Moffett says carriage fees for Disney’s ESPN and ESPN 2 alone account for 20 percent of the cost of a typical wholesale-priced cable subscription. ESPN collects, on average, $4.69 per subscriber, according to SNL Kagan.
And since revenue for a content rights owner represents cost to a distributor, those costs simply are passed along to customers.
Also, though the national networks like ESPN and regional sports channels account for about 50 percent of the cost of the average cable, satellite or telco TV service bill, Moffett argues, though representing about 20 percent of viewing hours consumed.
To be sure, sports enthusiasts might not mind paying. But lots of consumers watch live sports programming sparingly. Some don't watch at all. When overall prices are moderate, that isn't an issue. As monthly fees keep rising, prices will become an issue.
It isn't clear how far the cost run-up can continue before a growing number of consumers start voting with their wallets and disconnecting cable, satellite or telco video services, unless the current bundling practices change.
To be sure, few consumers have any idea about wholesale costs, nor should they. But the executives who run the video subscription business, and its programming suppliers, always have argued that consumers actually fare better when they "pay for channels they don't watch," compared to "buying only the channels they want."
The argument is not without merit. It is possible that consumers who watch perhaps a dozen channels or so would wind up paying as much, or more, for a la carte channels. Studies are relatively inconclusive, but it is possible that a move to full a la carte pricing might not save most end users money.
Nor is it clear how high prices must rise before there is a significant end user rebellion, rather than the modest abandonment we have seen so far.
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