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Posts Tagged ‘Sports’

Today’s exercise in everyday economics: Brian Stelter and Amy Chozick making the case that cable and satellite TV subscribers are paying a “sports tax”  (ht: Jennifer R.). Writing in the New York Times, they say:

Although “sports” never shows up as a line item on a cable or satellite bill, American television subscribers pay, on average, about $100 a year for sports programming — no matter how many games they watch. …

Publicly expressing the private sentiments of others, Greg Maffei, the chief executive of Liberty Media, recently called the monthly cost of the media empire ESPN a “tax on every American household.”

Patrick Flynn personifies the consumer challenge. He and his wife, who pay Comcast $170 a month for television, Internet and a home phone in Beaverton, Ore., are keenly aware that part of their bill benefits the sports leagues that charge networks ever-increasing amounts for the TV rights to games. Save for one regional sports channel, he said, none of them are worth it. …

But there are also millions of viewers like Russell Tibbits, of Dallas, who says, “If you eliminate sports channels from cable packages, I literally would not own a TV.”

Sports channels apparently make up a sizeable chunk of subscription costs. The authors report, for example, that ESPN earns about $4.69 monthly for each subscriber, while the next closest channel is TNT at a mere $1.16.

Given the limited number of channel bundles that cable and satellite services typically provide, the relatively high cost of sports channels creates the possibility of significant cross-subsidies. The sports-agnostic end up covering some of the costs of the sports-obsessed.

Of course, the reverse can also be true. Russell Tibbits may watch only sports channels, but he’s helping pay for AMC, Lifetime, and TNT, too.

For that reason, both sports fans and non-fans may prefer more choice about which channels they pay for. This “a la carte” discussion has been around for years, but Stelter and Chozick highlight a new factor. Changing technology make it make it easier for subscribers to get around current subscription models:

Soon, though, there may be an Internet alternative — something that was heresy until recently. Distributors like Dish Network are talking to channel owners about creating virtual cable providers that would stream channels over the Internet instead of traditional cables. That would break up the bundle of channels that subscribers have grudgingly accepted for years and allow subscribers who don’t like sports to avoid paying for them.

“They’re aggressively looking for ways to offer a lower-cost package of channels without sports,” said the chief executive of one such channel owner, who insisted on anonymity because the talks were confidential. “There may be a market in America, whether it’s 10 or 20 million people, that would be very happy to have 50 or 60 channels but not ESPN.”

By streaming the channels online, old distributors like Dish or new ones like Google could do an end run around the contractual commitments and market dynamics that effectively force them to carry sports channels now.

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Updates on some previous posts:


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Thus far, the top three stories of the World Cup are (3) Germany looks strong, (2) the U.S. got lucky, and (1) the vuvuzela is remarkably annoying.

For those who haven’t tuned in yet, the vuvuzela is a meter-long plastic horn whose name translates roughly as “making a vuvu noise.” And make a noise it does. When thousands of fans start blowing, you’d think a swarm of bees was taking over the soccer stadium … and your living room. Highly annoying.

And that’s not all. According to Wikipedia, the vuvuzelas raise other concerns:

They have been associated with permanent noise-induced hearing loss, cited as a possible safety risk when spectators can’t hear evacuation announcements, and potentially spread colds and flu viruses on a greater scale than coughing or shouting.

In short, the vuvuzela creates a host of externalities. So it’s not surprising that FIFA is under growing pressure to ban them.

I’ve been unable to come up with a market-based approach for dealing with the vuvuzela — there won’t ever be a Pigou club to limit the vuvu noise — and I would personally benefit from such a ban. So I’m all for it.

It is worth pondering, however, whether there are less drastic actions that might address some of the vuvuzela nuisance. Here’s one idea: ESPN and ABC should figure out a way to cancel out most of the vuvuzela noise. I still want to hear the cheers of the crowd and the screams of players who pretend to be hurt, but those are on different frequencies than the dreaded vuvu noise.

I don’t know how technically challenging that would be, but the marketplace is already providing similar solutions for consumers. According to Pocket Lint, you can change the sound settings on your TV, purchase an anti-vuvuzela sound filter, or even build your own filter at home.

Or you can go really low tech and use your mute button.

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Worldly wisdom teaches that it is better for the reputation to fail conventionally than to succeed unconventionally. John Maynard Keynes

Keynes’ insight has a natural corollary, which Bill Belichick, coach of the New England Patriots, learned painfully on Sunday: to fail unconventionally is really, really bad for your reputation.

As described by Steve Levitt over at the Freakonomics blog, Belichick “made a decision in the final minutes that led his team the New England Patriots to defeat. It will likely go down as one of the most criticized decisions any coach has ever made. With his team leading by six points and just over two minutes left in the game, he elected to go for it on fourth down on his own side of the field. His offense failed to get the first down, and the Indianapolis Colts promptly drove for a touchdown.”

As Steve notes, the interesting thing about this decision is that (a) Belichick has endured blistering criticism, but (b) he may well have made the right decision. According to calculations by multiple analysts (e.g., here and here), Belichick’s maximized the chance that the Patriots would win. He just got unlucky.

Belichick must have known that he was risking the wrath of Monday morning quarterbacks if the play didn’t work out. But he chose to play the odds despite that risk. That’s a great attitude. Keynes would be proud.

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