Sports-cost increases are outpacing other programming charges for distributors, and that gap is expected to get even wider in the next five years, according to SNL Kagan.
Kagan estimates that overall programming costs increased at a 2.8% compound annual growth rate (CAGR) over the past 15 years, from 27 cents in 2000 to about 39 cents in 2014. At the same time, sports costs have risen by about 5.1% between 2000 and 2014, but that is expected to accelerate to 7.3% annually between 2014 and 2018.
Sports costs already well outpace other programming segments, according to Kagan, averaging about $1.03 per subscriber per month compared to 81 cents for film-oriented channels, 39 cents for general/variety networks and 29 cents for family/kids’ channels.
Skyrocketing sports rights fees are the main culprit for the disparity, according to Kagan. In the past several years, rights for games have risen exponentially, and charges for the channels that carry them have increased accordingly. Distributors have tried to offset some of those costs by implementing sports surcharges — DirecTV was the first in 2012, adding $3 per month to customers’ bills in select markets. Since then several other distributors have followed suit. Verizon Communications, Cablevision Systems (which has a sports and broadcast-TV surcharge), Mediacom Communications, WideOpenWest, Time Warner Cable, Comcast, Cable One and RCN all now have implemented the additional sports-related fees, according to Kagan.
Charter Communications recently increased its broadcast- TV surcharge 25 cents to $5.25 per month, but does not have a sports surcharge.
TWC’s decision to add a $2.75 monthly sports surcharge to its existing $2.75-per-month broadcast-TV charge was not without irony. Kagan noted that TWC is involved in two of the priciest RSNs in the country — Los Angeles’s SportsNet LA and TWC SportsNet — which cost distributors an average of $4.90 and $3.74 per subscriber, per month.
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