MVPD Sports Programming Rebates Called Unlikely Even With Cancelations

If there were no more live sports content this year, a voluntary programmer rebate might be in the cards, said sports lawyer and former United Football League Commissioner Michael Huyghue. With signs pointing to some live sporting content returning in coming months, programmers "are just going to ride it out," he said. Huyghue said a court-ordered rebate in response to subscriber or MVPD litigation is more likely than a voluntary one.

A rebate reduces the value of the programming, making it tougher to convince subscribers to keep paying that amount in the future, Huyghue said. "You run a greater risk … your customers will look with more scrutiny at what they're getting," he said.

Rebates make sense for leagues and programmers to not lose some fans, but shortsightedly they won’t offer one, said University of Dayton sport management professor Peter Titlebaum. “Everybody’s hurting, you don't want to lose your base.” He said programmers and leagues are likely somewhat concerned about litigation, albeit not enough to act proactively even though litigation is inevitable.

Not everyone agrees. A rebate could happen if the money returned to the operators were passed on, or at least partially, to subscribers and if the programmers could promote themselves as being particularly caring for customers, emailed Duquesne University professor Robert Bellamy. For carriage deals expiring relatively soon, the incentive is on the programmers to say no, since they have a streaming option as well.

For longer carriage deals or if there are equity stakes between the programmers and carriers, the prospect is better, said Bellamy. He said ESPN more so than regional sports networks has the ability to deny rebates because it has Disney clout and has streaming platforms to bypass distributors if they insist on a rebate.

Whether programmers must offer rebates depends on the precise wording of their contracts, which are commercially sensitive, emailed Penn State Center for the Study of Sport in Society Executive Director Steve Ross. He said as cord cutting becomes more prominent, a significant rebate offered as part of some long-term renegotiated agreement with a cable operator could be conceivable.

Rebates came up repeatedly in cable ISPs’ quarterly earnings calls last week. “We would expect to get some relief for sure,” Altice CEO Dexter Goei said. He said Altice had initial discussions with multiple major sports programmers about rebates.

Charter Communications CEO Tom Rutledge said sports costs make up more than half of the $60-some it pays per subscriber in wholesale costs for programming. The expense of sports "makes the whole product difficult to sell," he said. He said if live games return this year, customers likely won't get rebates. He said due to content contracts, Charter has very little direct control. Ultimately, athletes receive the money "and at some point, somebody has to give up their money and give it back to the customer and that hasn't happened yet," he said. ESPN and the NBA didn't comment.

"Sports will come back," said Comcast CEO Brian Roberts. When it gets clarification from leagues, it will pass that information to customers, he said.

A cable ISP executive said the MVPD contacted programmers but was told no. He said AT&T's Turner might consider one since it supposedly withheld its payment to the NCAA for March Madness and so would be in a position to rebate money paid for the programming. AT&T didn't comment. Programmers wouldn't comment on the record.

Generally, any rebate or refund would have to start with the sports leagues or teams, since the MVPDs paid the networks for the content, and they in turn paid the leagues, the cable executive said. The New York Attorney General's Office focused on sports fees MVPDs charge video subscribers when it announced last week it had sent letters to MVPDs pushing for them to eliminate or reduce sports programming fees. That drew the ire of some in the cable industry. ACA Connects CEO Matt Polka blamed others in the distribution/programmer chain: His members "have been caught in the middle of these sports and media titans for far too long.” The AG's office emailed Friday it targeted MVPDs first since they charge customers directly, with future steps it might take still to be determined.

An NAB spokesperson emailed that broadcasters have never been the cause of high cable rates. Citing Kagan, he said cable programming fees are four times higher than the fees received by TV stations, though broadcaster ratings dwarf cable networks'.