SBJ Media: Distributors Tell Capitol Hill ‘We Can’t Pay More’

On Tuesday, it was my 17-year old daughter who graduated from high school. On Friday, it will be my 14-year old daughter who graduates from 8th grade. It really does fly by way too fast…

DISTRIBUTORS DRAW A LINE IN THE SAND

• It’s hard to feel good about cable’s business model for video after two days of Capitol Hill hearings that looked into the future of media. Take the cable industry’s top lobbyist Michael Powell. When Sen. Brian Schatz (D-Hawaii) asked whether cable distributors were profitable, Powell gave a succinct answer. “Not on video,” he said, adding that broadband was “dramatically more profitable.” Powell: “The single greatest driver of rising prices is rising cost of programming and sports costs." He added that the retransmission consent money distributors pay to broadcast networks “increased from $500 million ten years ago to $10 billion” today. On Tuesday, AT&T executive Rob Thun sounded a similar alarm, saying that his company has “hit a wall. Consumers aren’t willing to pay any more.”
  
  
• It’s usually a folly to try and figure out trends from Congressional hearings. It's a DC tradition for executives to use hyperbole and overstatements whenever they appear before Congress. Tensions between programmers and distributors have existed since the beginnings of cable. Distributors have always complained that they can’t pay more; somehow they always do.
  
  
• But something feels different about these complaints today. There seems to be more evidence than ever that distributors may be losing their stomach to pay more in costs. Earlier this spring, MoffetNathanson suggested that video costs could rise so high that cable operators would lose enough money on video that they stop offering it and go broadband only, which still is hugely profitable. “We’ve already seen precisely that among smaller cable operators,” the report read, citing CableOne, which has been pushing broadband more than video. 
  
  

• Then there’s this write up from Bloomberg’s Gerry Smith that documents that cable operators no longer are offering a better price to keep customers who complain about the size of their bill. Smith: “Pay-TV companies [are pulling] back discounts they’ve used for years to retain video subscribers. With internet service growing faster and more profitable, [video] subscribers … are becoming expendable.”
  
  

• This should be a concern for networks (especially sports networks) that those sub fee increases are close to being maxed. The surest bet to make: expect programmer-distributor battles to become more public, especially as Sinclair takes ownership of the Fox RSNs and ESPN tries to launch its ACC Network. Another sure bet: consumers should keep a close watch on their monthly cable bill because that is certain to keep getting more expensive.

GROUPM SEES TOUGH TIMES AHEAD FOR TV ADVERTISING

• Advertising media company GroupM offered a bearish assessment of the TV ad marketplace, predicting a 0.2% decline this year and a 2.3% decline in 2020, numbers that exclude political advertising. Television “is benefiting from the emergence of new advertisers, certainly (including the app-developing technology companies), but it is hampered by the relative weakness of the medium’s traditional sponsors,” the company said in its U.S. Media Forecast released this month.
  
  
• Still, the report says television remains the place where advertisers spend the most. “It is benefiting from the emergence of new advertisers, certainly, (including the app-developing technology companies), but is hampered by the relative weakness of the medium’s traditional sponsors,” the report said.
  
  
• GroupM predicts that national TV will hold up better than local TV, but over-the-top services will continue to take ad dollars that normally would have gone to television. “The rapid growth of Hulu and Roku – primarily through revenues that would have otherwise gone to traditional national networks – and connected TV are more generally illustrative of the ways in which new players can capture shares of spending on what remains a highly durable medium.”
  
       

SPEED READS

• Nielsen and Leaders teamed up for a report on the FIFA Women's World Cup, and one nugget that caught my eye was the amount of female fans driving conversations around the tournament on social. Per the research, 58% of all conversations on Facebook surrounding the U.S. team were driven by women. Over on Instagram, that number rose to 60%. The World Cup gets underway on Friday with Fox scheduling 22 of the tournament's 52 games on the broadcast network. 
  
  
• Jim Miller took to Twitter today to tease a possible sequel to his ESPN book, “Those Guys Have All The Fun." "I only have about 550 pages of notes," he tweeted. Miller also said the long in-development film adaptation, which at one point was to be directed by James Franco, is "still alive." His book, written with Tom Shales, debuted eight years ago this week.
  
  

• Hearty congratulations to the LA Times' Sam Farmer, who will be honored at the Pro Football Hall of Fame this summer as the winner of the Dick McCann Award. The LA Times has a good write-up, including this quote from Farmer: “It’s surreal.”
  
  

• TNT's Charles Barkley has no time for the media's free agency speculation about where Kevin Durant and Kawhi Leonard will land next season. Appearing on Dan Patrick's radio show, Barkley said: "I'm so tired of all these jackasses getting on TV and acting like they know where these guys are going to go. ... These guys on TV and radio are full of crap. ... I don't think even the players know where they're going."

Barkley voiced frustration with the media's coverage of Durant's pending free agency

• My social media feeds were filled with touching remembrances of former New York Times sports editor and ESPN ombudswoman Le Anne Schreiber, who died Friday at the age of 73. The New York Times has an obituary that is worth a click. On Twitter, The Athletic's Richard Deitsch called her, "The best of all the ESPN ombuds. Such a talented edit person. RIP." CBS Sports' Adi Joseph said: "She led change in the industry. She was incredibly talented. She won’t be forgotten." Bill Simmons tweeted: "We talked a few times in 08/09 during a frustrating work stretch. Her wisdom and sanity really helped. I liked her laugh most of all. She was a special lady."
                       

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