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Two Years In, Is The Fox Sports 1 Plan Succeeding?

Fox Sports 1 LogoTwo years ago, we took a closer look at how Fox planned to use its new national sports channels as a means of shifting the cost of all its sports broadcast rights deals onto pay TV customers. (You can read that analysis here.) Now that Fox Sports 1 and 2 are established, how is that plan working out for them?

If you believe the numbers SNL Kagan is publishing about Fox’s sports channels, they might be pretty close. According to those numbers, Fox Sports 1 gets a carriage fee $0.99/month from 91.2 million homes, which adds up to $1.08 billion per year.

Other data, however, would dispute those figures. For example, we know that Fox asked carriers for $0.80/month per subscriber at launch. Further, we know Fox didn’t get that at all from several carriers, who demanded that Fox honor its previous contracts with Speed Channel before they paid more. At the time, Speed’s carriage fee was only $0.25/month. (Fox converted Speed to FS1 and Fuel TV to FS2 in 2013, much to the consternation of auto racing fans.) Presumably, all of those old Speed contracts are now expired, and Fox is getting the price it wants for FS1, even if $0.99/month per subscriber seems like a rougher estimate than it should be.

There’s also some question as to how many pay TV customers actually get FS1 and FS2. According to SNL Kagan, as of May 2015, FS1 is in 91.2 million homes, and FS2 is in 64 million homes. That’s quite different from the numbers Nielsen reported last February, which put FS1 in 84.8 million homes and FS2 in 45.3 million homes. Did those channels really add that many more homes in the span of three months?

For argument’s sake, then, we’ll use SNL Kagan’s carriage fee estimates, but we’ll stick with what Nielsen has published for homes. Here’s how much Fox Sports 1 and 2 can expect to collect in carriage fees in 2015:

Network
Subscriber Fee
Homes (in millions)
Yearly Revenue
FS1
$0.99
84.8
$1,007.4 million
FS2
$0.28
45.3
$152.2 million
TOTAL
$1,159.6 million

Let’s compare that now with a list of all of Fox’s TV sports rights deals:

League
Annual Rights Fee (est.)
Major League Baseball
$500 million
NASCAR
$300 million
Pac-12 Sports
$125 million
Big XII Sports
$90 million
Big East Basketball
$42 million
Conference USA Sports
$7 million
Big Ten Football Championship
$24 million
UFC
$90 million
FIFA
$53 million
UEFA
$30 million
Major League Soccer
$30 million
TOTAL
$1,291 million

So FS1 and FS2 come close to paying for all these contracts, but don’t quite get there. If we used SNL Kagan’s estimates for number of homes that pay for these channels, rather than Nielsen’s, the story changes a bit.

Network
Subscriber Fee
Homes (in millions)
Yearly Revenue
FS1
$0.99
91.2
$1,083.5 million
FS2
$0.28
64.0
$215.0 million
TOTAL
$1,298.5 million

Even based on the Nielsen figures, however, carriage fees for FS1 and FS2 are paying for everything except the Big Ten Football Championship, which airs on Fox’s broadcast network and might be more closely tied to the Fox-operated Big Ten Network, and the various soccer properties. That means you are paying for all those contracts listed above if you receive FS1 and FS2 in your pay TV package.

What’s more, both channels still have room to grow — especially FS2, which could eventually find its way into as many homes as FS1, much the same way that ESPN2 has reached parity with ESPN. In order to convince carriers to do that, however, Fox would have to add at least one major sports property to its lineup, and the only property up for bid this decade, however, is the Big Ten. At best, Fox can only hope to split that conference with ESPN, but that’s not impossible — ESPN and Fox split the Big 12 and Pac-12 deals, and ESPN might be happy to move some of its Big Ten inventory over to Fox in order to free up enough airtime to let it take the Premier League away from NBCSN in 2016.

The bottom line, though, is that Fox, like ESPN, is getting a whole lot of people to pay for sports, both locally and nationally, whether people watch sports or not. Fox’s commitment to the cable bundle might eventually be its undoing, but for now, it certainly seems to be paying off handsomely.

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