More than 80 million American households still pay for cable or satellite television. All of those people have been paying for live televised sports they haven't received for almost two months. None of those people should expect a refund any time soon.
U.S. professional and college sports have come to a standstill amid coronavirus concerns. About $20 of a standard monthly cable bill can be attributed to paying for sports, which programmers such as Disney's ESPN, AT&T's Turner, Comcast's NBC Universal and ViacomCBS's CBS pay billions for each year.
Americans shouldn't be forced to pay that money, New York Attorney General Letitia James argued this week. James called on seven cable and satellite television providers in New York to provide relief to consumers by reducing or eliminating fees attributable to live sports programming.
"At a time when so many New Yorkers have lost their jobs and are struggling, it is grossly unfair that cable and satellite television providers would continue to charge fees for services they are not even providing," James said in a statement. "These companies must step up and immediately propose plans to cut charges and provide much needed financial relief. This crisis has brought new economic anxiety for all New Yorkers, and I will continue to protect the wallets of working people at every turn."
So what was the reaction of cable providers to this news? They said sure!
{Record scratch}
"We are in complete agreements with the New York AG," said Altice US CEO Dexter Goie during his company's earnings conference call. "We'd expect to get some relief, for sure."
But wait. That's not what the AG said. She said consumers should get some relief, not cable providers.
That's the rub here. Cable executives would be thrilled to give refunds to customers -- but only if the programmers that they pay for sports give them refunds.
In other words, Altice pays ESPN an affiliate fee -- about $9 per month per subscriber, according to S&P Global estimates. If ESPN gives Altice a refund for the sports ESPN hasn't provided, then Altice will happily give that money back to consumers. And then consumers will say, "wow! Altice credited me $20! Awesome! Way to go, Altice!"
And then maybe they won't cancel cable TV, like millions of Americans are doing each year.
But don't expect ESPN to start crediting Comcast, Charter, AT&T, Dish Network, Cox, Altice, and other pay-TV distributors.
Most contracts protect ESPN in the case that sports aren't delivered, according to people familiar with how these deals are structured. While ESPN may guarantee a pay-TV provider a certain number of hours of live sports or events, the network is probably covered as long as most sports simply postpone their games rather than cancel them outright.
If sports seasons are completely canceled, it's possible the leagues will refund programmers for TV fees. In that case, programmers would likely refund distributors and those distributors would credit consumers. Regional sports networks, which have different contractual language with leagues and distributors than ESPN, may also receive relief for unplayed games. That's why some owners in the National Basketball Association are pushing to play at least 70 regular season games. That's the number of games the NBA promised to RSNs, according to ESPN reporter Brian Windhorst.
But league refunds to programmers aren't certain, even in the case of cancellation. The big legacy networks -- ESPN, ABC, NBC, TNT, TBS, CBS -- may be reluctant to sue professional sports leagues over fees. They are long-term partners on TV deals and need to stay on good terms with the leagues. Otherwise, the NBA and National Football League could sell their exclusive rights to large technology companies like Google and Amazon in their next renewals -- which are already underway. Such a move could doom legacy media companies who rely on sports to keep the highly profitable cable model alive. So, if leagues decide to keep the money...{emoji shrug}.
Even if leagues were to return money to TV programmers, that's less money for athlete salaries. If salary caps contract because of TV right refunds, athletes will fight back. And fans -- the very consumers who want refunds -- may be upset if their favorite professional sports team start releasing their favorite players to cut costs.
On top of all of this, sports networks like ESPN haven't gone dark. They've continued to air programming, and some of that content has been highly rated, such as the NFL Draft and "The Last Dance," the documentary on the 1997-98 Chicago Bulls.
Any refund would have to be partial, accounting only for live sports not aired, rather than the entire monthly affiliate fee. Coming up with a figure that both ESPN and a distributor agree upon that isolates the value of undelivered live sports could be tricky, if not impossible.
In other words, the system is simply not set up for refunds. The chain links connecting consumers to distributors to programmers to sports leagues are too rigid.
This isn't to say this is a dead issue. Dish CEO and co-founder Charlie Ergen will likely speak on his company's earnings conference call this week. I'd expect him to dial up the "sound and fury," calling for sports programming refunds.
Sadly for consumers, it will likely signify nothing.
WATCH: NFL Draft held online due to coronavirus pandemic
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May 03, 2020 at 08:30PM
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Americans are paying for TV sports they're not receiving, but don't expect to get a refund any time soon - CNBC
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