Thoughts On Cable And Satellite Going A La Carte

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Includes: CBS, CHTR, CMCSA, T, TWX
by: Rocco Pendola

Summary

CBS and HBO's Internet-only offerings will prompt other networks to consider severing traditional ties with cable and satellite companies.

Major professional sports leagues don't have to wait.

As the NHL example illustrates, cable and satellite hold fans hostage for access to a relatively small batch of programming.

Once sports falls, the cable and satellite establishment will crumble leading to a mad M&A scramble.

Over the weekend, I entered into serious discussions with my wife about our household's video entertainment situation. This impromptu summit took place after I stumbled upon a somewhat startling fact: We subscribe to DirecTV (NYSE:DTV) for one reason and one reason only - NHL Network (NHLN). And we - or, I should say, I - only have NHLN for one reason.

This personal experience speaks to the larger discussion about the notion of cable going a la carte.

I started thinking on this due to recent moves by CBS (NYSE:CBS) and Time Warner's (NYSE:TWX) Home Box Office (HBO) to offer their services "over the top," which, on the ground, means without a cable or satellite subscription via the Internet. Others will certainly follow, but they're likely to use the CBS and HBO experiences as litmus tests.

That said, at least one space exists that doesn't need to wait for CBS and HBO's results - professional sports. It's the last bastion of appointment viewing. The one thing that keeps people like me from cutting the cord. In fact, in my NHLN example, I'm effectively forced to not only subscribe to DirecTV, but keep one of its higher-priced packages because NHLN isn't part of the lower-tier offerings. My local cable provider, Time Warner Cable (TWC), isn't an option - they don't have a deal with NHLN.

This example further highlights the minutia, the lame examples we can all relate to that keep us from ditching cable or satellite. The powers that be essentially "force" me to keep NHLN because of archaic and unnecessary blackout rules.

Follow me here - I subscribe to both NHL Center Ice and NHL Game Center. Center Ice is the package available through DirecTV. Game Center is the Internet-delivered service sold by the NHL.

When NHL Network or Comcast's (NASDAQ:CMCSA) (CMCSK) NBC Sports Network (NBCSN) broadcasts an NHL game nationally I can't access it via Center Ice or Game Center. It's blacked out. I can only watch on NHLN or NBCSN. This is a problem given that NHLN (and NBCSN) televises solid matchups throughout the year, including part of Hockey Night in Canada every Saturday and several games featuring my favorite team, the Toronto Maple Leafs.

Across sports, you can come up with similar examples. And, often, they come as a result of the blackout rules that govern local and/or national broadcasts. The NHL, and I presume other leagues (you tell me!), could buck this trend.

If I'm the NHL, why do I continue providing access to NHLN only through a traditional cable or satellite subscription? To have access to households which will probably never turn on NHLN other than by mistake? To collect whatever fee the cable and satellite companies pay me? To ensure that my network isn't made available to TWC subscribers in markets such as Los Angeles, which is where I live? It's illogical.

Take NHL Network over the top for a monthly fee and/or bundle it as part of NHL Game Center. Or just ditch the notion of having your own network to begin with and stream all of your non-game programming via NHL.com and Game Center. Lift blackout restrictions on NBCSN games, making them available through Game Center. Pave the way for broadband-only households to access all of your programming with no strings attached.

Of course, I would view this as a consumer-friendly solution to my problem. But it also speaks to the larger notion of cord cutting in the wake of the CBS and HBO announcements.

There's not a whole heck of a lot propping up the cable and satellite subscription infrastructure. If HBO is willing to say at least a partial goodbye to the cash it collects per subscriber from cable/satellite (we're talking billions of dollars), there's no reason other marquee franchises shouldn't follow suit. Sports lead the pack as something that keeps some people from ditching cable or satellite. Once they completely fall, the landscape really changes.

Think about it - the NHL is pretty much completely accessible without a subscription with the exception of these pesky NHLN and NBCSN national broadcasts. So the relationship between cable/satellite and the NHL hangs by a string that's thin, but incredibly strong all at the same time. It's time for the league to cut the twine so hockey fans can cut the cord.

I have to think the recent seven-year deal the National Football League (NFL) signed with DirecTV includes provisions for a full over-the-top service. The official announcement from earlier this month noted:

The new agreement also expands DirecTV's rights to stream NFL Sunday Ticket live on mobile devices and via broadband ...

Once you have HBO as well as a considerable chunk of professional sports leagues completely over the top, other big names will follow. At this point, cable and satellite subscribers will look at their packages and discover that everything that's left - networks such as CNN and HGTV - are expendable. Many of these networks will go extinct and cable/satellite companies, particularly those unprepared to go broadband-only in a big way, will scramble to merge and acquire in a bid to stay alive.

But it all comes down to sports. HBO is big, however it's nothing in comparison to sports. While the NHL's my example - and a good illustration - it's got nothing on the other major professional leagues. That said, if hockey made the move, it would absolutely send ripples through the cable and satellite establishment. Even if the NHL has to tap lawyers and break contracts to get it done, it's high time to crumble the cable and satellite empire once and for all.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.