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The cost of TV sports grows as pay-TV bundle breaks

May 10, 2022
Affiliate revenue versus subscribers for select sports networks
Data: S&P Global; Chart: Simran Parwani/Axios

Amid cord-cutting and the secular decline of linear TV viewership, sports networks are charging distributors more to carry their networks, data from S&P Kagan shows.

Why it matters: The ongoing push-pull between rising costs for rights fees and the decline in pay-TV subscribers may signal looming carriage fights between networks and distributors.

  • Distributors have been trying to fight back against rising affiliate fees that ultimately get passed down to consumers. This has created a particular pain point for Regional Sports Networks.
  • For example, Kagan found that Comcast subscribers were hit with a $19 "regional sports fee." Other operators like Verizon, Cox and DirecTV charge an extra $7-$10 each month.
  • Last year, Dish Network severed all ties to the RSN business, removing RSNs from Sinclair, AT&T and the New England Sports Network.

By the numbers: The average license per subscriber each month that RSNs charge distributors is expected to rise from $3.67 in 2021 to more than $5 by 2025. At the same time, the RSN subscriber base is expected to drop from 123 million in 2021 to under 90 million in that same timeframe.

  • Those licensing fees are rising among the national networks, too. ESPN, the most expensive channel among basic cable networks, charged more than $8/month per subscriber and has grown an average of 5.6% each year.
  • The next most-expensive sports-related network is TNT with a monthly affiliate fee of $2.78. NFL Network, at $1.91, is more expensive than USA Network, which costs distributors $1.71 per subscriber.

Yes, but: Live sports, especially the NFL, are the only programs on linear TV that still show any growth.

  • Most sports have regained all their lost audience from the COVID-affected 2020 seasons, though some are still down from pre-pandemic days.
  • The ones that are up compared to 2019 and earlier are getting some help from Nielsen's inclusion of out-of-home viewing, a practice it only began in 2020.

The big picture: Rights fees are only getting more expensive — and more complicated, with the consumer shift toward streaming. In fact, Tuesday's earnings release from Fox says that sports programming hurt profits.

  • Fees have risen faster than inflation, with the major leagues bringing in more than $15 billion each year under their current contracts.
  • The NFL pulls in $5.6 billion each year by itself. When the league's new deals kick in next year, that number will surpass $10 billion. That's not even including its upcoming Sunday Ticket renewal.
  • Most recent deals have included streaming distribution as a key pillar: ESPN+ and HBO Max were included in the NHL's current rights deal, while the NFL will put "Thursday Night Football" on Amazon Prime Video exclusively starting this fall. HBO Max will also play a major role in the U.S. Men's Soccer team's new rights deal.

What's next: Sinclair is launching a regional sports-themed streaming service called Bally Sports+ this quarter that will cost $19.99 a month.

Disclosure: Cox and Comcast are investors in Axios.

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