Astros Sports Network in Trouble

Phil Plantier

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I thought these regional sports networks were licenses to print money, but not in Houston:
 
http://www.fangraphs.com/blogs/astros-regional-sports-network-awash-in-losses-and-lawsuits/
 
It seems that the main problem is that non-Comcast carriers have balked at the fee:
 


There are several factors contributing to CSN Houston’s bleak financial situation, but biggest is the network’s inability to reach agreement on carriage fees with the non-Comcast cable and satellite operators in the viewing area. AT&T-Uverse, Time Warner Cable and DISH Network have, thus far, refused to pay the $3.40 per-subscriber-per-month fee that CSN Houston demanded to carry the network.
 
I have the same question asked in the article: is this a cautionary tale, or just peculiar to the Houston market? 
 

Average Reds

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In truth, it is both.  The specific dynamics are local.  The larger issue (of properly setting the carriage fees) is something all sports networks have to deal with.
 
The local aspect is based on the relative value of the Astros as a media commodity:  the cable operators have decided that Astros' baseball is not so critical to the community that they are a "must carry" and so they are pushing the network to lower their fee or allow them to list it as a premium channel.  The network wants this to be a basic cable channel while charging a premium price for the carriage fee.   And  all regional sports networks have to deal with this issue.
 
To give an example of what I  mean, when the YES Network was formed, their carriage fees were so high that more than a few cable systems refused to carry it as a non-premium channel.  After  a fairly protracted public war,  the network and cable systems finally reached an agreement and the network was  picked up.
 
I suspect that the Astros' network will lower the fees and the issue will go away quietly.
 

IdiotKicker

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$3.40 seems to be an awful lot for a regional network to charge.  ESPN, the biggest dog in cable TV, charges $5.54.  I don't know if other regional sports networks are up in that $3 range, but a quick google didn't turn anything up.  The vast majority of cable networks are in the $.50-.75 range per subscriber.
 

Bosoxen

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I wonder if part of this dynamic is a symptom of the proliferation of digital recording devices. I heard on the radio yesterday, coincidentally, that advertises simply aren't paying as much for their spots due to the fact that a certain percentage of their ads are now being skipped. This is probably not as big of an issue during live sporting events, but since baseball games constitute, at most, 10% of the networks' broadcasting, it's not a stretch to imagine that this may be part of what's driving the increase in what the they're charging the providers.
 

Average Reds

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Bosoxen said:
I wonder if part of this dynamic is a symptom of the proliferation of digital recording devices. I heard on the radio yesterday, coincidentally, that advertises simply aren't paying as much for their spots due to the fact that a certain percentage of their ads are now being skipped. This is probably not as big of an issue during live sporting events, but since baseball games constitute, at most, 10% of the networks' broadcasting, it's not a stretch to imagine that this may be part of what's driving the increase in what the they're charging the providers.
 
That's a general point about the value of television as a medium.
 
The issue in the Astros case is about the value of the content to the cable system, which is very different.   If the content carried on your network is seen as critical to viewers, you have pricing power when you set carriage fees.  The Astro's do not have that sort of value right now, and the cable systems are informing them of that fact.
 

timlinin8th

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Chuck Z said:
$3.40 seems to be an awful lot for a regional network to charge.  ESPN, the biggest dog in cable TV, charges $5.54.  I don't know if other regional sports networks are up in that $3 range, but a quick google didn't turn anything up.  The vast majority of cable networks are in the $.50-.75 range per subscriber.
"Sports" networks tend to have a higher cost than the average just because of the cost of the content (paying a team is far more expensive to broadcast than The Real Housewives of Who Gives A Shit). I found this quick blurb that says NESN charges $3.56 per sub (which granted is the highest, according to this slide):
http://xfinity.comcast.net/slideshow/sports-mostvaluablebrands/11/
Wiki says the average for a RSN sub fee is $2-3 per:
http://en.m.wikipedia.org/wiki/Regional_sports_network
 

Fred not Lynn

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I wonder if part of this dynamic is a symptom of the proliferation of digital recording devices. I heard on the radio yesterday, coincidentally, that advertises simply aren't paying as much for their spots due to the fact that a certain percentage of their ads are now being skipped. This is probably not as big of an issue during live sporting events, but since baseball games constitute, at most, 10% of the networks' broadcasting, it's not a stretch to imagine that this may be part of what's driving the increase in what the they're charging the providers.

I think the bigger point is that advertisers pay MORE for sports than they do non-sports programming because the live nature of the event precludes using a device to skip ads.
 

Dehere

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$3+ isn't out of line for the strongest RSNs, as already noted in this thread. It IS awfully aggressive for an RSN anchored by one of the worst teams in the league in what is not generally a baseball hotbed.
 
Cable and satellite operators are looking for opportunities to take a stand against rising sports costs. The Astros have basically gift-wrapped such an opportunity for them, not only by pricing a bad team aggressively but also, as noted in the article, by agreeing to a most favored nation clause that would make it painful for the team to simply lower their ask to reach deals with the holdouts.
 
Ad-skipping technology is pretty much the best thing to happen to sports networks in many years, maybe the best thing since the widespread adoption of cable. If DVR adoption were to enter into the Astros negotiations at all it would likely be to the team's advantage.
 

redsoxcentury

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I never understand these new upstart RSN's anchored by mediocre sports teams thinking they can just bully cable and satellite tv (and their customers) into paying ludicrous fees.  This hopefully is a lesson to these teams and (sports networks) down the road but have to think similar mistakes will continue to be made.  Certainly, they didn't learn from the difficulty of getting games to fans in Carolina (Bobcats), Louisiana (Hornets/Pelicans) and Portland (Trailblazers)
 

MuzzyField

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Comcast may have to let this failed channel go. It's a separate entity in the Comcrap empire, and with the TW Cable acquisition pending (that includes the Dodgers new channel most MVPD's aren't carrying) this may be a quid pro quo effort to eventually get the Dodgers on DirecTV and other MVPD's.