I like to follow the business of sports television, and it's becoming clear to me that a bubble is forming. Not everyone shares that viewpoint, mind you. But I see it coming, and it will be interesting to see where it ends up.
The money being offered by television networks keeps going up each time a contract goes up for bid. There are good reasons for it: sports broadcasts draw eyeballs and are typically a consistent, proven commodity. Television networks are moving away from scripted comedy and drama programs in favor of reality programming for a reason. People watch this stuff, and any show that requires creativity represents a risk factor. Sure, if you come up with a blockbuster idea, you'll cash in. But that's a big if, and most networks nowadays are quick to pull the plug on new shows that don't grab a huge audience right away. So why take a chance?
So go for sports and pay for the rights. Why? Because the networks also know that they can pass the buck. Especially if they think it's "must see TV". Most fans don't realize that ESPN charges their cable company over $5 a month to carry the "Worldwide Leader". And cable companies have almost no option except to pay. What are they going to do? Drop ESPN? No Monday Night Football? None of the college games that ESPN carries? No to the national NBA or Major League Baseball games?
ESPN knows they can pretty much charge whatever they want. The other sports networks have a little more risk. Squabbles between networks and the providers are commonplace anymore. Last fall, it was Dish Network and BTN. But that's not the only one. DirecTV has had issues with Versus (now NBC Sports Network) in the past and still has a dispute with the Pac-12 Network. And Texas fans still experience the pain of the Longhorn Network boondoggle.
So now providers are now passing the buck directly to customers by adding a monthly sports surcharge to the bill to pay for these escalating prices. Some of this is in local markets where the regional sports networks are now offering ridiculous contracts to sports teams. The LA Dodgers just signed a 10 year television deal for $7 billion. Again, who's going to pay this in the end? The fans will. Heck, if the Chicago Cubs are actually contemplating severing ties with WGN and go regional instead of national with their games, you know there must be big money at stake.
Where will this end? John Ourand of Sports Business Journal says there is no end in sight. Maybe not in the short term, but this isn't sustainable. USA Today reports that NPD Group, a research organization in New York, estimates that by 2020, cable bills will average over $200 a month.
Back when I first got cable TV nearly 20 years ago, it was under $20 a month. Adding another zero to that certainly would give me pause about continuing to pay for television programming. I already go with a cheaper service (no HD, no ESPNU, and no CBS Sports Network) to save a few bucks each month.
But if it cost me $200 a month to get Husker games on ESPN and BTN, would I still pay that? That gets really tough. Heck, it makes the days of the $40 pay-per-view broadcast seem downright reasonable in comparison. At least that was just three or four times a year. But $2,400 a year for cable television?
Really? That's the sign of a bubble. Cable prices simply cannot keep going up like that without a crash. It's just like the "dot.com" bubble in 2000, or the housing bubble that started the great recession, television sports rights are another bubble just waiting to burst.
And like those other bubbles, it's everybody else that will get soaked when it finally bursts.