If you’re reading this, you’re likely a fan of the Washington Nationals, so allow me to ask you a question. How much would you pay to watch the Nationals on TV? Sure, technically you already indirectly pay to watch the Nats on TV through your cable bill, but I’m posing this hypothetical as if cable TV didn’t exist. If it was the only way to watch the Nats on TV, how much would you pay for a Nats.TV internet streaming package?
$20 per season? $100? $200?
I ask this question because that’s the direction we’re headed. The cable industry is dying. Slowly, to be sure, but it’s dying. The Washington Post had an interesting article this morning about Disney, the owner of ESPN, and their looming financial trouble due to cord cutting. According to the article, ESPN has lost seven million subscribers over two years, which is a big considering how much money ESPN has been paying sports leagues to televise their games (ESPN is paying over $1 billion per season to both the NBA and the NFL).
What’s happening is a shift in consumer appetites. Viewers are opting out of cable in its entirety and instead relying on cheaper and more flexible providers of entertainment, including Netflix, Hulu, and Amazon. As noted in the article, this gives sports networks like ESPN a tough dilemma. Do they jump into the growing internet streaming marketplace? Offering an ESPN streaming service might generate short-term profits, and offset the losses from lost cable subscribers, but it only increases the consumer’s incentive to cancel their cable service. I, for one, still pay for a cable subscription. Once live sports are available via streaming, I’m probably opting out too. ESPN built their empire on cable subscription fees. Once cable dies, ESPN as we know it dies too. ESPN’s dilemma is not too dissimilar from the record industry last decade: do they jump into digital music sales, even if it means people will buy more individual songs and fewer albums? History tells us the record industry saved itself from collapsing in its entirety, but sales will probably never go back to it’s peak, when consumers were forced to buy CDs if they wanted to listen to music.
ESPN has just over 90 million subscribers who pay around $7 a month for ESPN. Of course, not all of ESPN’s subscribers are sports fans. The Washington Post article noted, using basic math, if one third of current ESPN subscribers—30 million—paid $21 a month, ESPN could survive in its current state. Would you pay $21 a month to watch Monday Night Football, the MLB Wild Card Game, and the NBA Playoffs? Somewhere, an ESPN executive is praying 30 million people would answer yes to that question.
Put simply, we’re witnessing the collapse of a broken system. Cable subscribers are forced to pay for networks they don’t watch. MASN is no different than ESPN. Washington/Baltimore area cable subscribers are forced to pay for MASN even if they don’t care about the Nationals or the Orioles. The majority of non-baseball fans are actually subsidizing those of us who do watch baseball on TV.
Which leads me back to the original question. Once the cable industry implodes, whether that’s five years or 10 years from now, the cost of televising baseball on TV will likely be paid by the actual people who watch it—you and me. So how much money would you pay to watch the Nats? ESPN is hoping one third of their subscriber base like sports enough to pay three times as much. The percentage of actual baseball fans in DC is much smaller. Let’s say 10% of the area actually cares enough about baseball to pay for a MASN.TV streaming service. That audience would have to pay 10 times as much as MASN currently charges cable companies to provide the channel. Any way you slice it, a cable streaming universe probably means less money for baseball teams. Bryce Harper better sign that $500 million contract before it’s too late.