SBJ/October 18-24, 2010/Media

DirecTV tests tier with only 3 sports channels

DirecTV, a brand synonymous with sports, is testing a low-cost tier that carries only three full-time sports channels, all from ESPN. If successful, the entry-level tier could wind up affecting the entire sports media industry.

Distributors long have complained about the cost of sports channels, which typically are the most expensive channels available. If this type of tier becomes popular with subscribers, it could become an option that other distributors use as well, potentially cutting into many sports channels’ affiliate revenue.

“It could be a big deal,” said a cable network executive who asked not to be identified because his channel has deals with DirecTV. “We’re keeping our eye on it.”

Cable channels are paid per subscriber. If enough subscribers embrace the kind of tier that DirecTV is testing — instead of digital basic — many sports networks would get smaller payouts.

Most sports channels do have contracts mandating that they are carried on a distributor’s most widely distributed tier, so if this new tier grows too much, it would eventually have to include the additional sports channels it now lacks, such as regional sports networks. Until that time, however, it will be an interesting test to see how many consumers are willing to subscribe to a tier that has only three dedicated sports channels.

The tier, called the Select Package, is being tested in 14 rural and minor-metro markets, according to network executives who have been briefed on the plan. DirecTV officials would not identify the markets where the package is being made available.

“We’ve been taking a more regional approach to our marketing over the past year and we would characterize this as another regional marketing campaign,” a DirecTV spokesman said. “With this new package, we’re simply looking at the value of giving customers more choice in certain markets.”

The package offers 120 channels, including ESPN, ESPN2 and ESPN3D, for $45 per month. A DirecTV spokesman pointed out that the tier also still carries sports from the broadcast networks, along with the sports offerings of TBS, TNT and HDNet.

What’s more interesting are the channels the tier does not carry. There are no RSNs. There’s no Versus, Golf Channel or any Comcast-owned channel. There’s no TruTV, which will start carrying NCAA tournament basketball games in the spring. In addition, none of the league-owned channels are on the tier.

The main reason DirecTV is marketing the tier is to compete with Dish Network’s popular low-cost AT 120 tier, which is available for $40 per month. The Dish package, which has been available for several years, has proved to be relatively popular. It offers ESPN, ESPN2, ESPNU and ESPN News, plus the horse racing channels HRTV and TVG.

DirecTV introduced its package earlier this month, marketed as the satellite company’s “newest value-priced package.” DirecTV representatives would not say how long the package will be offered.

So far, DirecTV is making the package available only to new subscribers. Current subscribers will not be allowed to downgrade to the service.
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