How is soccer profitable for the networks?
I understand the rating are improving but is the only revenue they can pull from the halftime commercials? I don't know a lot about the business but what am I missing?
Remember that for cable networks, their main revenue source does not come from commercials per say. It comes from charging cable and satellite companies money to carry their channel.
The more popular items you have, the more you can charge.
With sports being one of the last footholds for live TV, the content providers are charging a pretty heft fee for their sports channels and/or they are forcing the carriers to carry their smaller channels as a package deal.
This is why every major content provider player has started up their own sports network to compete with ESPN. And these networks need programming and anything that can draw ratings during the off prime time hours is a gold mine.
What the EPL does on an Saturday morning for NBCSN is really amazing. When the next EPL contract goes up for bid later this year/early next year, ESPN/FOX and NBC are all going to be tripping over each other trying to secure the rights.
Even MLS secured a deal with Fox/ESPN of a size no one really expected as it took advantage of this possible bubble we have in this unique time in our viewing habits.
NR - Im still not entirely sure I get this. Its seems like everyone (mercifully) is leaving money on the table by minimizing adversiting during programming. Heres how it works:
The Content provider (MLS, EPL) ----> gets paid by the Networks (ESPN, FOX) ----> who gets paid by the Cable Company (Comcast, Dish) ----> who gets paid for the subscriber (me, you)
As soccer becomes more popular, content providers charge much more money to the networks to carry their games. They can increase by hundreds of millions of dollars per cycle. However, the increases in carriage fees paid by Cable companies to the Networks never increase by the same amount. Barring ESPN (who make more than the next 20 networks combined), very few networks are able to charge more than a $1 per household.
It gets even more tenuous when cable companies try to pass on the costs to the subscribers. Cable companies suffer from the worst customer experiece metrics of any major industry in the US and will be hard pressed to keep raising prices to make up the difference. Especially now that the web is an alternative viewing screen.
The only way to break this cycle of passing on the costs is for someone in the value chain to identify on another revenue stream to offset the rising costs. Thats why advertising is so important for networks - it helps fill the gap of created by astronomical content acquistion $$ without having to pass on all of the costs downstream. But if the networks dont earn enough money from advertising, during soccer games, they will be limited in how much they can eventually afford to pay for the content.
Heres my concern: Right now we are in a period of soccer euphoria where Networks, Cable companies and Content providers (EPL, MLS, FIFA) are falling over themselves due to the new windfall being created by this sudden infatuation with the sport across 100M US households. My fear is in that price pressure in the value chain due to rising content costs will eventually cause the industry to "commercialize" the game :X :X . The same way we did with the NFL and NBA.
I dont believe that FIFA and UEFA fully understand how much more money they can make in the US by lengthening the game and creating artifical pauses for advertisers. Its part of our culture here, why wouldnt they tag along for the ride? I really dont want to see mandatory water breaks, injury timeouts, etc. where advertisements are shown. But I can see it happening.
So yes, moving billboards are a nice, cute revenue stream for the industry, but I dont believe it will be enough to sustain the current model.
Thoughts?