NFL’s Game of Chicken

The strategic game between the NFL and “Big Cable” was the feature story by Barry Horn on the front page of Sunday’s Dallas Morning News sports section. He describes a classic “game of chicken”:

The NFL hoped the promise of a Packers-Cowboys extravaganza in its second season of broadcasting games would ignite a run of viewers demanding their cable carriers offer the network. But a funny thing has happened to the most irresistible force in the sports universe. The NFL has run into an immovable object: big cable carriers.

Phil Miller’s post in 2005 alerted Sports Economist readers to the blooming idea of an NFL Network. In a September post Skip provided an economic rationale for these kinds of vertical integration moves by sports leagues, observing that technological changes have made intermediaries (somewhat) less valuable than in bygone days.

Even with this rationale, the NFL still had to deal with the cable providers and the “chicken and egg” problem for a startup channel — they needed viewers to get on main cable tier but it’s hard to attract viewers quickly if stuck on a specialized “sports tier.” As the Horn article notes, satellite services and “small cable” went for the new network, but “Big Cable” did not (these difference in the risk taking and innovation is an interesting economic story in itself). According to Big Cable, viewers didn’t care about the absence of the network. Only about 1/3 of households currently receive the NFL Network.

The NFL countered by putting better matchups on. As Dallas owner Jerry Jones states:

“it’s no accident that there are two Dallas Cowboys appearances in the network’s eight games” … “We anticipate broadening the number of games on NFL Network,” “The cable companies are screwing with our fans, if you will. And we’ve got to stop it.”

“The NFL knew it had something special when its scheduling formula spit out a Packers-Cowboys matchup this season. While the league could never have anticipated they would rank as the top teams in the NFC, it did know the value of tradition and could document each team’s enormous drawing power on national television.” (Horn)

Then, the NFL got the huge unanticipated boost of both teams holding 10-1 records coming into the game. That puts the spotlight back on Big Cable. The impact is softened somewhat by some local cable franchises and/or local cable channels working out one-time deals to carry the game as has happened in and around Dallas.

The article alludes to possible intervention over the long run by the FCC and state legislators. I can only hope that doesn’t happen, other than prompting them to reduce whatever barriers to competitive entry exist. There is a marketplace out there, and it is working itself out albeit not in some kind of instantaneous, nirvana kind of way. By the way, I’ll be enjoying the game on my DirectTV connection.

Photo of author

Author: Brian Goff

Published on:

Published in: