In the news:
Pac-12, DirecTV still can’t make a deal
There appears to be little hope an agreement will be reached anytime soon for DirecTV to carry Pac-12 Networks.
Seattle Times staff reporter
The website for satellite carrier DirecTV bills itself as “the undisputed leader in sports.”
Meanwhile, the Pac-12 Conference has emerged as a cutting-edge force in college athletics, having negotiated huge TV deals and implementing the Pac-12 Networks 13 months ago.
So why can’t the two sides lay down their weapons, strike a deal and end the simmering frustration of DirecTV subscribers — 20 million of them nationwide — who can’t get the Pac-12 Networks?
The sides do speak. A Pac-12 executive says they last sat down face-to-face in Los Angeles at the conference’s football media day late in July. And there are periodic phone conversations.
But publicly, the relationship is mostly one of chilly exchanges, such as DirecTV’s recent website statement expressing willingness to negotiate if the league would “propose a deal that’s fair.”
That followed Pac-12 commissioner Larry Scott’s address at football media day urging fans to switch carriers, piggybacked by a league ad campaign with the same message.
There appears to be little hope for a deal anytime soon, although neither side will discuss negotiations. Interviews with key figures on each side and industry analysts paint a picture of a carrier taking a stand on rising consumer costs and a league that can’t understand why its proposal was acceptable to some 50 providers — the latest agreement with AT&T and its U-Verse customers — but not to DirecTV.
“We’re very comfortable with our pricing and how we’ve packaged everything,” says Lydia Murphy-Stephans, president of Pac-12 Networks. “Please know the commissioner and his team have done extensive research on the value of the content.”
Responds Dan York, DirecTV’s chief content officer, “It turns out the price-value proposition is even lower than we’ve offered. Most of the games fans really want to see will still be available on DirecTV.”
The league has 35 live football games and 150 men’s basketball games on the Networks, increasing appeal for hard-core fans. DirecTV questions if there are enough of those fans to justify the cost.
DirecTV has offered to carry Pac-12 Networks on a pay-per-view basis or on a sports tier, both of which the league has rebuffed.
Bruce Leichtman, president of the Leichtman Research Group, says subscriber-acquisition costs for DirecTV — all costs associated with adding one customer, averaged out — have risen from $694 early in 2009 to $888.
“You would think it would be more appealing to DirecTV because they try to position themselves as the sports leader,” says Leichtman. “They’re trying to put their foot down. My guess is, they want it, but they want it at a certain price.
“Look at the industry in general. It’s saturated. It’s pretty flat as a whole. With that scenario in place, a new channel essentially just means more cost for the operator. I think that’s the way they’re looking at it — a cost with likely little gain.”
AJ Maestas of Navigate Research echoes that, saying, “I think (providers) started to sense a resistance level as to what people are willing to pay for cable. They’ve kind of reached a place where they can’t shove it into a bundle and force it on them. They had to stop somewhere.”
Essentially, that’s what York maintains: “The TV sports-rights marketplace is on an unsustainable trajectory, especially for families that aren’t sports fans. And at some point, if the price-value equation is not acceptable, it’s our responsibility to 20 million families to say no.”
Ironically, DirecTV’s profile as a sports leader might be working against a deal with the Pac-12. The carrier offers Sunday Ticket, a premium package of the vastly successful NFL. So a Huskies fan otherwise inclined to switch to get Pac-12 Networks might pause at having to forfeit Sunday Ticket.
“There’s a high correlation between NFL Sunday Ticket customers and DirecTV sports viewers in general,” says York.
The Pac-12 began taking an increasingly hard line this summer, capped by the ad campaign based on school mascots. The one tailored to the Seattle area shows huskies — the Alaskan sled-dog kind — with a bold voice advising that’s the kind of huskies you get on DirecTV.
“I feel what we’re doing is very tasteful and reflective of the Pac-12 and its brand,” says Murphy-Stephans.
York says he sees it as a campaign “to extract more money from our subscribers, and their fans and alumni.”
Neither side knows how many DirecTV subscribers have switched carriers, but York calls the number “de minimis.” That’s defined as “so minor as to merit disregard.”
There’s little debate that the Pac-12 Networks has been a success technically, and in production and content. It promises 750 live events this school year, headed by football and basketball.
In the spring, Pac-12 Networks was one of five finalists, along with goliaths like ESPN and CBS Sports, for the Sports Business Journal’s best-in-sports-television award at its sports-business awards banquet in New York.
But until there’s a settlement, the question will remain: What’s all that worth to DirecTV?
Murphy-Stephans, while expressing sympathy for DirecTV subscribers who can’t get Pac-12 Networks, notes that they’re available in every home market in the Pac-12.
Asked if Pac-12 Networks can be called a success in distribution without DirecTV, Murphy-Stephans said, “Unequivocally. Absolutely. We’re entering year two. If we’re entering year seven without DirecTV, I may have a different answer. Entering year two, we’re a smashing success.”
Bud Withers: 206-464-8281 or firstname.lastname@example.org