The Chicago Cubs don’t even have their new TV deal yet, but there’s already a carriage fight:
— Chicago Cubs (@Cubs) November 24, 2014
I’m partially kidding here, because, while CSN Chicago is part-owned by the Ricketts Family and does carry a portion of the Cubs’ games, it’s quite a bit bigger and broader than that, given the other sports involved. This is very likely just your standard carriage dispute going right up to the wire on an existing contract. You’ve seen ads like this before.
I’m only partially kidding, however, because this is the kind of issue that the Cubs will face if and when they have their own regional sports network (RSN). They will regularly have to fight to get their channel carried, at the fee-level they’d like to charge cable providers, on whatever basic level of service will reach the most fans. Historically, the way this model for broadcast rights has worked is (with advertising revenue sprinkled in): team charges RSN huge guaranteed fees for their broadcast rights, RSN charges cable providers huge carriages fees to put their channel on their lineup, cable provider passes on at least a portion of those fees to the end consumer in the form of an increased monthly bill.
You can see where the choke point for fighting begins: as more and more consumers rebel at the idea of huge cable bills (full disclosure: I’m a cord-cutter, myself), fewer and fewer cable providers are willing to pay the kind of huge carriage fees that are necessary to make the enterprise profitable for the RSN.
The Dodgers have been the most visible of these fights in recent years, with most Dodgers fans in LA unable to watch games SportsNet LA because the network could net get carriage agreements in place for the season thanks to the steep fees they were hoping to charge. You wonder, then, whether Time Warner – who partnered with the Dodgers on the RSN – regrets that enormous rights deal they signed.
Most importantly, the existence of fights like CSN/Dish one, and of the carriage issues in LA, represent headwinds to the Cubs getting their huge TV deal in the first place* (because it could make potential RSN partners a little more nervous about guaranteeing huge dollars that they aren’t certain they can recoup). At a minimum, it’s a bit of negotiating leverage in those talks, and may force the Cubs to take even more of an equity stake in the RSN, rather than merely getting a huge guaranteed payout. (Then again, because equity distributions from RSNs are not subject to revenue sharing, perhaps that’s the structure the Cubs will want anyway. But I digress.)
As I often say, this is complicated stuff, and it’s easy to see why the work to put together the right TV partnership in the near and long-term has taken so long. I think talking about this issue as a “sports rights bubble” is a bit too simplistic, because there’s still a ton of money to be made. It’s just that the money is shifting as the technology changes and the habits of end users change. Hopefully, these things are being considered carefully, and accurately projected far into the future, as the Cubs negotiate on the TV deal that will dictate, in large part, the financial future of the organization.
*(Poor ratings for Cubs games in recent years can’t have helped, either, but that’s an entirely separate issue.)