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.