John Ourand of the Sports Business Journal talks about the idea of major networks charging distributors for their programming in his latest piece:
But as the economy has wreaked havoc on the TV advertising market, these disputes have taken on a new urgency for broadcasters. They need new revenue streams. It’s pretty simple: Broadcasters don’t have the dual revenue streams of ESPN and rely mainly on advertising revenue, which is clearly not growing.
In the New York market alone, ad sales are down 35 percent year over year, and next year they are projected to be flat, according to one veteran New York television executive.
To counter that decline, which is affecting stations all over the country, Fox and CBS have said they plan to start charging cable operators to carry their stations. Some reports have News Corp. charging cable operators 50 cents per subscriber per month for its locally owned and operated Fox stations, and 25 cents for its MyNetworkTV affiliates, local broadcast stations that Fox also owns.
For Cablevision, with its 3 million subscribers, that could result in a monthly payout of $2.25 million for Fox. By comparison, Cablevision pays ESPN around $12 million per month for its flagship channel alone. That’s what broadcasters are up against, and why they feel the need to be paid cash for their stations.
“It’s not rocket science,” Chase Carey, News Corp.’s deputy chairman, said at an industry conference last month. “It doesn’t make sense that broadcast is only ad supported. It competes against other channels that are dual revenue businesses, while a network like Fox sits there with truly the best programming in sports and entertainment.”
Payout Perspective:
The story is the latest development in a string of television related coverage that MMAPayout.com has featured over the last few months – all in anticipation that the sport of MMA will continue to push its way onto the major networks.
However, the story is interesting for another reason: it highlights the debate currently raging between the value that concentrated cable networks provide sports properties versus their broad-based broadcast network counterparts.
ESPN, the most dominant of sports cable networks, is in a prime position to collect a wide array of content, because of its dual-revenue business model and its concentrated platform that caters to a specific audience that these properties covet. Yet, on the other hand, broadcast networks offer greater overall exposure in the form of all 115 million homes in America’s television audience.
It’s a trade-off, especially for MMA, and one that isn’t to be taken lightly. It might be tempting to swing for the fences with a major network, but there’s certainly the risk that an organization gets lost in the vast set of programming obligations that the network already maintains. The show, and the sport, may lose some of the promotional support they need to truly be a success. And, while a cable network like ESPN may not have the same exposure, it does have the experience and promotional savvy to handle a new sport such as MMA.
Even though rights fees and production control might be at the front of the negotiating list for an organization like the UFC, promotional control and influence shouldn’t be far behind either.
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