Bubble bubble, toil and trouble (Business of hockey/sports article)

[GGG]

With Salaries linked to dollars the sports leagues will survive at least until stadiums and arenas fail. So the current model is sustainable for at least 50 years.

Franchise values may have peaked and owners who debt finance team purchases might get themselves into trouble but other rich people will swoop in to buy with cash at reduced cost.

So the model isn't really broken at all. The dollar values might change and escrow payments rise and caps fall but none of this affects the viability of these teams.

[Enoch Root]

I remember when Barry Shenkarow warned that NHL salaries would breach $1M and many didn't believe him.

The discussion - in this very same paper suggested that if that were true, only the biggest markets would survive and the league might only be able to support something like 12 to 16 teams. And Winnipeg most certainly wouldn't be one of them.

30 to 40 years later, payroll budgets are approaching $70M, the league has increased it's number of teams to 30, and Winnipeg is one of them!

I look forward to the day this conversation is being had yet again, because some team just hit $1B for player salaries.

[Enoch Root]

Originally Posted by Locke

Theres a lot of hope and faith in this post.

That solutions to problems 'have always emerged' is not the same as 'they always will emerge.'

Different solutions are viable at different stages of the lifecycle.

I'm not saying that you're wrong but people are expressing concern that its reached critical mass, is past its peak and is now becoming unsustainable, this hasnt ever happened before.

There might be a solution, heck, there probably is: contraction and deflation. But that also means that the industry itself will have to change and adapt.

These things have happened many times before

[Hockey Fan #751]

The biggest bubble is the regional TV contracts and cable TV contracts. A lot of these stations, particularly in the US, make their money off the backs of people who don't even want their channel. Cable subscribers are forced to take channels like Fox Sports (Regional) or the Yankees YES channel for anywhere from $3 to $5 per subscriber whether they want the channel or not. ESPN is $8 per subscriber.

As more people cut the cable cord, this cash cow is going to go away and that will create the largest market correction. It will probably also result in franchise values dropping which will cause a handful of owners to get out of the business.

I do think the NHL will be affected the least by this sort of thing because they're so gate driven. People in the more popular markets are still going to pay ridiculous prices to watch NHL hockey live and the less popular ones generally don't get a ton of money on regional deals anyway so they'll just continue on losing money (since the NHL doesn't seem to want to relocate these teams as long as someone's interested in owning the team in that market).

[Itse]

Current situation being unsustainable and new heights in the future are not mutually exclusive. But I do think there is going to be a bigger revolution in TV entertainment than people are realizing, and that might hurt sports.

On the other hand e-sports is a huge growing industry. Whether you count that as "new sport" or something that will eat away the popularity of traditional sports is I guess a matter of taste.

[Enoch Root]

Originally Posted by Hockey Fan #751

The biggest bubble is the regional TV contracts and cable TV contracts. A lot of these stations, particularly in the US, make their money off the backs of people who don't even want their channel. Cable subscribers are forced to take channels like Fox Sports (Regional) or the Yankees YES channel for anywhere from $3 to $5 per subscriber whether they want the channel or not. ESPN is $8 per subscriber.

As more people cut the cable cord, this cash cow is going to go away and that will create the largest market correction. It will probably also result in franchise values dropping which will cause a handful of owners to get out of the business.

I do think the NHL will be affected the least by this sort of thing because they're so gate driven. People in the more popular markets are still going to pay ridiculous prices to watch NHL hockey live and the less popular ones generally don't get a ton of money on regional deals anyway so they'll just continue on losing money (since the NHL doesn't seem to want to relocate these teams as long as someone's interested in owning the team in that market).

The death of cable seems inevitable at this point.

But that might simply mean that people have to buy packages like Game Centre directly.

People want sports, so demand isn't likely going anywhere. The question is: how will it be supplied? And since it's a multi-billion dollar industry, I would imagine that it will continue to find ways to evolve.

[dissentowner]

Originally Posted by calgaryblood

Anze Kopitar might not be the best player on his team? He clearly is, and aside from Doughty being close, it isn't close.

You are right, it isn't even close but you have it backwards. In no universe is Kopitar a better or more valuable player than Drew Doughty.

[Hockey Fan #751]

Originally Posted by Enoch Root

The death of cable seems inevitable at this point.

But that might simply mean that people have to buy packages like Game Centre directly.

People want sports, so demand isn't likely going anywhere. The question is: how will it be supplied? And since it's a multi-billion dollar industry, I would imagine that it will continue to find ways to evolve.

Agreed. The biggest correction is going to be with stations like ESPN which currently make $8 for every single cable subscriber out there. That's somewhere around 90 million.

If and when cable goes away, how is ESPN going to recoup that $700 million annually? The answer is that they're not but they won't be able to pay as much money for products like Monday Night Football. ESPN will eventually be an online subscription service, probably something like $10 per month.

[Enoch Root]

and if that happens, another supplier will take over MNF

[Street Pharmacist]

Originally Posted by Enoch Root

and if that happens, another supplier will take over MNF

Not for the money they'd command with the current structure

[Enoch Root]

Originally Posted by Street Pharmacist

Not for the money they'd command with the current structure

said most people about just about every tv sports deal ever

[Street Pharmacist]

Originally Posted by Enoch Root

said most people about just about almost every tv sports deal ever

Not ever, just since this model began. There's disruption coming. It's inevitable

[Jay Random]

Originally Posted by Hockey Fan #751

Agreed. The biggest correction is going to be with stations like ESPN which currently make $8 for every single cable subscriber out there. That's somewhere around 90 million.

If and when cable goes away, how is ESPN going to recoup that $700 million annually? The answer is that they're not but they won't be able to pay as much money for products like Monday Night Football. ESPN will eventually be an online subscription service, probably something like $10 per month.

It isn't $700 million annually. It's per month:

http://blogs.wsj.com/numbers/how-muc...-channel-1626/

In 2014, U.S. cable companies were paying an average of $6.04 per month per subscriber for ESPN. That figure has been rising steadily and quickly. And that, I agree, is unsustainable. That's a pool of billions of dollars a year for ESPN to spend on programming, and while it isn't going to go away entirely, it could shrink very quickly.

Originally Posted by Enoch Root

People want sports, so demand isn't likely going anywhere.

The current model allows ESPN to levy a tax of more than $70 per year on millions of cable subscribers who don't want sports and never watch their channel. Their product is not being demanded by consumers, but by middlemen who want to be able to say that they carry every major channel. As the middlemen are disintermediated, that particular chunk of demand is going to go away. Can you imagine an ISP adding several dollars a month to your Internet bill so they can say, ‘We have access to espn.com’? Of course not; the Internet doesn't work that way. And the Internet is steadily eroding the market position of cable TV.

Originally Posted by Street Pharmacist

Not ever, just since this model began. There's disruption coming. It's inevitable

Yup. I'm an old hand at disruption, myself. Most of the jobs I've had in the past came about because new technology disrupted a previous industry and created new opportunities; and most of those jobs don't exist anymore because newer technology came along and disrupted them in turn.

At present, I'm seeing the disruption happen up close and personal in the publishing industry, which is a kissing cousin to other media businesses. The people running old-line publishing companies think they've found the golden goose because new tech allows them to cut their costs. But they are not going to survive in the long run, because the same new tech allows writers and readers to bypass them entirely. Every media business is vulnerable to this form of disruption, including broadcast sports.

[Enoch Root]

Originally Posted by Jay Random

It isn't $700 million annually. It's per month:

http://blogs.wsj.com/numbers/how-muc...-channel-1626/

In 2014, U.S. cable companies were paying an average of $6.04 per month per subscriber for ESPN. That figure has been rising steadily and quickly. And that, I agree, is unsustainable. That's a pool of billions of dollars a year for ESPN to spend on programming, and while it isn't going to go away entirely, it could shrink very quickly.



The current model allows ESPN to levy a tax of more than $70 per year on millions of cable subscribers who don't want sports and never watch their channel. Their product is not being demanded by consumers, but by middlemen who want to be able to say that they carry every major channel. As the middlemen are disintermediated, that particular chunk of demand is going to go away. Can you imagine an ISP adding several dollars a month to your Internet bill so they can say, ‘We have access to espn.com’? Of course not; the Internet doesn't work that way. And the Internet is steadily eroding the market position of cable TV.



Yup. I'm an old hand at disruption, myself. Most of the jobs I've had in the past came about because new technology disrupted a previous industry and created new opportunities; and most of those jobs don't exist anymore because newer technology came along and disrupted them in turn.

At present, I'm seeing the disruption happen up close and personal in the publishing industry, which is a kissing cousin to other media businesses. The people running old-line publishing companies think they've found the golden goose because new tech allows them to cut their costs. But they are not going to survive in the long run, because the same new tech allows writers and readers to bypass them entirely. Every media business is vulnerable to this form of disruption, including broadcast sports.

That's not demand, that's distribution. Demand is defined by viewership.

I agree that the current cable model is going to be under increased pressure. But that is the nature of the industry - outmoded models constantly getting replaced.

You said yourself you have personally watched new technologies replace old, over and over. No reason not to think the same isn't going to continue to happen again and again.

Disruptions? Turmoil? Maybe. But the death of sports? Not a chance IMO.

And if anyone thinks sports is going to be free on the internet for everyone... well, I think those people are in for a surprise and disappointment.

[Itse]

Originally Posted by Enoch Root

But the death of sports? Not a chance IMO.

And if anyone thinks sports is going to be free on the internet for everyone... well, I think those people are in for a surprise and disappointment.

I don't think anyone has said either of those things.

[Buzzard]

Originally Posted by Fire of the Phoenix

Good. Can't say I'd feel bad if a bunch of rich people got knocked down by a couple dozen notches.

Regardless of whatever rationale you can dig up, I will never understand this type of statement. Unless of course you were to just flat out say it's based purely on envy?

[Northendzone]

To me sports is about the only thing on tv that The majority of viewers care about watching live - until that changes networks will continue to offer large sums of money for this almost guaranteed viewership and content

[IgiTang]

People who think professional sports are going to crumble are naive..

Pro-sports is arguably the single largest distraction from federal politics, more specifically foreign policies and events.

Sports is important to the federal gov't not from a taxation stand point.. From a "look over here and get caught up and emotionally invested over here, while we do crazy things over there".

Heck its essentially what created women's baseball.

[Fire of the Phoenix]

Originally Posted by Buzzard

Regardless of whatever rationale you can dig up, I will never understand this type of statement. Unless of course you were to just flat out say it's based purely on envy?

It's probably envy honestly. Envy and self loathing.

Ever been at that point where everything is falling apart in your life and you just want to scream? I guess I should find a better outlet lol.

[Locke]

Originally Posted by dissentowner

You are right, it isn't even close but you have it backwards. In no universe is Kopitar a better or more valuable player than Drew Doughty.

I dont know, I think a true #1 Centre and a true #1 Defenceman are probably pretty close in value to a team.