> The financial stakes are especially high for ESPN because it earns the most carriage fees of any TV channel, about $6.61 a month per subscriber
I have no interest in televised sports. But if I had a cable package I'd be paying ESPN almost $80 a year? Whether I watch sports or not?
Now I'm glad I don't have cable TV, just a cable modem. I'll take the $80 over those sports broadcasts I don't care about, thank you.
That's not why the financial stakes are high. They're high because ESPN has fixed price contracts into the future for the rights to broadcast sports events. If their subscriber base falls, they're still on the hook for those contracts.
The article "Is ESPN A Giant Bubble About To Burst?" [1] does a much better job of explaining the whole picture. It also gives a reasonable argument as to why subsidizing channels we don't watch benefits TV viewers as a whole. (I'm thinking about becoming a cord cutter myself, but the argument is still reasonable.)
[1] http://www.foxsports.com/college-football/outkick-the-covera...
If ESPN continues to lose viewers, their ad revenue will suffer. If ESPN revenue suffers, will they be able to pay the fixed price contracts they have with the largest, most viewed sports leagues, such as the NFL, MLB, and SEC (college football)?
Seems to me that this is the first domino to fall...
Hypothetically, ESPN itself doesn't need to lose many viewers for this to happen. The ad revenues mostly just cover production costs. The bulk of their revenues come from the cable companies via cable subscriptions. Virtually all cable bundles include ESPN, so if cable subscriptions fell among non-ESPN watchers, it would still impact ESPN's bottom line.
This is something a lot of people don't really think about.
For example, Breaking Bad, while a critical success, was never a popular show until its final episodes. It and Mad Men mostly existed as a way to keep their parent network, AMC, in a more popular cable tier, so that it could continue taking in carriage fees.
Most importantly, it incentivizes people to make channels with cheap but low quality content just to suckle on the teat of the cable bill.
If there were true alacarte pricing options for cable channels, the channel would actually have to put an effort in for my dollar. Many channels would wither and die, but that's because they are offering an unappealing product.
It would also give consumers a way to actually push back when a channel goes against its core subscriber base just because they found some cheap content that can fill the airwaves. I mean just look at the current state of the History Channel or Discovery or even Animal Planet. Maybe it is time for them to die off and make room for a younger competitor not so in love with reality programming.
Still I find it ironic how many complain about the six dollar figure assigned to ESPN when many premium channels; hbo/showtime/etc are ten to fifteen dollars a month. I know quite a few who spent that for HBONow just for one show only to cancel as soon as the season for GOT was over. While I have no interest in sports its a matter of perception.
Now ESPN and others have sued cable operators who have tried to slice up offerings to where customers could elect to not have specific channels. So while not defending cable and satellite companies it does come to the point where its cheaper to eat the bad customer feelings than spend the money on court cases. That being said, you would think with the drop in subscribers that the financials of that decision are turning around sufficiently that maybe they will push back harder