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Comment by nhebb | Hacker News Reader

> 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

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...

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I'm still not sold on "it's necessary that you subsudize channels you don't watch" argument. This policy just seems to lead to ever increasing cable bills and an even broader array of channels that we don't need. Do we really need a Cooking channel if we already have Food network?

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.

> 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.

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...

Very good point. This has huge implications for conference realignment which seems to be driven by these contracts. If they can't make good on them what then?

They're owned by Disney, so it's not like the bills wouldn't be paid, but if (when) the bubble burst, it would have a ripple effect through sports and television.

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.

> It also gives a reasonable argument as to why subsidizing channels we don't watch benefits TV viewers as a whole.

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.

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