DirecTV recently announced that it will begin implementing a $3 monthly surcharge for regional sports networks in markets that have multiple RSNs (read: New York and Los Angeles). The company isn't alone. Verizon's FiOS TV has begun assessing similar increases in California, Texas and Florida. It won't be long before customers in all markets will be hit with rate increases.
The surcharges come as no surprise. Rights fees to sport teams and leagues have skyrocketed of late and ultimately it's the consumer who pays the bill. The Dodgers' recently announced $8 billion contract with Time Warner Cable is only the latest in a long line of exorbitant media deals.
Is it time for sports fans to revolt? Not at all. Three dollars per month, or $36 per year, is hardly worth getting worked up over. It costs most Americans $6-8 more to fill up their gas tanks today than it did a month ago, and most drivers fill their tanks once or twice per week. Now that's something to complain about, if only we knew who is responsible for - literally - what amounts to highway robbery.
The money we spend to watch sports on TV is still a bargain, especially when compared to the price of admission to virtually any sporting event. Add in the expense of parking, concessions and souvenirs at the ballpark and you're talking about a small fortune. And did I mention the increased cost of gasoline to drive to the event? In comparison, an additional $36 per year to watch your favorite baseball team - or two - play 162 games is a pittance.
But that doesn't mean everyone should be happy. Non-sports fans who subscribe to a basic package that includes sports programming are effectively subsidizing sports fans. If sports fans were charged the actual cost of sports programming, monthly fees could see a ten-fold increase, meaning that $3 monthly surcharge could be $30. Still, that's less than the additional monthly expense of gasoline we are paying today vs. a month ago. Which is more egregious, the increase in the price of gasoline or sports programming?
The cable industry prices its products similar to an insurance company. The cost of medical insurance is spread over a wide population, but not everyone gets sick and uses the benefits. That keeps rates low for those who do see doctors or are admitted to the hospital. If only people who use insurance benefits paid premiums, the rates would be prohibitive.
Some cable operators carry sports programming on an ala carte basis, sometimes referred to as a cafeteria plan; if you want it, you pay for it. That approach may mollify the non-sports fan, but why stop with sports? Why should the rest of us pay for channels such as National Geographic or PBS if we never watch them? There's a strong argument to be made that all TV programming should be on an ala carte basis. But don't hold your breath. Cable operators, with an assist from the government, reserve the right to decide what programming is "good" for us.
If consumers were given the option to choose their TV programming, there wouldn't be a thousand channels. There just isn't enough demand to justify the cost of producing all the programming that's out there. Similarly, if Social Security and Medicare contributions were voluntary, neither of those programs would exist. However, there is sufficient demand for sports programming to make it financially viable, even if it was billed separately. But teams and leagues are greedy; they want as much money as they can get, not merely what they need to exist. That means as long as "basic" customers can be charged for the programming, rights fees will continue to climb higher and higher and sports fans will be spared the brunt of the cost.
Someday, the current method of packaging sports programming will change. Basic customers will complain enough to their elected representatives that Congress and/or the FCC will take action to require the implementation of an ala carte pricing system, at least with regard to sports programming. When that happens, sports fans will suffer sticker shock. But even when that happens, compared to what takes place at the gas pumps, sports fans still won't have reason to complain.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is a Professor and Chair of the Sport Management Department at SUNY Cortland and is a contributing author to the Business of Sports Network and maintains the blog: http://sportsbeyondthelines.com Jordan can be reached at firstname.lastname@example.org.