The End of the Broadcast Bundle
Out-of-market packages migrating to streaming platforms mark the point at which sport stops subsidising the cable ecosystem that carried it for forty years.
Photograph: Hugh Mason · CC BY-SA 4.0 · Wikimedia Commons
For four decades the relationship between live sport and pay television was symbiotic in a very specific way. Sport was not merely valuable programming for cable operators; it was the reason a large proportion of subscribers tolerated a bundle containing dozens of channels they never watched. Sport supplied the retention. The bundle supplied the revenue. Both parties understood the arrangement and both profited from it.
The migration of premium out-of-market packages to streaming platforms marks the formal end of that arrangement, and it is worth being precise about the mechanism, because the headline numbers obscure it.
What the bundle was actually paying
A sports network inside a traditional bundle receives an affiliate fee per subscriber per month, collected from every household on the tier regardless of whether anyone in that household watches sport. For the largest sports networks this fee has historically been several multiples of any other channel’s, and it is paid by tens of millions of non-viewing households.
That is a subsidy, and it is enormous. A rights holder selling to a bundled network is indirectly monetising an audience that includes people with no interest in the product. No direct-to-consumer model can replicate this, because a subscriber who does not want sport simply does not subscribe.
The bundle let sport charge people who did not watch it. Nothing in the streaming model does that.
The trade being made
When a league moves a package from a bundled network to a platform, it typically receives a higher nominal fee. That is the number reported, and on its own terms it is real. What is not reported is that the transaction removes a slice of programming from the bundle, marginally weakening the case for the bundle, and accelerating the subscriber decline that erodes the affiliate-fee base supporting every remaining sports property.
Each individual decision is rational for the league making it. Collectively they degrade the system that has been paying above-market rates for sports rights since the 1980s. This is a coordination problem of a familiar kind: the payoff to defecting exceeds the payoff to cooperating, the cost of defection is borne by everyone, and there is no mechanism by which leagues could commit to each other not to defect even if they wanted to.
Where the losses land first
The distribution of harm is uneven and predictable. Properties with the largest national audiences have genuine direct-to-consumer optionality; they can command a subscription on their own account and will likely emerge from the transition with their economics intact or improved.
Properties in the middle of the market — regional franchises, second-tier national competitions, sports with devoted but modest followings — have no such optionality. Their entire commercial model depends on being carried inside a bundle at a fee far above what their audience would pay directly. When the bundle contracts, those rights do not migrate to platforms at comparable value. They reprice to something much closer to what their actual audience is worth, which in several cases is a fraction of the current fee.
The regional collapse to come
The clearest near-term expression of this is in American regional sports networks, whose economics depend almost entirely on carriage fees paid by households within a designated market area. Those networks carry long-dated rights agreements with local franchises, signed when subscriber counts were higher and priced on the assumption that they would remain so.
The subscriber base has been declining for a decade and the contractual obligations have not. A number of these agreements are now materially above what the underlying audience can support, and the mechanism by which that gets resolved is not renegotiation. It is insolvency, followed by rejection or renegotiation of the rights contracts through a restructuring process, followed by franchises discovering that a revenue line they had treated as contractual and guaranteed was neither.
That process has already begun at the edges. It will be the defining media story in North American sport for the next three years, and it is a direct consequence of decisions that looked, individually, like straightforwardly good deals.