Altitude Vs. Comcast — The Changing Economy of Sports Media
Taxing "the man behind the tree" is no longer an option, and the traditional sports media model is quickly becoming extinct.
Don’t tax you, don’t tax me, tax that fella behind the tree! — The kicky chant coined by former Louisiana senator Russell Long encapsulates the quandary affecting whether the Denver Nuggets and the Colorado Avalanche show up on your television screen.
The fault here lies with: Other Guy.
Not the cable company, not the Altitude regional sports network. Other Guy.
In the good ol’ days of a bygone sports-media ecosystem, Other Guy helped to foot the bill for Nuggets games on TV. That was ironic, because Other Guy didn’t follow the Nuggets. Didn’t care how many offensive rebounds the team racked up against the Warriors. Thought the “Joker” was a Batman nemesis.
But he paid for the games anyway. Every month, he kicked in a few dollars from his cable bill to support the team’s owner, Kroenke Sports Entertainment, and its Altitude sports channel. This same formula prevailed nationally for tens of millions of pay TV customers and their regional sports networks (“RSNs” in TV language).
It was what Charles Ergen, the dry-witted, Tennessee-bred founder and chairman of Colorado-based Dish Network, called an RSN tax: a fee you had to pay, whether you wanted to or not. Pretty much everybody chipped in.
Until they didn’t. Around 2015, something started happening that was bigger than Altitude, Comcast or Dish Network. People started disconnecting their pay TV service altogether, fleeing to a new assortment of streaming services like Netflix. A few people at first, then a torrent. From 2015 to 2021, Comcast lost more than 4 million video subscribers – a drop of 19%. A bunch of them were in Colorado.
As cable customers defected, the pool of “taxpayers” shrunk, putting pressure on an ecosystem that once spat out money like an ATM. Every time a subscriber checked out, Altitude lost a payment. Comcast felt the pain, too. Fewer people paying for television meant its video business was withering.
You can see the standoff taking shape here: Altitude’s revenue from the cable guy was shrinking as people cut the cord, while pay-TV providers like Comcast and Dish TV were watching their video business deteriorate. Great time to be prepping for a new deal.
Not long after, Ergen made a move that sent the RSN category trembling. In the summer of 2019, the Dish TV boss authorized managers to drop from the lineup 16 RSNs owned by a category newcomer, Sinclair Broadcast Group.
Industry watchers gasped. Was Ergen losing his marbles? People surely were going to abandon his satellite TV service by the droves.
Except, wait: They were already abandoning his satellite TV service. Ergen understood the cold reality of the moment. If the pay TV business was deteriorating anyway, why keep paying to carry expensive sports channels lots of people didn’t watch?
A decades-old business model was officially under siege. But Ergen came out all right. The media industry analyst Rich Greenfield, a frequent CNBC contributor, calculated that a modest acceleration in Dish TV defections, costing Dish around $40 million, was more than offset by the money Dish saved by abandoning the Sinclair channels: close to $400 million. Ergen explained his decision to analysts, describing RSNs as “outliers … in terms of the amount of money they charge and collect versus the amount of people who actually view them.”
Of course, this is not what Avalanche Fan wants to hear. Avalanche Fan just wants games to return to the television screen. But there’s a fair chance that won’t happen until a new economic model rises.
One example is popping up out west. The NBA’s Los Angeles Clippers in October inaugurated ClipperVision, a “direct-to-consumer” video service that streams 72 of 84 live Clippers games for $199 per season. The RSN aggregator Bally Sports (a Sinclair corporate cousin) is eyeing a similar gambit across its RSNs, floating a price point of $20 per month.
Whether Altitude might embrace a “direct” model remains an open question, although it’s a certainty management has run the numbers. For now, Kroenke Sports Chief Operating Officer Matthew Hutchings – a veteran media industry executive who used to run Comcast’s Houston-based RSN – is working with intermediaries like Fubo TV, an online video aggregator. Fans who sign up for Fubo TV can layer on the Altitude Now streaming service for an extra fee. But (at least as of yet) they can’t do what ClipperVision subscribers can do: purchase the streaming service in the internet wild, as a self-standing offering.
To be sure, emotions run high here. But calling Comcast a bunch of “bullies,” as the late Peter McNab did on Twitter, doesn’t solve anything. Nobody is a bully, any more than the guy who pulls up to the parking lot with a taco truck is a bully. Taco Truck Guy has to eke out a living from paying customers. The same will eventually be true for RSNs. Taxing that fella behind the tree is no longer an option.