PAC-12 Network, DirecTV deal industry perspective

[CPtheCoug]

My old man has spent over 40 years in the sports broadcasting industry, and his current company has contracted in the past with the Pac-12 Network.

After the recent failure to secure a deal with DirecTV, I asked my pops if he knew what the heck was going on and if he had heard anything that was not entirely in the headlines.


Here is his industry perspective:

"Basically DirecTV does not see value in PAC 12 Networks at 80 cents per month per sub (I believe that is the inner market rate that PAC 12 is getting from it’s current distribution base (i.e.: Time Warner, Comcast and COX Cable). I believe DirecTV has something like 20 million subscribers so their monthly financial commitment would be substantial at 80 cents per sub. However, the rate would be blended across the country so really not sure where all that would fall.

Still, they are low balling the PAC 12 and frankly their offer is somewhat insulting and obviously are attempting to establish who is boss here. As an example the LA Dodgers launched a cable network two years ago and the only major distributor they have is Time Warner. All others including DirecTV have deemed the network too expensive and are not carrying it. If the Dodgers cannot get carriage it will be even harder for the PAC 12. Another issue maybe the number of channels the PAC 12 produces and the load of six additional channels or so DirecTV would have to carry. The Big 10 Network and SEC Network offer only one channel and have not super regionalized their offering.

Solution may be negotiating an equity piece for DirecTV, but probably the PAC 12 would then have to do the same for their other large distributors (most favored nations type of situation). PAC 12 gets their rate, but the partners share in growth and future revenue. This is a tough situation and a solution will not be easy. No one in the end will be happy."


Maybe nothing new, but something to think about...

 

[Coug1990]

My old man has spent over 40 years in the sports broadcasting industry, and his current company has contracted in the past with the Pac-12 Network.

After the recent failure to secure a deal with DirecTV, I asked my pops if he knew what the heck was going on and if he had heard anything that was not entirely in the headlines.


Here is his industry perspective:

"Basically DirecTV does not see value in PAC 12 Networks at 80 cents per month per sub (I believe that is the inner market rate that PAC 12 is getting from it’s current distribution base (i.e.: Time Warner, Comcast and COX Cable). I believe DirecTV has something like 20 million subscribers so their monthly financial commitment would be substantial at 80 cents per sub. However, the rate would be blended across the country so really not sure where all that would fall.

Still, they are low balling the PAC 12 and frankly their offer is somewhat insulting and obviously are attempting to establish who is boss here. As an example the LA Dodgers launched a cable network two years ago and the only major distributor they have is Time Warner. All others including DirecTV have deemed the network too expensive and are not carrying it. If the Dodgers cannot get carriage it will be even harder for the PAC 12. Another issue maybe the number of channels the PAC 12 produces and the load of six additional channels or so DirecTV would have to carry. The Big 10 Network and SEC Network offer only one channel and have not super regionalized their offering.

Solution may be negotiating an equity piece for DirecTV, but probably the PAC 12 would then have to do the same for their other large distributors (most favored nations type of situation). PAC 12 gets their rate, but the partners share in growth and future revenue. This is a tough situation and a solution will not be easy. No one in the end will be happy."


Maybe nothing new, but something to think about...

Thanks. Interesting read. I think that things may change when AT&T actually takes over DirectTV.

 

[M-I-Coug]

Some advice from an audiophile with a dedicated room, Dish Network by far offers THE BEST in hardware technology, specifically the Hopper DVR and interface. They've always been the leader in DVR boxes, light years ahead of the competition. (I didn't say NFL programming, but technology). IMO, they blow away Comcast and DirectTV. If you're considering a change, the best informed decision is to switch over to DISH.

 

[cr8zyncalif]

As your dad notes (my interpretation), it is partly about the money and it is partly about which dog gets to claim dominance on the shared turf. This will be a multi-year battle, at least if the PAC handles it right. The decision to offer more channels and lots of minor sports was a gamble, but "The Conference of Champions" would probably have blown it if they did not take that approach. And the stubborn, difficult decision not to share revenue long term is also probably a good decision if they can get through the next 3-5 years. DTV, on the other hand, has a lot of barriers to their future success. They may make it big, but it is not obvious at this time that their business model will work well long term. I think it is fair to say that the situation is still in flux, if not in doubt. So both sides are getting in their licks and staying in their fox holes. It would take some real commercial success for the cable companies with the PAC offering to dislodge DTV from its position…that or some real market resistance to DTV. Both are present in small amounts now, but not in landscape altering amounts.

At this point neither party perceives that it needs the other enough to abandon its position. That is likely to change over 3-5 years, and it may take that long for a resolution, unless the competitive landscape evolves sooner.

 

[Coug95man2]

My old man has spent over 40 years in the sports broadcasting industry, and his current company has contracted in the past with the Pac-12 Network.

After the recent failure to secure a deal with DirecTV, I asked my pops if he knew what the heck was going on and if he had heard anything that was not entirely in the headlines.


Here is his industry perspective:

"Basically DirecTV does not see value in PAC 12 Networks at 80 cents per month per sub (I believe that is the inner market rate that PAC 12 is getting from it’s current distribution base (i.e.: Time Warner, Comcast and COX Cable). I believe DirecTV has something like 20 million subscribers so their monthly financial commitment would be substantial at 80 cents per sub. However, the rate would be blended across the country so really not sure where all that would fall.

Still, they are low balling the PAC 12 and frankly their offer is somewhat insulting and obviously are attempting to establish who is boss here. As an example the LA Dodgers launched a cable network two years ago and the only major distributor they have is Time Warner. All others including DirecTV have deemed the network too expensive and are not carrying it. If the Dodgers cannot get carriage it will be even harder for the PAC 12. Another issue maybe the number of channels the PAC 12 produces and the load of six additional channels or so DirecTV would have to carry. The Big 10 Network and SEC Network offer only one channel and have not super regionalized their offering.

Solution may be negotiating an equity piece for DirecTV, but probably the PAC 12 would then have to do the same for their other large distributors (most favored nations type of situation). PAC 12 gets their rate, but the partners share in growth and future revenue. This is a tough situation and a solution will not be easy. No one in the end will be happy."


Maybe nothing new, but something to think about...

There are many thorns to this deal but one that is often overlooked is one you glanced off of. The multiple channels. The South, The NorthWest, the blah-blah-blah channel. Regional coverage allows a lot but it really bogs things down, as well. In today's world, there are plenty of satellites working but bandwidth is quickly overtaking that. So providers with one channel take so much bandwidth but 3 or 4 or 5 channels take a BOATLOAD more.

Your dad is right on several points. The hard part, without being a part of DTV, is what point has the heaviest emphasis. Bandwidth is a pretty big one, IMHO.

I would be interested to see/know how Root Sports has managed their multiple channels, and then to compare if P12N is blazing their own trail or not trying to re-invent the wheel and following a similar model…