Are Canadians Paying Too Much For Cable?

This month, there has been some serious debate about Canadians paying less for television sports content than their American counterparts. It’s been highlighted that ESPN charges double that of TSN and TSN2 for similar content, and thus us Canadians are getting great value from our sports providers. But from a regional perspective, in America there are normally two to three regional networks that one must subscribe to for sporting content, whereas in Canada there is normally only one, and in rare cases two. Therefore, regional networks then are also cheaper in Canada when compared to the United States. First, there are less regional networks to purchase in Canada, and then of the ones that are available, they are cheaper. Overall, Canadians are paying much less for their cable sporting experience. However, there is concern that there is about to be a market adjustment for Canadians. That the increased rights fees will be passed on to the consumers, and that they may begin to be charged more similarly to their American counterparts.

An article written by cites an unnamed source who believes “customers will always pay for what they want and pretty soon – only what they want.” This means maybe customers who want to watch Leafs games, will buy individual Leafs games from iTunes or another source. Or, maybe customers who don’t want to watch sports, don’t at all. This will then see the costs passed on to the people who are still buying the sports bundle; that they will bear the costs the other users have forgone. If this begins to happen, then maybe the price increases of TSN and Sportsnet that have happened over the last two years are only the beginning.

First, it’s important to note the distribution channel opportunities for Canadian sports content is becoming limited. Not because iTunes or similar channels aren’t reputable services, but because the content is being owned by the cable operators. Rogers and Bell have done a great job of locking up sporting events through long term deals (Vancouver Canucks), or by just buying the teams outright (Leafs, Raptors, Blue Jays, Canadiens).  However, leaving that aside, it’s still possible that a league wide deal could exist for new media distribution.

The counter to the scenario that cable packages will increase in costs due to fragmented distribution and increased rights fees is the advertising revenue that TSN and Sportsnet receive for these sports properties. As viewers buy more content on iTunes, Netflix, and PVR, traditional television advertising becomes less effective. But as live events mostly have to be consumed live, these events are not at risk of losing their value to advertisers like scripted TV. Thus, advertisers will pay more to have their ads appear next to this content. We are seeing the beginning of this phenomenon with the Dodgers huge TV deal, the recent Olympics broadcasting deal, and other sporting broadcast rights negotiations. Any decrease in subscribers will be offset by the increased advertising revenue.

The equation can then be overly simplified. The increasing ad revenue will outweigh any decrease in subscribers or people who drop their cable packages. Thus, any sports fan following the dialogue this month about increased fees, reduced value bundles, and costs going up can rest easy knowing that their fee increases are probably not going to increase astronomically. As long as consumers keep watching ads, and watching live events, then they are fine.

So we are paying less, but are we getting the same value? I would say no. In Canada, we get most of the live events. However, the studio shows, the information part of the equation, we do not get. Because we only have three or four channels dedicated to sports that need to show six or seven channels worth of content, we do lose out on the story telling side of things. Our sports channels only have time to properly cover hockey. Real basketball, football, or soccer coverage gets left out. If you look through ESPN’s line up, they have 30 for 30, E:60, First Take, and other shows that provide context for the events we watch. In Canada, we do not get a consistent diet of these shows, and are left with the live events but no real context for what is happening. Then there are some events that just don’t happen in Canada. College sports is completely forgotten in Canada. Athletics only exists in Olympic years, and there are tons of soccer leagues Canadians are not exposed to. So we are not exactly getting more for less. We are getting just the games, and none of the other stuff.

Overall, it seems rosy for sports fans in Canada. We watch lots of hockey, curling and baseball, and pay next to nothing for all the channels. We don’t get the same quality coverage, but we also don’t pay what Americans pay. For some, it’s perfect. Sure, we don’t get to watch much NCAA sports, whether it’s basketball, hockey, football, or anything else. Athletics is an afterthought unless in an Olympic year. Then there is our soccer coverage.

Soccer is currently split among three channels in Canada. For the Barclays Premier League, Sportsnet and TSN split the Saturday morning slate of games, and TSN gets the Monday prime time game. However, the normally great Sunday match ups, those are exclusively on the specialty channel Sportsnet World. UEFA Champions League is available only on Sportsnet, where they split the games between Sportsnet One, Sportsnet Regions and Sportsnet World. The FA Cups is exclusively on Sportsnet World. The rest of the leagues: La Liga, Serie A, Ligue 1, Bundesliga are split among The Score, GolTV, Sportsnet World, and more. Basically, if you’re a soccer fan, get out your TV guide.

However, it’s important to note the “customers will always pay for what they want” part of the article. Sportsnet World is $18-$19 per month. There are no advertisers on the channel, it only runs promos for other Sportsnet properties, thus showing a ton of unsold inventory. The entire cost of the rights are passed onto the subscribers. It is the most expensive single channel on Cable. It is a cautionary tale for sports fans. That if for whatever reason advertisers begin to walk away from sports as an advertising vehicle (maybe for digital initiatives, event activations, or any of the other avenues that some believe will hurt traditional media) but are still locked into these long term lucrative licensing deals, the pricing can get quite high. Additionally, if you happen to like niche sports in Canada, you will have to pay for it, and the cable companies will charge it.

Where does this put Canadian sport fans? In short, you get what you pay for. We pay less for sports, and we get less coverage. Nobody can say they’re getting ripped off. But for some sports fans, they can certainly long for coverage like their American counterparts. Just don’t expect your fees to stay the same.

 Jeffrey Lush is a weekly blog contributor to Sports Business Canada

Jeffrey Lush

Jeff Lush is a Raptors fan and digital nerd who works as an advertising consultant. Follow Jeff on Twitter @jlush709.