Deeper Dive—TV sports fees fall under pressure to take a timeout

Live sports are at least several months away from returning to TV and with each passing day without a single game or event to watch, it will get harder and harder for pay TV providers, broadcasters and leagues to justify the high prices charged to consumers. (Pixabay)

Pressure continues to mount for pay TV providers to sideline sports fees during the coronavirus pandemic that has shut down play for all professional leagues.

This week, New York Attorney General Letitia James publicly called on Altice USA, AT&T, Charter, Comcast, Dish Network, RCN, and Verizon to provide financial relief to consumers until live sports programming comes back on the air.

“At a time when so many New Yorkers have lost their jobs and are struggling, it is grossly unfair that cable and satellite television providers would continue to charge fees for services they are not even providing,” said James in a statement. “These companies must step up and immediately propose plans to cut charges and provide much needed financial relief. This crisis has brought new economic anxiety for all New Yorkers, and I will continue to protect the wallets of working people at every turn.”

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Pay TV plans often carry extra sports fees and subscribers often need to pay more to get channel packages that offer all the sports they seek. In her letter to pay TV providers, James said that pay TV providers may have certain provisions in residential service contracts that effectively say they are not guaranteed to provide live broadcasts. However, under the current extraordinary circumstances brought on by the pandemic, she said “applying those contractual provisions…is leading to unexpected and unfair results for consumers.”

Dish Network may already have a plan in mind on how to stop paying for live sports that aren’t happening and pass the savings onto its subscribers. According to the New York Post, Dish is looking for a way to get out of paying Disney between $80 and $100 million in ESPN fees for April and use the money to lower subscriber bills. The company has about 12 million subscribers – 9.4 million Dish TV satellite subscribers and another 2.6 million Sling TV subscribers.

Lightshed analyst Rich Greenfield said his firm believes that multiple MVPDs have said the same thing to Disney and that Disney and ESPN have declined to forego their rights fees. In a research note this week, he urged providers to declare “force majeure” (or unforeseeable circumstances that prevent someone from fulfilling a contract) and stop paying sports fees for no sports.

“We believe there has to be a tipping point where enough sports have not occurred that distributors will refuse to pay sports network programmers – the question is how much content has to be delayed/cancelled for distributors to say enough is enough so they can stop paying themselves and most importantly credit their subscribers for content not received?” Greenfield asked.

UBS analyst John Hodulik said his firm believes that if the reports about Dish pushing back on ESPN fees are accurate, it could also drive other distributors to push back on affiliate pricing for sports networks given suspension of play by the leagues.

“We expect RSNs to face similar issues while it's unclear if retrans dollars – increasingly driven by live sports – could also be at risk,” he wrote in a research note.

UBS said ESPN could be entitled to refunds from sports leagues if live sports remain off the air. However, if live sports cancellations affect the NFL and college football seasons later this year, then ESPN’s negotiations with providers would become “increasingly contentious.”

ACA Connects, a trade organization representing more than 700 smaller service providers, said pay TV providers are less to blame for sports fees than programmers and leagues.

“If Attorney General James truly wishes to address consumers’ concerns about sports programming, we recommend she focus on the root cause of the problem and investigate sports programmers, broadcast networks and sports leagues. The members of ACA Connects, their customers, and other MVPDs have been caught in the middle of these sports and media titans for far too long,” said ACA Connects CEO Matthew Polka in a statement.

Leagues’ plans for resumed play have begun to leak out. USA Today reported this week that MLB is optimistic about starting its 2020 season in late June and playing at least 100 regular season games at MLB ballparks, but without fans in attendance. The NBA hasn’t settled on a date for resuming its regular season but it is eying May 8 as a timeframe for teams to begin practicing again.

Still, live sports are at least several months away from returning to TV and with each passing day without a single game or event to watch, it will get harder and harder for pay TV providers, broadcasters and leagues to justify the high prices charged to consumers.