leaving for more money from competitors. As others have noted, for a company the size of ESPN the salaries of a few high profile personalities are mostly negligible.

2) Same thing with the Grantland shutdown -- the site was never realistically expected to be a money maker, it was essentially shut down because the departure of Simmons made the site's future unclear, and ESPN decided to get out of the pop culture business and fold the sports writing back into their main site.

3) A lot of ESPN's cutbacks are because they (foolishly) forecast their finances on the assumption that subscriptions would continue to grow. That doesn't mean the well has dried up, it just means that they've been a bit reckless the past few years.

4) I think this is excluding that a lot of sports are consumed on the free broadcast stations (CBS, NBC, FOX, etc.). Even with cable folding, those networks are still going to be paying billions for TV rights.

That said I agree with the overall gist of the argument that valuations are going to drop when the cable money starts drying out. I just don't think it's going to be a catastrophic crash or something; I doubt the average consumer will even notice.

webXL• 11 years ago

Man, I feel bad for all the people subsidizing my college football addiction over the years. Well, athletic departments' addiction to $$$ that is. But I never had to worry about not seeing a game live from my very own couch. It was very easy for me to justify $70/mo from September to January (until I found out I could get Sling for $25/mo). I never asked for 40 bowl games though. Hopefully all of those no-name bowls disappear. College sports was still exciting before they came along.

mark_l_watson• 11 years ago

Hopefully not too far off topic: I really enjoy live sports but find sports on TV to be fairly boring. I have had more fun watching local high school teams play that watching 'big games' on TV.

And, I really resent the 'ESPN tax' on cable bills, although now it is sometimes possible to unbundle that.

nogridbag• 11 years ago

I left this page open overnight on thedailybest.com and woke up in morning with "FirefoxPatch.exe" attempting to download (clean install of W10). Will not visit this site again.

jbiddy• 11 years ago

Much of that article didn't make sense, but there was a nugget of truth in there. Cable is losing subscribers, but that isn't a unique problem to ESPN.

I don't think the sportstainment industry will see a bursting of the bubble, so to speak. I do think instead, people who consume sports and sportstainment will simply pay more to make up for the suckers that were pitching in without ever realizing it.

There are sports fans out there that are cable-cutters, but not as many as you would think. Sooner or later, sooner if they have any sense, ESPN will move to the HBO Now type of model. That will bring many of them back.

The Sports Bubble Is About to Pop

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