Mad About the Cost of TV? Blame Sports

By Derek Thompson

If you're furious about the cost of cable TV, and you don't watch sports, just close this window and walk away. Seriously, don't even read another paragraph. It'll just make you too angry.

Still there? Okay, so here's where we left things last time we discussed the economics of sports and television.

In a sentence: Television economics are sports economics, and sports economics are television economics. Sports accounts for half of the programming costs of TV, and TV accounts for more than half the revenue of many professional sports leagues. Without television, professional sports could scarcely exist. Without sports, the TV cable bundle -- and the golden age of television that it's ushered into existence -- might unravel entirely.

Your cable bill -- $80 or $90, or whatever it is -- is best understood as two prices. The programming (i.e. the channels you watch) and the distribution (i.e. the infrastructure and profits for the cable companies). Every time you pay a cable bill, the channels collect a small fee. It's called an "affiliate fee." The most in-demand channels tend to negotiate the highest fees. And those tend to be sports channels. Take a look.

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There's no great mystery here. Sports are expensive because they are valuable. And sports are valuable because they attract a larger live audience than average prime-time shows. That's the big picture. A 2013 report from RBC, "Moneyball: The Current State Of The Sports Media Landscape," sharpens the image.

Here's a great picture of the sports premium, drawn from data in the report. The gap between NFL viewership and primetime viewership is large and growing. In 2002, NFL games averaged about 15 million viewers and broadcast primetime shows averaged about 10 million. In 2012, that 50 percent gap exploded to a 150 percent chasm between the NFL and non-sports programming.

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I used the NFL, because just as sports economics dominate the price of TV, NFL costs dominate the price of sports. The NFL accounted for 30 percent of sports advertising and 36 percent of sports rights in 2012.

By my rough calculation, if you pay $90 a month for cable, you are paying about $76 a year (about 7 percent of the total cost of cable TV) just for the NFL.

If you don't watch sports, you are literally paying an annual subsidy to support your sports-fan friends. But wait. Before you get more upset, consider this. You're *also* paying the media companies that produce some of the great shows you like on other channels. Roughly 28 percent of Disney earnings -- and 23 percent of News Corps' cable earnings -- come from sports channels.  These sports channels are profitable. And those profits can cover the cost of content on ABC (owned by Disney) and FX (owned by News Corp).

Sports keeps the cable bundle together. And the cable bundle is powering the media companies through a remarkable surge in quality TV entertainment.

This article available online at:

http://www.theatlantic.com/business/archive/2013/04/mad-about-the-cost-of-tv-blame-sports/274575/