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College Sports, Cord Cutting, and the Long Tail of TV Content

by David Tice , 14.12.2012

As The Wall Street Journal recently reported, college football leagues are taking a major gamble by setting up their own TV networks, leveraging the huge quantities of sports programming that they produce but cannot -- or choose not to -- sell to ESPN, NBC Sports Network, or any of the existing regional sports nets. This changes the business model of college athletics, which is receiving less and less public funding, and forces a difficult choice on TV content providers – whether to pay extra for what is essentially niche programming.

David Tice, Senior Vice President in Media at GfK, has been researching media technologies and usage for over 20 years and was quoted in the WSJ article. Here he offers further thoughts on sports programming, TV’s complicated economics, and the phenomenon called “cord cutting.”

So what are the issues at stake right now around college football TV rights?

The fear is that having to pay for carrying all of these new college networks will force the service providers – cable and satellite companies – to increase the price they have to charge subscribers. And that, in turn, could push more people to “cut the cord” – discontinue their paid TV services altogether. These sports networks might serve a very small part of the audience, but everyone would wind up paying the bill. And if service providers bundle them in a premium package, that will only limit viewership further. With Netflix and YouTube and other platforms offering alternatives to viewers, service providers are concerned about anything that might tip the scales against them.

These college networks typically do not show the best games; those go to ESPN and the other majors, right?

They are mostly outlets for sports that relatively few people want to watch, like volleyball or water polo. For the major sports, like football and basketball, conference networks typically get the very last pick in terms of games. The selling proposition is that, if you're a fan of one of these schools, whether it's USC or Michigan or Rutgers, you are able to watch all the teams from your university, and you won’t miss the “lesser” football games that the major networks don’t bother to carry.

And what do advertisers get?

Viewers of college football tend to be younger, better educated and more affluent – a very desirable audience. And because they are probably tuning in to these niche networks to watch their alma maters, you could also make the argument that they will be more involved in the content, more engaged. So you could say they are worth more per viewer than a national broadcast of a college football game might draw, where the share of fans of one of the two teams would be quite a small slice of the total audience.

What about the phenomenon of cord cutting – is that on the rise generally?

Cord-cutting has been on a slight upward trend over the last couple of years. It still represents a very small proportion of the population, but it registers incremental growth each year. Our research has shown that it's almost totally driven by economics, not by people finding alternative online ways to view TV or movies or other video. The big test will be after the economy turns around; then we'll really see if cord-cutting is here to stay.

A related trend is “cord shaving,” when people maintain their paid TV service but reduce it in some way – again, mostly to save money. They may switch from a tier that has more networks to one that has fewer, or get rid of a premium channel. We found that about 15 percent of current pay-TV homes had reduced their service in some way in 2011; but another 12 percent had increased their service, so the news isn’t all bad.

Is cord cutting mainly happening among younger people?

People 18 to 24 are more likely to be what we call “cord-nevers” – in households that never had pay-TV service. It will be interesting to see where those very youngest adults end up in the next five or ten years – if they become subscribers when they get married and have kids, or if they are really satisfied with what they can get online, for free or pay.

Is there an opportunity for these upstart networks to make inroads on mobile devices?

Definitely. I have the Pac 12 Network app on a tablet, and it’s very user friendly, with a lot of content. Accessing through a TV service provider’s viewing app would probably send you straight to the Pac 12 interface, anyway. So, for example, maybe the Pac 12 can hold onto some of these rights to make a mobile play, and in the process make itself more affordable to Comcast and others.

So what is the takeaway here?

As we see all over the media ecosystem, the symbiotic relationship between content owners and content providers is a delicate dance. Conference networks will create the most value for their owners by getting on basic viewing tiers; but if they are charging affiliates too much per subscriber, then they risk getting put on an extra-fee tier – or not getting on the system at all. And by holding back good games, the conference risks the value of the larger rights agreements they have with ESPN or others. It’s really a very complicated optimization of the so-called “long tail” of content – and it puts the conferences in the new position of assuming the risk of success, rather than passing it on to a media company.

David Tice is Senior Vice President in Media at GfK and the director of The Home Technology Monitor™. He can be reached at david.tice@gfk.com.