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Paying for Sports Programming

2013 January 19
by Skip Sauer

It is pretty widely understood that sports programming drives live television these days.   The Nielsen ratings for broadcast networks during the week of December 24 provide some recent data.  Nielsen’s table, reproduced below, shows that NFL broadcasts were the four most watched telecasts that week  (“The OT” is Fox’s NFL post-game show).

Prime Broadcast Network TV – United States
Week of December 24, 2012

Rank Program Network Rating Viewers (000)
1 NBC SUNDAY NIGHT FOOTBALL NBC 17.0 30,281
2 SUNDAY NIGHT NFL PRE-KICK NBC 12.2 21,911
3 OT, THE FOX 10.2 17,813
4 FOOTBALL NT AMERICA PT 3 NBC 8.8 15,901
5 BIG BANG THEORY, THE CBS 7.4 12,013
6 60 MINUTES CBS 6.5 10,265
6 PERSON OF INTEREST CBS 6.5 10,326
7 NCIS 12/25-SP(S) CBS 6.1 9,836
8 TWO AND A HALF MEN CBS 5.7 8,621
9 CRIMINAL MINDS 8PM-SP(S) CBS 5.4 8,564
9 NCIS: LOS ANGELES 12/25(S) CBS 5.4 8,622
10 ELEMENTARY CBS 5.2 8,055

Source: Nielsen. Primetime Broadcast Programs (source page, which is updated to current weekly ratings with a lag).

On cable and satellite the story is the same.  The top ten list for cable during the week of Dec. 24 is dominated by the much maligned college football bowl games.  Virginia Tech – Rutgers (ugh!) and and Duke – Cincinnati are among six bowl games on that week’s top ten list for cable.

Amidst this general background, consider the recent LA Times piece on the rising cost of sports programming, a trend which is expected to continue.  The main point of the piece is that when tv programming is served in a bundle, consumers who don’t like specific components of the bundle end up paying for a service they don’t consume.  Continued increases in the costs of sports programming threaten the sustainability of a pricing system that is allegedly already burdened with inequities, since consumers who don’t watch sports will presumably drop their subscriptions by the thousands.

The problem is that the main point of the piece is probably wrong.  At Marginal Revolution, Alex Tabarrok presents the simple arithmetic for a hypothetical bundle offered to consumers with differing tastes for sports and non-sports programming.  This is a neat example and exposition.  The bottom line:  each consumer gets what she pays for.

There are many hypothetical bundles however, so it is possible that a lack of perfect competition allows some combination of the leagues, networks, and carriers to set prices which subsidize those who watch (and provide) sports entertainment by selling bundles which extract consumer surplus from viewers who don’t watch sports.  My own personal experience is somewhat different.  I view with amazement the occasional offer of a low cost bundle of networks in the $40 range (ESPN included), alongside my monthly bill which is north of $100.  On close inspection, the difference is revealed:  a la carte consumption of various sports channels!  I wonder if my base package is subsiding viewers of Masterpiece Theater.

The simplistic alternative offered to bundling is a la carte pricing, across the board:  choose whatever combination of tv networks, individually priced, that you want!  This is a durable proposal, often recycled but rarely implemented.  There is probably a reason for this.  As Tom Hazlett has pointedly argued, it is telling that we don’t see very much a la carte in cellphone pricing, internet service, satellite radio, or on the ski slopes.  Market power is not pervasive, and across many markets we find consumers opting for, rather than out of bundles when given the choice.  There are efficient reasons for this.  Hazlett’s 2006 article in the J. of Telecommunication and High Technology Law, “Shedding Tiers for A La Carte” explains why.

It is possible that continued increases in the value of sports programming among aficionados would shift some sports packages out of the basic tier bundle, for the same reason that caviar is never offered as a free topping on a hamburger.  Non-sports viewers would then have no complaint.   At that point the howling would come from fans unwilling to pay the market price for sports.

8 Responses
  1. Brian permalink
    January 21, 2013

    Interesting piece on a very misunderstood topic. Hazlett’s article on bundling should be required reading in applied micro or public policy courses. As a related point, Southwestern Bell gained a huge advantage over ATT by bundling minutes into a monthly package rather than using the long established (and seemingly consumer friendly), pay per minute approach. Besides cost differences of bundling, the pricing mechanism becomes an attribute of the product itself that consumers may value for their own transactions costs (convenience) purposes

  2. January 21, 2013

    “It is possible that continued increases in the value of sports programming among aficionados would shift some sports packages out of the basic tier bundle, for the same reason that caviar is never offered as a free topping on a hamburger. Non-sports viewers would then have no complaint. At that point the howling would come from fans unwilling to pay the market price for sports.”

    To some extent I believe this has already happened. In the sense that the availability of NFL football and college football broadcast outstrips the broadcasting on basic tiers this seems to be true. The NFL Ticket and the various college packages put many broadcasts out of reach for many marginal fans.

  3. January 22, 2013

    “We find consumers opting for, rather than out of bundles when given the choice.”

    I disagree; that quote looks more like the head of an industry group trying to paint a dismal picture in bright hues. About one-third of US households are without landlines, and there is a continuing trend for people to cut their cable TV too; about a million a year, on average, for the last few years, now.

    I love live-televised football, but I’m not going to pay the outrageous prices for cable. I think most people would agree with me. Let’s look at that Nielsen chart closely.

    Those sports shows were available over-the-air (OTA) on network television, not solely on cable. During that week, there were 14 bowl games. Not a single one of them came close to cracking the top 10 of the network broadcasts that included non-sports shows.

    People who watch Top Chef (but not sports programming) are, in an insidious way, subsidizing ESPN’s (Disney’s) ability to overpay for sports programming that, on a per-viewer basis, is vastly higher than any other programming. They are not subsidizing sports viewing directly, but they’re subsidizing ESPN’s ability to steal the market of sports programming from the networks.

  4. Shizzmoney permalink
    January 22, 2013

    Trying to cut cable costs, but need to watch sports? Just do what I do:

    - Get baller internet speed (around $50-$80/mth)

    - Get an XBOX (it has ESPN now)

    - Stream third party sites for games

  5. Rocky permalink
    January 22, 2013

    You do know that you picked a week with all reruns in the regular programming slots, right? This would depress ratings for other shows and make football look better by comparison.

    Odd that you’d pick a week that best shows sports when more recent data are available.

  6. Skip Sauer permalink*
    January 22, 2013

    Rocky,

    If you don’t trust the integrity of my posts, I suggest you visit other sites.

    The data printed here were the data accessible on the Nielsen page on the day I read Alex Tabarrok’s post. I didn’t “pick a week.” (And obviously, next week there will be few if any football telecasts on the top ten lists. But that doesn’t negate the observation that sports are driving live television these days).

  7. Rocky permalink
    January 23, 2013

    Sports and “reality” television drive live viewing.

    Here is a more representative week, easily available through the Internet, that contains both sports and regular, non-rerun programming.

    1 FOX NFC PLAYOFF-SAT-01/12 S FOX 11.1 14037
    2 Big Bang Theory, THE-01/10 CBS 6.4 8147
    3 GOLDEN GLOBE AWARDS-01/13 S NBC 6.4 8058
    4 Modern Family-01/09 ABC 4.7 5989
    5 Two and a Half Men-01/10 CBS 4.2 5278
    6 NCIS-01/08 CBS 3.5 4452
    7 60 Minutes-01/13 CBS 3.3 4184
    8 Person Of Interest-01/10 CBS 3.3 4124
    9 Grey’S ANATOMY-01/10 ABC 3.2 4001
    10 Family Guy-01/13 FOX 3.2 3996
    11 AFC DIV-PLF-POST-GAME-SA-01/12 S CBS 3.1 3877
    12 NCIS: LOS ANGELES-01/08 CBS 3.0 3816
    13 Once Upon A Time-01/13 ABC 2.8 3582
    14 Scandal-01/10 ABC 2.8 3525
    15 PEOPLE’S CHOICE AWARDS-01/09 S CBS 2.7 3379
    16 Suburgatory-01/09 ABC 2.6 3327
    17 American Dad-01/13 FOX 2.4 3093
    18 ELEMENTARY-01/10 CBS 2.4 3072
    19 MIDDLE, THE-01/09 ABC 2.4 3061
    20 Simpsons-01/13 FOX 2.4 3045
    21 Biggest Loser 14-01/07 P NBC 2.4 3043
    22 BOB’S BURGERS-01/13 FOX 2.3 2939
    23 BACHELOR, THE-01/07 P ABC 2.3 2903
    24 OFFICE-01/10 NBC 2.2 2772
    25 Chicago Fire-01/09 NBC 2.2 2757

    If you claim to be a scholar, you should validate your data and not be satisfied with one week that “proves” your point.

  8. Skip Sauer permalink*
    January 23, 2013

    You state ‘Sports and “reality” programming drive live television.’ Ok then.

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