Is ESPN worth what we are forced to pay?

Posted on August 29, 2013 by Chris Dorr

Recently The New York Times revealed how much the typical cable operator (TWC or Comcast) pays per month for ESPN.  For each subscriber the operator pays $5.54 for ESPN and .70 for ESPN 2-a grand total of $6.24 per month.  This adds up to a lot of money that ESPN takes in every month from the operators.

Of course, we pay for this (with a small markup from our cable operator no doubt) as part of our basic cable bill each month.  Let’s assume that we pay at least $6.50 per month for the privilege of watching ESPN (and ESPN 2).  We pay, of course, whether we watch it or not. This is done without our consent-because if we want basic cable-we must take ESPN (and ESPN 2).

We are also forced to watch ads when we watch ESPN. It is not enough to take our money without our consent.  We have to give some of the time we paid for back to advertisers so they may hawk their wares with commercials as well as sponsorship opportunities within the shows themselves.

Think of this example broadly as the “3 strikes” of cable television.  They are,

1. The fee I pay is hidden-because the price for ESPN is never revealed to me on my cable bill or contract.

2. I am forced to pay-I have never been asked if I want ESPN-I must take it.

3. Advertisers take time from my viewing (that I have paid for).

I understand that networks have to make money in order to license and create their programming.  But I am in favor of a clear consumer proposition.

Here are two propositions that I like.

1. If you want to give me programming for free then I will watch advertising.  This makes sense because I am giving (or lending) my attention to your advertisers (who in turn are paying you for my attention) in exchange for your programming.

2. If you want me to pay for programming I am happy to do so if-the price is right and I  get to decide whether or not to buy it. This makes sense because I am exchanging my money for your programming and it is a transaction transparent to you and me.

So either I give you my attention, which you monetize thru an advertiser or I give you my money, which means you monetize me directly.  Simple, right?

This does not seem too much to ask. Surely this is Customer Service 101.

Unfortunately over time these two very clear propositions have become mixed in with each other and also become hidden, which creates a bad situation for consumers but a very profitable one for media companies.

ESPN is just one example of how today’s media world is too muddled for its own good and shows how a media company can extract maximum dollars from its customer. The questions remains though, does it provide maximum value to its customer?

This cobbled together cable delivery system that includes cable networks and broadcast networks does not understand that its end user is the person who pays the bills.

That person is not the cable operator.  It is us- those millions who watch and pay for the content and are given very little choice about what we watch, how we watch and if or how we pay.

Let us look at the latest dispute between CBS and Time Warner Cable.  Allegedly CBS wants to increase its subscriber fee from .66 to $2 per month. So we have a company that is granted free spectrum by the US taxpayers that provides us with ads on all of its programs (and which means we grant them our attention in exchange for free viewing) and wants to charge us $24 per year to watch their programming.

Why should I pay more for a network that used to be completely free? Are they providing me with special programming that is better than what they had before?  Are they reducing the number of ads they run because I pay more upfront? Are they providing additional value to me? The answer is no.

As a TWC subscriber I have not been able to watch CBS for the past three weeks.

Funny thing is, I have not missed it.

Perhaps because I am spending a lot more time on Netflix.  You know, that service that tells me how much they cost, ($7.99 per month), that creates great original programming and whose entire content library is available to me any time I want, on any device I want-with no ads!

I think they call that providing maximum value to your customer.

CBS and ESPN ought to take note.

About Chris Dorr

I consult with companies on digital media strategy and business development. Clients include Samsung, MTV Networks, Tribeca Film Festival, Shaw Media and Canadian Film Center. I created the Future of Film blog for Tribeca. I have worked in the movie business for Disney Studios, Universal Pictures, Scott Free and in the digital media business for Intertainer, Sony and Nokia. Contact me at [email protected] or follow me at @chrisdorr
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  • Caldecot Chubb

    I have been trying to reconstruct in my mind the arguments against unbundling. Who’s benefitting from this business practice, where I’m spending a hundred dollars a year or so for channels that I almost never watch? Not me. And my basic Cox cable bill is running $1,200/yr (without premium channels). TimeWarner (with premium) is closer to $2,500. Umm… for how much longer?

    • chrisdorr

      Hi Cotty,
      Thanks for your comment. It benefits the cable companies, the cable networks, the broadcast networks and the sports leagues, but not consumers. I predict that bundles will continue until cable operators start to lose a million subscribers a quarter. When that happens, the cable operators will start to freak out, because the stock market will freak out. How soon will that happen? Stay tuned!

      • Caldecot Chubb

        I guess the argument was that without a lot of people paying for stuff they don’t want, people would have to pay a lot more for the stuff they do want. So there was supposedly a public good to it. Except that I’ll happily pay more for the stuff I do want with the money I’m saving not paying for the stuff I don’t. And I’d like to be in charge of that decision, not the people who are getting rich charging for making it for me.

        • chrisdorr

          Well put!

  • Joel Valle

    I’m personally rooting for Netflix and crossing my fingers for a Steven Spielberg/Netflix collaboration soon, as he recently praised the company in his “industry implosion speech”. The only thing I really want to watch on cable is Game of Thrones and The walking dead; in which the former I buy the episodes on my PS3 the day after airing. As of Game of Thrones I have to rely on friends and family and well, it’s the most pirated series for a reason since HBO does not make it easy to support it.

    • chrisdorr

      Thanks Joel for your comment. It will be fascinating to see who Netflix works with next.

  • Chris Horton

    I pay Time Warner Cable $169 / month for Internet (“turbo” speed, which, when I just tested it at home, has a circa 2003 download speed 12.96 MBPS), Cable TV, HD, HBO, DVR. I don’t even get IFC Channel, Nat Geo, or H2 in my package. I mostly watch ESPN (for live sports) and HBO, and mostly through my Apple TV so as to avoid the head-slapping stress of the TWC Interface/Remote. (I also watch AMC, but likely not for long given BB and MM ending). ONE HUNDRED AND SIXTY NINE A MONTH. WTF!

    • chrisdorr

      Chris, thanks for your comment. You’ve laid out why the bundle has gotten too expensive and cumbersome for its own good.

  • ivalscifi

    I don’t find your logic about free vs pay very compelling. You can get free television via an antenna. You choose to get cable and so you do have to pay - essentially for the infrastucture that gives you good images and a lot of viewing choice.

    Where the argument is compelling is about unbundling. And I agree that this TimeWarner/CBS dispute is a stalking horse for sports rights. And really, what’s being priced out is passion. While only 20% to 30% of the audience cares about sports, they’re highly passionate. So, they are willing to spend for cable to get a lot of sports. So, from TimeWarners perspective, ESPN et al is a required deliverable for their business. CBS and its channels, on the other hand, is enjoyed by probably 70% to 80% of the audience. But, that audience is not passionate.

    Bottomline, the pricing structure is opaque and way out of wack.

    Additionally, it’s interesting to think. If cable was ala carte, would we see the diversity of channels that we have now? I don’t think so. Many channels would disappear.

    • chrisdorr

      Ian, thanks for your thoughts. I will try to make my next argument more compelling. You are right that one chooses to “get cable” but one is forced to pay a lot for it. I think you should be able to get basic cable for some small fee that pays for the overhead of its operation and then choose to get what content feeds (also known as channels) you want and pay accordingly. For some their bills might go up-for many others their bills would go down-but at least you get to choose what you want.

      The danger that this will cause a lack of diversity is I think a red herring. What this says is that it is OK to for some people to overpay (i.e the people who just want a few channels) so that others are essentially subsidized. I think that is wrong-which is what the giant sports subsidy of cable proves out. Diversity will flourish-just in different forms-witness the number of foreign TV shows that are available on Netflix that you can not get on any TV channels in the US.