Until a few months ago, Fox Sports and Prime Ticket were the only regional sports networks in town. But with the addition of the Time Warner channels and the Pac-12 Networks, cable and satellite operators are paying close to $10 per subscriber per month, an increase of more than 90 percent, according to an article in Sports Business Journal. It's just slightly below the amount operators pay in the NY market - and that doesn't include a new TV deal for the Dodgers (you know that won't come cheap). The costs aren't going down well, as seen by the continued impasse on distribution deals between Time Warner Cable and satellite operators DirecTV and the Dish Network. This is what happens when the numbers get out of hand.
Time Warner Cable's biggest business is as a distributor itself, where it has gained a reputation for conducting tough carriage negotiations with sports channels such as NFL Network and MSG Network. Now, Time Warner Cable is the one with high-cost sports channels, and other distributors are the ones complaining about them. DirecTV and Cox went public last month with complaints about the high cost of the Lakers channels. [Bob Wilson, the top programming executive at Cox Communications], worries that the strategies being used by Comcast and Time Warner Cable could threaten the entire pay-TV business if their business plan is used in other markets. "This has been a really good business model for a long time," Wilson said. "You intuitively have to have some understanding that as we go forward more people will be increasingly priced out of the product."
The rising cost of sports rights is one of the reasons why Cox decided to shutter its own RSNs earlier this year. Cox opted not to bid on the New Orleans Hornets or San Diego Padres rights this year in an attempt to prevent a bidding war that could cause those rights to climb too high. Fox Sports' RSNs eventually gained rights to those two teams, and Cox signed long-term carriage deals with the networks. Cox was the dominant cable operator in both of those markets. But Wilson said the cost of sports rights had been increasing so rapidly that it stopped making financial sense for Cox to keep those rights. "We didn't control the entire marketplace in those areas," Wilson said, adding that negotiations with other distributors were becoming problematic as rights fees rose. "And we feel that more bidders has the effect of driving rights fees up disproportionately. I'm not saying that's right. That's the path we chose. Others have chosen different routes."