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Friday, March 30, 2012

Gedankenexperiment: Worst Case TV Scenarios

Returning to my piece from the other day on the implications of viewership erosion with respect to the long-term viability of the Dodgers' TV payouts, I got into a protracted discussion with Jon Weisman on a private Facebook baseball group. He complained that my arguments treat all subscribers as though they were not sports fans. Presumably, sports fans will be more willing to pay for cable packages carrying their favorite team(s); that is, the overall Fox/ESPN strategy is sound, and the cable carriers themselves will have no choice but to hand over an increasing fraction of their revenues to the one thing proven to keep viewer interest.

All right, then. Let us look at a worst-case scenario:

  1. First, assume cable has become completely unbundled. That is, currently, to some degree the costs of delivering Dodgers (or Angels) content is borne upon people who never view those games. The most recent best-case scenario I was able to come up with was 111,000 average viewers in 2009, a number that might be low; roughly double it and round down to the nearest hundred thousand, and admit 200,000.
  2. Convert the $3 billion figure to an annual, non-increasing figure: $150M/year.
  3. Divide the second figure by the first, on the basis that no longer will anyone get a "free ride" from uninterested viewers. That yields $750/year.
I really don't care how much you like the Dodgers, that's a lot of revenue to expect to make. Some fraction of it could be recouped in advertising dollars, but it seems very rich to me.

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Comments:
I agree that the whole thing seems like a house of cards once you start to break it down, and it has sobering implications for all three Southern California baseball franchises. If Fox were to find itself in an untenable position fiscally somewhere down the road and had to file Chapter 11, the fallout could severely cripple the franchises.
 
Yeah, it really seems like the way to go is what the Yankees have done with YES: make it explicitly a for-pay option that you could take wherever you need to (even on the Internet if it came to it) with the idea that fans will pay some nominal amount to see the games. This will not, of course, work for all teams; the counterexample would be the collapse of the Royals self-owned network. They later ended up back in the arms of Fox.
 

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