Consumers are footing the bill for premium sports, and it’s not changing anytime soon
Cable bills are on the rise due to a multitude of reasons. On average, the cost of a basic cable subscription has risen 6.1 percent per year since 1995 according to the U.S. Federal Communications Commission. That increase outpaces the average U.S. inflation rate of 2.35 percent over the same time period. One reason for this rapid increase can be attributed to broadcast or cable network surcharges. These networks pay a premium to carry live event programming, premium sports and high profile shows that yield larger audiences with a higher propensity for live viewing. A prime example of these premiums came with the 2013 negotiation between NASCAR, NBC and FOX to broadcast its races in a 10-year deal for a combined $8.2 billion. While ratings and attendance are soft for the sport overall, why would a network agree to a new deal without the numbers to back up the investment?
There are a few enticing reasons to justify the networks’ spend. First, advertisers are willing to paymore for sports programs. With TV ratings on decline and more time-shifted viewing, advertisers are evolving their TV daypart and programming mixes in order to reach the live-viewing masses. According to Nielsen, 99 percent of sports in 2012 were watched either live or on the same day among fans ages 18 to 49 years old. Additionally, there is less variation in sports ratings compared to prime programming. Primetime shows come and go, but established sports will always have a following.
Second, both parent companies were looking to grow their cable network extensions, FS1 and NBCS, to compete with the dominant sports cable network, ESPN. Both networks will now be able to charge higher subscription fees by way of carrying live, exclusive, premium sports content. Networks can count on guaranteed audiences when they lock in long term sports contracts.
The final and most frustrating reason for consumers about networks investing so heavily in sports is...