Cable’s ESPN Dilemma: Wildly Popular -- but Costly

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Of the 20 most-watched programs ever on cable TV, 16 were episodes of Monday Night Football -- a show that Walt Disney’s ESPN sports network didn't begin broadcasting on cable until 2006. ESPN is also the only cable channel ever to have more than 20 million households watching a regularly scheduled program at once -- a feat it’s accomplished four times. That ratings strength is the reason most cable operators believe carrying the world’s No. 1 sports network is essential to keeping 99 million U.S. pay-TV subscribers shelling out monthly fees. Now system operators are being forced to figure out how much subscribers are willing to pay for sports -- and at what point they'll throw in the towel.

ESPN charges cable operators an average $4.69 a month for each subscriber that gets the channel, up from $4.34 last year, according to researcher SNL Kagan. Cable networks such as CNN or TBS charge less than a dollar, says Kagan’s Derek Baine. But paying more for ESPN is only part of the problem. Disney charges distribution fees and collects ad revenue from its other channels, including ESPN2, ESPN Classic, ABC Family, and Disney Channel. To get ESPN, pay-TV systems must take bundles of channels, including some less popular. ESPN and ESPN2 account for almost 20 percent of the wholesale cost of the average pay-TV subscription, says Sanford C. Bernstein analyst Craig Moffett.


Cable’s ESPN Dilemma: Wildly Popular -- but Costly