Major sports leagues earn BILLIONS of dollars every year. That money comes directly from YOUR cable bill.

The Fox Sports 1 Plan: Bundle Broadcast Rights Deals, Make Pay TV Customers Foot The Bill

The Truth About Fox Sports 1

When Fox Sports announced the launch of their new national sports network a few weeks ago, they pulled out all the stops. Marquee teams! Dazzling events! New shows! Regis Philbin! Erin Andrews! It was a grand spectacle worthy of the launch of the biggest “threat” to ESPN’s dominance since Comcast bought the broadcast rights to the NHL and slapped hockey on the Outdoor Life Network.

You could hear a few rumblings in the background, though, as a few media pundits reminded everyone that their cable bills will go up once Speed Network converts to Fox Sports 1 in August — which is true, of course. A general sports network, especially one with the Fox brand name attached to it, will always command more than a channel focused on a single sport that isn’t football. Even before the announcement, word got out that Fox would be asking pay TV providers for a carriage fee of 90 cents to a dollar per month for Fox Sports 1 – a big jump from the quarter or so per month Speed currently gets from roughly 87 million subscribers.

This new national network is more, though, than just a simple money grab. Fox has one reason for thrusting a national sports channel on us now: to consolidate all of its non-NFL sports properties and shift the costs of all those contracts — including that shiny new 12-year, $500 million deal with the reconfigured Big East — to consumers.

Those contracts are scattered all over the place, too. NASCAR’s deal is primarily with Speed Network (for now). UFC has a deal with FOX to show fights on Fuel TV, the prime candidate to be re-branded as Fox Sports 2. Fox also has several big college sports contracts and a few key soccer contracts left despite losing the Premier League to NBC Sports Network after this season, and the UEFA Champions League is quality mid-afternoon programming for a general sports network.

So let’s add up all the contracts Fox has that could be served by Fox Sports 1 at launch:

League
Yearly Rights Fee
NASCAR
$300M
UFC
$90M
UEFA Champions League /
Europa League
$30M*
Pac-12 Sports
$125M
Big XII Sports
$90M
Big East Basketball
$42M
Conference USA Sports
$7M
TOTAL
$684M

* – I freely admit I pulled this number out of my ass. Numbers on Fox’s deals with UEFA haven’t been published, and this is based loosely on Fox’s 3-year, $70-million deal with the Premier League, which expires in June. If you happen to know the official terms of that deal, drop me a line.

How will Fox Sports 1 cover those costs? By charging 87 million people $0.90/month for the channel. $0.90 x 12 = $10.80 a year, and $10.80 x 87 million = $939.6 million a year. This is the low estimate, too. At a dollar per month, Fox Sports 1 will pull in $1.04 billion a year from cable viewers.

Now here’s the fun part. Fox’s new contract with Major League Baseball, which starts in 2014, will allow Fox to air select baseball games on Fox Sports 1. At some point between now and then, Fox will convert Fuel TV to Fox Sports 2 and ask TV providers for (at the very least) a third of the price of Fox Sports 1, or at least $0.30/month — about twice what Fuel TV currently gets.

So lets add baseball to the mix. Also, let’s throw in the Big Ten Championship game, which Fox has shown on its over-the-air broadcast network so far:

League
Yearly Rights Fee
Major League Baseball
$500M
NASCAR
$300M
UFC
$90M
UEFA Champions League /
Europa League
$30M*
Pac-12 Sports
$125M
Big XII Sports
$90M
Big East Basketball
$42M
Conference USA Sports
$7M
Big Ten Football Championship
$24M
TOTAL
$1,208M

Now here’s what Fox Sports 1 & 2 would makes in carriage fees, starting in April:

Network
Subscriber Fee
Homes (in millions)
Yearly Revenue
FS1
$0.90
87
$939.6M
FS2
$0.30
43
$154.8M
TOTAL
$1,094.4M

This takes into account that Fuel TV only has 43 million subscribers at the moment. What happens when FS2 starts to get into as many homes as FS1?

Network
Subscriber Fee
Homes (in millions)
Yearly Revenue
FS1
$0.90
87
$939.6M
FS2
$0.30
87
$313.2M
TOTAL
$1252.8M

As you can see, two national Fox Sports networks should successfully shift the costs of all those sports contracts — including one deal for a game on their over-the-air network — onto every pay TV subscriber in America. What’s more, only the UEFA, Conference USA and Big Ten Championship contracts expire prior to 2020. That gives Fox plenty of time to prove the ratings value of these new channels and push pay TV providers to charge more and get the channels in more homes.

Now imagine what these numbers might look like in just 3 years, when both channels have expanded in 90 million homes and have seen subscriber fee increases of just 5% per year:

Network
Subscriber Fee
Homes (in millions)
Yearly Revenue
FS1
$1.04
90
$1,123M
FS2
$0.35
90
$378M
TOTAL
$1,501M

That’s $293 million left over after all the rights fees listed above are paid. That’s probably a conservative estimate of what Fox Sports 1 and 2 will actually be getting by 2016, too.

That $293 million won’t be enough to reel in a big fish like the NBA, whose broadcast rights are up for grabs in 2016, but it would certainly be enough to keep the UEFA Champions League and cover that 8-year, $425 million deal with FIFA, which gives them the broadcast rights to the 2018 and 2022 World Cups. Fox might even try to snatch the Premier League back from NBC and/or take over Major League Soccer’s deal with ESPN, especially with ESPN seemingly shifting away from soccer now that it’s ceded the World Cup and lost the Premier League on two continents. After all, if Fox is going to be the home of the World Cup, it might as well grab up everything else that appeals to soccer fans in America.

Of course, some would look at these numbers and say, hey, this is just good business for Fox. Clearly, having all of these properties on one or two high-value general sports channels, rather than having them spread out over a bunch of cheaper niche channels, should be more profitable for them in the long run. The bundle commands more than the niches. It’s a great strategy.

The question for pay TV subscribers, however, is this: how good a value is this for you, if you’re never going to watch any of it?

***

Are you okay with paying $14 to $18 per year for Fox Sports 1 & 2? Leave a comment below, or contact the author directly by email or Twitter. Also, find out how much of your cable TV bill goes directly to sports leagues every year with our front page web app.

Filed Under: Fox

14 Responses to The Fox Sports 1 Plan: Bundle Broadcast Rights Deals, Make Pay TV Customers Foot The Bill

  1. I’ll admit that I know next to nothing about pay tv, or just about anything else involved here. What I’d like to know is, how will this affect me as a DirectTV subscriber? On my current package, which is one of the cheaper packages, I currently have both Speed and Fuel. Will this affect either of those? Will I pay more or will there be no change for DTV? Other than the change of name from Speed/Fuel to FS1/FS2, I’m not sure how this will play out for Direct TV customers. Anyone?

  2. Simon: You’ve been paying about $0.30/month for Speed Network and $0.16/month for Fuel TV. When Speed and Fuel TV become Fox Sports 1 & 2, those subscriber fees will jump to roughly $0.90/month and $0.30/month — an increase of $0.74/month. So you will likely see up to a $1/month increase in your DirecTV bill come August.

  3. I don’t mind an extra $1-2/month for my Big East basketball to be on a national channel. The soccer games and UFC are just an added bonus. Don’t mind some baseball either. @Simon, I have cable, but don’t you Directv folks have contracts?

  4. Have no problem paying that extra. I get dinged from the Big Ten network for just as much and NEVER watch a SINGLE game. Whereas on Fox Sports I will see more UEFA/Europa plus Big East basketball.

  5. As a fan of Big East basketball as well as MLB, I definitely think it is worth it personally. But I can certainly see why non sports fans will be upset over this. All of these sports channels drive up prices, and without options to select your exact channels, many customers end up paying for them without ever watching anything.

  6. I think we should all get to pay directly, for only the channels we want. If I want the ESPN and Fox suites, along with BTN, for example, why should I pay for ten home shopping channels, 20 DIY channels, and a bunch of other things I don’t watch. I don’t even bother with cable now, but would be happy to have my own, 20-channel custom package.

  7. I don’t know if I will like Fox sports 1. I have Speed to watch racing, all types of racing. Now with Fox Sports 1 is going to have Baseball,basketball,Soccer on this channel. Why can’t they have the CRAP CHANNEL for that stuff and leave Speed alone.

    • Read the article again. Fox will make more money from a general sports channel with racing on it than from a niche racing channel. And they need it to pay the rights fees for all those sports. That’s why Speed, Fuel, and Fox Soccer are all going away on August 17.

  8. I could care less about most of the “ball sports”. I switched to Dish network less than a month ago to GET Speed channel. I could give a rip about the other sports. So here I get two FREAKIN’ WEEKS of Speed Channel and Fox pulls the plug on a feature-rich motorsports channel and institutes a glitzy, nauseating sports channel that doesn’t represent a fraction of what Speed channel was? I’m dropping the additional channels tomorrow. Good article Dave but FYI, Speed was integrated into a package with Dish network that isn’t .90-$1.00, it’s TEN BUCKS and that’s only a year-long introductory offer!

    • It’s $10 for you, yes, but you’re getting a lot of channels in that package, and every channel gets a certain amount of that, which the carriers and networks negotiate in advance. (And when they can’t agree on the price, the channels get blacked out. See: CBS v. Time Warner Cable.)

      That subscriber fee is what the networks get from your cable bill. What you pay for those channels is different. Think of it as wholesale price v. retail price.

  9. Unfortunately Dave what a lot of the people that responded above don’t seem to get is that the piddly Dollar + or – per month is just the entry amount, and that their acceptance of these fees just opens the door to not only more fees but fewer choices! I remember the original selling point for cable was LESS commercials! That has worked well hasn’t it…take that same mentality, blind acceptance and belief and within a decade you will not be able to see a sporting event or game of any kind without paying a monthly fee! How many people do we need in our wallets…I for one cannot stand PAYING to watch commercials or any form a TV and am about to cut the cable cord and go back to the old antenna. I know that alone my succeeding from the cable union won’t make a difference but if enough people get it maybe a little reality will creep into life and people will once again realize that there is more to life than what my parents used to call the BOOB TUBE!

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