- Impasse reflects pay-TV industry bid to rein in costs
- YES Network remains unavailable to about 900,000 subscribers
Louis Scafidi has cheered for the New York Yankees since he was a boy in Brooklyn and Mickey Mantle wore pinstripes. A 52-year-old accountant in Clark, New Jersey, Scafidi brings a TV to work during tax season so he won’t miss a pitch.
Now Scafidi is caught in the middle of television’s changing landscape. In mid-November, Comcast Corp. dropped the YES Network, which airs most Yankees games, making the channel unavailable to about 900,000 subscribers including Scafidi. As spring training begins this week, the impasse between Comcast and the YES Network -- majority-owned by Rupert Murdoch’s 21st Century Fox Inc. –- isn’t close to being resolved, according to people close to both companies.
“To lose a network that I feel we’ve been paying for all along is just not right,” Scafidi said, adding he may switch to DirecTV if YES isn’t available by opening day.
In an age of cord-cutting, disputes between television networks and distributors are playing out with regularity across the country -- and not even sports networks are sacred anymore. Cable, phone and satellite companies are losing subscribers as Americans grow tired of higher monthly bills and opt for cheaper online alternatives and so-called skinny bundles with fewer channels. So pay-TV providers are trying to cut costs by taking a hard line with programmers like the YES Network on the fees they charge.
For their part, programmers want higher rates to cover the soaring price for rights to air live sporting events. They are also trying to protect a business model that’s based on all cable subscribers paying for sports networks, even customers who never watch them.
The result: blackouts of regional networks ranging from YES Network to SportsNet LA.
Underlying the disputes are changes in the way that Americans are watching television. Streaming services such as Netflix and Hulu are competing for the attention of viewers, especially young ones who may never have paid for cable. And more consumers, tired of paying for channels they don’t watch, are turning to smaller packages.
Verizon said about one-third of its new customers signed up for skinny bundles that leave out some networks that are normally part of traditional packages. About one-quarter of Comcast’s new video subscribers went for the reduced bundle.
As profits get squeezed, pay-TV companies are dropping channels or pressuring programmers to lower prices, and sports is no exception.
Last year, Verizon Communications Inc. left Walt Disney Co.’s ESPN out of the basic package of its new “Custom TV” service. ESPN filed a lawsuit, claiming Verizon had violated their programming deal. The suit is pending.
Los Angeles Dodgers games remain unavailable to a couple million local subscribers of AT&T Inc.’s DirecTV, Dish Network Corp., Verizon and Cox Communications. Those companies refuse to pay the rate that Time Warner Cable Inc. is charging to carry SportsNet LA, the regional sports network that airs Dodgers games.
As pay-TV distributors sell slimmer bundles of channels, regional sports networks may get left out, Dish Chairman Charlie Ergen said last year. While it would be hard to sell a TV package without ESPN, “that’s not the case with regional sports,” Ergen said. Dish’s Sling TV service offers more than 20 channels over the Internet, including ESPN, for about $20 a month. It doesn’t include regional sports networks.
“I don’t know that you can burden every single customer with a regional sports network when the vast majority of them don’t watch it and it’s very expensive,” Ergen said in an earnings call last year.
Fox Chief Executive Officer James Murdoch last week defended his company’s regional sports networks, saying many are the top-rated channels in their markets and that he was comfortable with how much Fox was charging to carry them.
Started in 2002 by the late Yankees owner, George Steinbrenner, the YES Network is the nation’s largest and most expensive regional sports network. It has 8.9 million subscribers and charges about $5 a month for each, according to SNL Kagan.
Comcast’s decision to drop the channel affects subscribers in New Jersey, Connecticut and Scranton, Pennsylvania. If Comcast doesn’t carry the channel again, YES Network could lose about 10 percent of its annual affiliate fees, or about $60 million a year, according to Geetha Ranganathan, an analyst at Bloomberg Intelligence.
Comcast says the channel isn’t worth the cost relative to its audience. More than 90 percent of customers watched less than a quarter of the 130 Yankees games the network aired last year, and when baseball wasn’t in season, viewership was even lower, Comcast says.
“The issue was the price/value proposition for the YES network given the customer viewership data we have, which did not justify the price that Fox was asking ,” Comcast spokesman John Demming said in a statement.
YES Network says its ratings increased during last year’s baseball season, and Comcast previously agreed to pay the same rate as other distributors.
“Comcast customers who want to watch Yankees games may want to look for another distributor,” YES Network Chief Executive Officer Tracy Dolgin said in a statement.
Sports blackouts have happened before in the New York area, notably in 2012 when Time Warner Cable refused to carry the MSG Network, preventing fans from watching Knicks, Rangers, Devils and Islanders games. The 48-day standoff ended after New York Governor Andrew Cuomo and Attorney General Eric Schneiderman got involved and helped resolve the dispute.
Both Comcast and Fox will likely feel more pressure to reach an agreement as the opening day of baseball season draws near, said Lee Berke, president of LHB Sports Entertainment Media, which helps teams create TV channels.
“The leverage here is the passion that fans have for these games,” Berke said. “That tends to get both parties pushing toward a solution sooner or later.”