Media Business Strategies

The Blog of David Polakoff

Tiers of A Clown

Posted by David Polakoff on April 22, 2015

The Windmills of My Immediate Mind

Media Business Strategies – David Polakoff

“Tiers of a Clown”

Sports Channels Must Offer OTT in the Skinny Bundle World

Consumers, cable/satellite providers, and programmers have each taken a turn playing the “clown” in the subscription television world. As this entertainment environment experiences consumer driven climate change, the skinny bundle consumer clown will be laughing and the sports programmer clown may be the one shedding tears, unless they embrace the over-the-top (OTT) world.

Verizon’s FIOS TV has just announced a skinny bundle of broadcast channels, plus a handful of basic cable networks, excluding ESPN, and the option to add cable channel themed packages. ESPN, like many popular cable channels, have contractual terms to be included in the “base” tier and often achieve that positioning through negotiating leverage when also considering other parent company channels (in ESPN’s case, ABC and Disney cable channels). Verizon claims that this new offering is consistent with existing contract terms. The high cost of sports programming, not just ESPN, has long been known to add substantial expense to cable/satellite base tiers. The shake-up to the sports programmers is presumed to be extraordinary if fewer than “every” cable/satellite subscriber is paying for these channels, whether the consumer desires these channels or not

My New York City, Time Warner Cable channel tiers include “Starter,” “Standard,” and “Preferred.” There are no sports channels in the “Starter” package, the “Standard” package has about 11 sports channels, and the “Preferred” package has about 22 sports channels. That’s a lot of sports and a significant component of my monthly cable bill.

My theory is that the cord shavers, cutters, and nevers, who are sports fans, would pick-up sports tier packaging or OTT sports programming options, at price points that are not insignificant, and likely keep sports programmers comfortably in business. Now, that is not to say that it wouldn’t be a great opportunity for the sports programmers to cut expenses and become more effective in their sports programming and business operations. And, it would be great leverage with the sports rights holders to finally push back on sports rights bidding, which is in the upper deck of economic rationales (see “Occupy Cable Television”).

Now, some may view the expensive cable/satellite standard tier, with sports, as still a cost efficient option, by comparison with a “bundle mix.” But, sports and other “tag along” channels of media programming conglomerates, must move out of the standard tier (including moving some to OTT, only) to be consistent with realities of today’s consumer driven media world.

Smokey Robinson and the Miracles sang

“Now if there’s a smile on my face

It’s only there trying to fool the public

But when it comes down to fooling you

Now honey that’s quite a different subject”

in “Tears of a Clown.” The consumer will no longer be the clown when it comes to exorbitantly paying for programming they don’t watch, especially as so many non-cable/satellite entertainment subscription and free, ad supported content options are available and garnering viewer time and attention. Sports, and some other live programming, have been the stranglehold on the cable/satellite programming business model. My theorizing is not disparaging of sports programming, but meant to encourage sports programmers to add OTT options and embrace sports tiers, as their content remains king and will be in demand at premium pricing to sports enthusiasts (as sports event ticket pricing and demand has demonstrated). Sports programming in base tier subscriber fees will suffer with the cord shavers, nevers, and cutters, anyway – it’s time to take a page from the playbook of the sports teams included in cable/satellite programming channels: it’s time for a good offense instead of a bad defense. If not, I’ll have to invoke a song title from The Main Ingredient, “Everybody Plays the Fool,” and I’ll be looking in the sports programmers’ direction.

 

                                                                                                                                                                          

Media Business Strategies is the blog/website of David Polakoff, a New York based, Media & Entertainment Industry Financial Executive.

David Polakoff’s media/entertainment industry experience and expertise results from his tenures in senior financial and development roles with: Ernst & Young, HBO/Time Warner, ITV Studios/itv plc, independent consulting, and multi-channel network, Iconic Entertainment, Inc.  Currently, David provides financial, operational, and strategic services to media/entertainment companies.  Read more in About.

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