If You Don't Watch Sports, TV Is a Huge Rip-Off (So, How Do We Fix It?)

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Are sports on TV a good deal? Depends.

If you watch sports, millions of pay-TV households who never click on their ESPN channels are subsidizing your habit. If you don't watch sports, you're one of the suckers paying an extra $100 a year for a product you don't consume.

Out-of-control sports TV costs are receiving a lot of attention these days, and much of the press coverage is misleading, miscalculated, or just plain wrong. Let's divide fact from fiction.

A shocking share of your monthly cable bill goes to sports programming.

TRUE. Here's how your cable bill works. You pay $80-ish each month for cable (just talking TV here, not Internet, which is often included in the bill). About $30 are the programming costs -- the wholesale price of all the channels. ESPN gets about $5 per household per month. MTV gets about $0.39.

Screen Shot 2012-12-02 at 9.54.53 PM.png

Half of your cable-TV bill pays for sports channels.

FALSE. Somehow, this stat, or something like it, made its way into headlines and ledes at the Los Angeles Times and Philadelphia Inquirer and Mother Jones and beyond. It's not true.

Your pay-TV bill is $80. Programming costs are $30. Sports programming costs (all of the sports networks combined) are $12, or more if you live in Southern California, as the graph above from the LA Times shows. Twelve dollars divided by $80 isn't 50% of your bill. It's 15%.

How did the newspapers get it wrong? First, they mistook programming costs for the entire cable bill. Big mistake. Second, they relied on analysis by Craig Moffett, who in September calculated that if you include the high costs of sports rights from TNT, USA, NBC, CBS, and ABC, it's clear that "sports easily accounts for more than half of the cost of a Pay TV subscription." But those are networks that practically every pay-TV customer watches, whether or not he/she likes sports. You could say that TNT "Law and Order" fans are subsidizing TNT basketball fans. But it's also the case that TNT basketball fans are keeping the lights on for TNT original dramas. In short: Channels are bundles, too.

It's all cable's fault.

FALSE. When we get mad at the price of a cable bill, we tend to blame the company name at the top of the bill. It's not that simple. Cable companies make deals to carry channels. Channels make deals to carry sports. Big sports leagues, understanding their unique position in a fragmented media market to be a major audience driver, force channels to pay through the nose for new contracts. 

Here are two examples. In September ESPN agreed to pay the NFL 70% more per game to carry Monday Night Football through 2021. Last week, the LA Times reported a possible deal between the Dodgers and Fox that would be worth 20-times more -- twenty! -- than the current contract. Expensive new contracts means higher costs for channels, who pass the costs to the cable providers, who pass the costs to you. That's why deals like these make sports programming a leading source of your steadily rising cable bill, whether or not you watch sports.

Television's bundling model allows runaway price inflation in sports. 

TRUE. If you pay for cable and hate sports, then ... well, gosh, I'm just really sorry. Actually a better word would be grateful. You're subsidizing my ESPN addiction. Thanks.

Seriously, though, you have the worst of two worlds. Channels competing over sports rights bid up the price of programming. The bundle pricing model means you have no choice but to pay what amounts to a mandatory sports tax. Media companies' all-or-nothing deal with cable providers means you have no choice but to pay at least $100 per year for sports you don't plan to watch.

Some awesome tech company will come along and fix everything.

FALSE. Hopefully you see at this point why there is little that Google, or Apple, or Microsoft, or whoever, can do to make watching TV much cheaper. Google can't force ESPN to pay less for the NFL, or force Fox to pay less for the Dodgers. If tried to compete nation-wide with Comcast and Time Warner Cable, it would stuck with the same programming cost inflation crisis that scares TWC ... plus! It would have to spend an extra $200 billion to build a nationwide infrastructure to move live video.

The evolution of TV is probably going to be much more boring. Maybe DISH will decide it won't pay the high costs that ESPN and regional sports networks demand and will become synonymous will "cable for people who hate sports." That way, households in an area served by DISH and Comcast can choose between sports and not-sports, and if more people choose not-sports, then sports networks will necessarily slow their inflation rate to keep from upsetting sports fans who suddenly get stuck with a higher bill. For now, maybe nothing changes. Time Warner Cable has offered cable packages without ESPN and other expensive sports networks to subscribers in the New York area. According to their press office, most of the people who started with cable-lite eventually upgraded to the full cable package, egregious sports programming and all.

The only thing we love more than complaining about the cable bundle is ... the cable bundle.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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