On Pac-12 Networks Carriage (Or, Enough With The Whining About DirecTV)

Pac-12_networks

So, the Pac-12 Network launched last night, and while most people have had a "hey, that's pretty neat!" attitude, there's a not insignificant number of people who have a "this sucks because DirecTV/Dish Network/my obscure cable company doesn't have it!!!"

On some level, I understand. It's not fun to be left out of what seems to be a big party because you don't know one of the cool kids. I have DirecTV, so I, too, was on the outside looking in last night. But can we just sort of pump the brakes™ on the moral outrage for a minute?

Let's start with a simple question, one that backtracks a little bit before coming back around to the Pac-12 Network: Where does the $3 billion the Pac-12 will be receiving over the next 10 years come from?

Your first answer probably is, "ESPN and Fox, silly." Technically, that's correct. But that's only part of the answer. The real answer will help you understand why DirecTV/Dish Network haven't yet met the Pac-12's asking price and, to a lesser extent, show you why this "a la carte" thing so many people seem to be clamoring for isn't what you really want, even though you think it is.

The business of television isn't terribly complicated; a network sells its content to providers for a negotiated per-subscriber fee, provider gives you the network's content on a specific subscription level. Of course that's a bit of an oversimplification, but it's really not much more complex than that. So, when ESPN or Fox or anyone else signs a contract with a sports league or conference, it's based off the expected revenue that comes primarily from anticipated subscriber fees (with a much smaller assist from advertising revenue).

That $3 billion Pac-12 schools will be divvying up for the next 10 years? It doesn't come from ESPN and Fox -- it comes through them. Where it really comes from is you and me and -- this is the key, really -- everyone else who subscribes to a television provider.

Think of it like this. You're on a cross-country road trip. You drive through Yellowstone National Park for the first (and probably only) time in your life. It's beautiful, right? But outdoors aren't really your thing, so once is enough for you. Now, that park exists because the federal government uses tax dollars to fund it -- your tax dollars, whether you've visited the park zero, one, 10 or 1,000 times. Fair? Probably not, but this is how our national parks work. You can do this for any number of governmental programs, even public education, the cost of which is shared amongst everyone, whether you're the double-income-no-kids couple or the Duggars.

The same thing is happening on cable/satellite television. ESPN typically charges $4.69 per subscriber for its flagship channel alone -- the next closest channel is TNT at $1.16. ESPN and ESPN2 appear on just about every basic cable/satellite tier there is, meaning the grandma who could give a crap about sports but loves to watch "Real Housewives" on Bravo has to pay for all those games she doesn't watch just so she can watch a bunch of rich people stab each other in the back since Bravo and ESPN are part of the same package.

Bernstein Research’s cable and satellite expert, Craig Moffett ... [pointed] out that ESPN and ESPN2 alone account for almost 20 percent of the wholesale cost of the average pay-TV subscription -- but account for just under 2.5 percent of total viewership.

(Via)

The $3 billion doesn't just materialize out of thin air -- grandma is being "taxed" to subsidize all of ESPN's broadcast partners, including the Pac-12 and WSU.

That is the essence of Pac-12 Enterprises' negotiations with DirecTV, Dish Network, and other cable providers. Which tier will the channel(s) be carried on, since that drives the number of subscribers, and how much will those providers pay per subscriber? The Pac-12 has a tier and figure in mind ... but so does DirecTV. And we can infer from the lack of agreement that the two were nowhere close to each other at the start of negotiations.

The thing to keep in mind, though, is that the satellite providers are notoriously stingy and can be difficult to negotiate with. Deals get done, but they often get done either at the last minute or even after content has been pulled and sites like this are launched. Because of that, I fully expect a deal with DirecTV to get done, but I don't expect it to happen until either right before the first games, or even until the first weekend of games have been missed. There's simply too much good football on the network for DirecTV to opt not to carry it, thanks to the Pac-12 reserving some excellent matchups. And with one of DirecTV's biggest competitors, Comcast, already carrying the networks, DirecTV eventually will have to come to some agreement unless they want to lose people like me. I imagine they don't.

Consequently, bitching about DirecTV not yet having Pac-12 Networks is kinda silly. I mean, feel free to bitch directly at DirecTV all you want -- the more they feel like a huge number of their subscribers want it, the more the Pac-12's position is going to be supported, which is going to mean more money for WSU under the model we just spent 800 words talking about. But getting on CougCenter (or your other favorite location) and whining about "geez, the Pac-12 Networks are worthless because DirecTV/Dish Network/obscure cable provider doesn't have it" isn't just pointless -- it actually actively misses the point.

Same goes for those of you who want a la carte services, such as Internet-only subscriptions. If the Pac-12 offers that, they lose leverage with the providers and lose the opportunity to bilk grandma for all she's worth. The TV everywhere model is supposed to add leverage for the Pac-12 -- as in, it's a bonus that subscribers want to have. But as soon as you move to an a la carte model, you might as well simply go straight to pay-per-view, because that's the only way you're going to make up for the lost revenue from grandma.

So, for now, just chill out and wait -- or, at least, direct your frustration in the proper direction with an understanding of how this all works. As long as you're not missing any games (I mean, really, are you super broken up that you're not watching Oregon/Arizona from 2009 right now?), be glad that Pac-12 Enterprises are holding out for the best deal. That means more money for WSU in the long run, and that's what we care about most, right?

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