Faced with soaring sports rights fees, TWC in February 2011 opted for the first time to create its own channels, shelling out an astounding $3 billion for Lakers games for 20 years.
So much for Los Angeles Lakers games being available to all DirecTV subscribers on their most basic service tier.
This fall, as the Lakers added superstars Steve Nash and Dwight Howard to their roster, Time Warner Cable was busy negotiating carriage deals for its new networks — Time Warner SportsNet and Time Warner Deportes — with providers like Charter Communications, Verizon FiOS… and DirecTV. There were two big sticking points: Time Warner Cable wanted almost $4 per subscriber more, and it wanted those networks available on the most basic tier of service. DirecTV signed a deal with Time Warner Cable to carry the channel on Nov. 15.
DirecTV has been adding a surcharge for new subscribers who want to watch regional sports teams – such as those who want to watch Lakers games on the new Time Warner networks. A spokesman for DirecTV said that they have added this choice, and the surcharge, in major markets across the U.S. — representing roughly 20 percent of their subscriber base — where there is more than one regional sports network. That way people who don’t want sports don’t have to take it and those that do pay for it.
“It’s really about the rising cost of sports programming that is going through the roof,” said a DirecTV spokesman. “This is one way to off-set sports costs. It doesn’t cover everything but it does cover a portion.”
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New subscribers who take the regional sports package will pay $3 more per month for their DirecTV service, where standard rates range from around $35-$90 per month. The DirecTV packages of channels that carry the surcharge, which has been rolling out nationwide since September, are Choice, Choice Xtra, Choice Ultimate and Premier, the most expensive option.
Those who don’t want regional sports can opt for the “entertainment” package of about 140 digital channels that includes ESPN but none of the regional sports networks, such as those offered by TWC. That costs $29.99 per month.
The surcharge applies not only in Southern California, but also in New York, Chicago, Denver and other cities where multiple regional sports networks are available.
Time Warner Cable had no comment on the surcharge.
The increased payment and different tier of service are interesting because as TWC negotiated with telecom providers like Charter Communications and Verizon FiOS for carriage of Lakers games, it sought assurances that its new networks would be available to all subscribers on their most basic tier. That way, TWC could aggregate the largest possible audience to sell to advertisers.
During the lengthy negotiations between TWC and DirecTV over carriage of the sports channels, there was a lot made of the rising cost of sports rights, most of which has to be passed on to subscribers. Even with the $3 surcharge, the DirecTV spokesman said that still does not cover all of their increased cost.
The TWC channels alone are said to cost the distributor $3.99 per month per subscriber; and in Southern California, DirecTV also pays to carry Fox Sports West and Prime Ticket (both owned by News Corp.). There was pressure on DirecTV to make a deal because it is known for its sports programming.
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The precedent of adding a surcharge to cover the rising cost of local sports isn’t just going to come under scrutiny as it relates to TWC or Southern California, The Los Angeles Times pointed out in an article Monday that first revealed the new DirecTV surcharge.
Nationwide, professional sports have nearly all migrated to cable for most – if not all – of their games. So the rising cost is an issue not just for DirecTV but also for Comcast, Charter and other cable and satellite providers concerned about passing on the costs to subscribers who these days have a lot of viewing choices.
Dish Network has yet to agree to carry the two TWC sports channels over their cost.
