NEW YORK (MainStreet) – March Madness is no longer tethered to cable or satellite subscriptions, but there's still a gap between cutting the cord and cutting down the nets.
During this season's NCAA Division I Men's Basketball Tournament, Dish Network has given fans the ability to opt out of cable packages or even its own satellite service and catch games on its Sling TV streaming service. Sling TV offers subscribers live streaming from ESPN, ESPN2, The Food Network, HGTV, ABC Family, IFC, The Travel Channel and AMC, but it's the inclusion of Time Warner and Turner channels including the Cartoon Network, CNN, TNT and TBS that make the deal particularly interesting.
Back in 2010, CBS and Turner sports signed a 14-year, $10.8 billion deal to broadcast March Madness and the Final Four. They've aired all games on a combination of CBS, TNT, TBS and Turner's truTV and have streamed all games through through their March Madness Live page and app — though the Turner games required a satellite or cable subscription code for access. This year, with Sling TV picking up TBS and TNT, the NCAA notes that 54 of the tournament's 67 games will be available without a cable or satellite subscription. Only the games on Turner's truTV fall beyond a cord cutter's reach.
For an extra $5 a month, Sling TV subscribers can get truTV as part of a "Lifestyle Extra" package of channels including the Cooking Network and DIY Channel. The inclusion of truTV, albeit for a fee, makes the entire tournament available without a cable or satellite subscription.
Still, that's enough to foster some doubt among industry observers. Wedbush Securities video game, social media, digital media and electronics analyst Michael Pachter says it will take more than Sling TV's effect on one event — even one that has generated $7.5 billion in television ad revenue since 2005, according to Kantar Media — to make large numbers of Big Dance viewers drop their cable and satellite subscriptions.
“It's a great idea, but I'd say the impact is going to be 1/1,000th of a percent,” Pachter says of March Madness cord cutters. “The bigger issue is the signal that Sling TV is sending and the signal that Warner is sending by putting its networks on there.”
According to research firm SNL Kagan, the monthly subscription rate for TNT was $1.48 last year, second only to the $6.04 charged for ESPN. By combining TNT's rate with the 74-cent cost of TBS, the $2.20 cost of those Turner networks is second only to the ESPN networks among sports providers, with even Fox Sports and Fox Sports 1 falling short at $1.67.
Turner knows this and has helped migrate games from its shared National Basketball Association playoff coverage and Major League Baseball playoff slate onto its cable- and satellite-only networks. This year, for the second-consecutive year, TBS will host the two Final Four matchups, leaving only college basketball's national championship game on TBS.
Meanwhile, it's also aware the wholesale cost per network of cable and satellite packages is expected to increase 36% by 2018, according to SNL Kagan. That is accompanied by the Federal Communications Commission's finding that the price of expanded basic cable and satellite service has increased at a compound average annual growth rate of 6.1% from 1995 through 2013. By market research firm NPD Group's measure, that's hiked the average monthly cable bill from $86 in 2011 to $123 today.
"I think more likely, as people learn that they're paying $85 to $90 for cable and they can pay $20 for Sling TV [and] get three-quarters of the NCAA games on Sling TV if all they watch is basketball anyway, they might stop cable,” Pachter says. “I get it, but it'll take years before people really do it.”
In the grander picture, that change is already taking place. SNL Kagan reported that cable and satellite subscriptions fell for the first time in history in 2013, with providers shedding more than 251,000 subscribers. Research firm IHS notes that just about every cable and satellite service that wasn't DirecTV lost roughly 2 million customers combined. Even worse, Nielsen notes that the time U.S. viewers spent watching live linear TV fell from four hours and 50 minutes in late 2012 to four hours and 32 minutes at the end of last year.
At the crux of the issue are the 18- to 32-year-olds that make up 48% of the viewers who have never paid for television, according to Forrester Research. That's roughly the same demographic that market research firm The Marketing Arm sees as the NCAA tournament's regular, self-replenishing key demographic.
“Audiences — especially the youngest adults — appear to be losing interest, programmers like HBO are going around traditional distributors and advertisers are eager to finally get more value from advertising generally and TV advertising in particular,” says Forrester Research analyst James L. McQuivey in one of the firm's reports. “All of this adds up to what seems like insurmountable pressure.”
In a survey of 405 of those same 18- to 32-year-olds who have never paid for cable or satellite television service, Forrester found that 38% didn't consider it worth the money, 36% found it too costly, 23% found streaming more convenient and 21% said they watched only a few television shows. That's a whole lot of college-age viewers who are already leaning toward streaming and for whom, Pachter says, sports are the only missing piece of the viewing puzzle. They're also the viewers that Time Warner's HBO is targeting with its $15-a-month HBO Now streaming service and that Sony is chasing with its upcoming PlayStation Vue cloud-based cable-style streaming service — the latter of which is aimed at the 58% of U.S. viewers that use their game consoles as streaming devices, according to Forrester. It's that same demographic that Pachter says Turner Sports is underestimating.
“My guess is that Turner gets more money from cable and my guess is that they're making the bet that nobody's going to cut the cord,” Pachter says. “The surprise that I think is coming for the cable broadcast business is the cord-nevers, because my kids watch Netflix on tablets all the time and they're developing different viewing habits.”
They might be the only ones surprised. Already, antenna producer Mohu is marketing its products as a March Madness package with Sling TV. The folks at Time have already suggested exploiting Sling TV's seven-day trial period to watch most of the tournament free. Slate, meanwhile, has taken some of the guesswork out of cord cutting by providing a calculator comparing your current cable package to the cost of various streaming services.
While Pachter firmly believes the cost of producing content and the elevated cost of a la carte channels compared with bundled cable and satellite packages will make streaming live events unfeasible for many viewers, he notes that March Madness exposes one of streaming's key strengths. He still sees cable and satellite bundles as key to keeping as many channels as possible available to a broader audience, but admits that Sling TV and other live streaming services have the potential to fill very specific niches, especially around tipoff time.
“It only makes sense for people who don't watch a lot of TV, and if you don't watch anything but sports those packages are perfect,” he says. “Here's the proxy for that: It works for single people, who don't have other people in the house.”
— Written by Jason Notte in Portland, Ore.
To follow the writer on Twitter, go to http://twitter.com/notteham.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.