This may be more information than you want to know, but a little cable tv economics...
First of all, my guess is they are paying less than $1.10 per month if they do get a deal.
Mediacom is between a rock and a hard place, and the other cable providers will be also. Let's say for example that Mediacom has 1 million subscribers in BTN territory, which is about right I think. If 5% of these customers are die hard sports fans and go to Directv to get the channel, then Mediacom would loose 50,000 subscribers at a conservative value of $3,000 per subscriber, or $150,000,000 in value for the company. Mediacom would also lose the chance to sell internet and phone service to those 50,000 customers. At $80 per month of average revenue those 50,000 customers would cost them $48 million a year in revenue, about half of that is EBITDA, so even if they have to eat the $5 -$6 million in fees they are ahead. But they will for sure pass on the cost.
BTN Economics-
It is no coincidence that Directv is carrying the BTN because Directv is owned by Fox, and surprise, surprise, Fox owns 49% of the BTN. Directv would love to have no one else carry the BTN and they pick up all those die hard sports fans that would probably also buy the full sports package they sell. There are probably 20 milion cable subscribers in the BTN target. If Directv picks up 5% of those cable companies customers that do not sign up for the channel, they would gain 1 million customers. The value of every Directv customer is valued by Wall Street at around $4,000 last time I looked and that means they would pick about $4 billion in value.
Does anyone think that Fox is not going to do everything they can to have Directv pick up as many of those customers as they can? Over time I think they are planning on a bigger than 5% take rate because of the BTN. If all the cable companies cave they still get value out of their interest in the BTN.
Does anyone think they will not do this in the next few years for all the major conferences? That is why all the big cable companies are fighting this. The guys at Fox are no dummies, and if they have to loose a couple hundred million getting the BTN started, look at the return on the Directv side. Do not be surprised when it is announced for the SEC or BIG 12 channel that the big cable companies end up owning a piece of the pie.
Anyone who thinks the BTN will fail does not understand all the reasons for doing it. Of course it is just another way to get more money out of the consumer for things that used to be advertiser funded. But hasn't that been the whole model of ESPN since it started?
First of all, my guess is they are paying less than $1.10 per month if they do get a deal.
Mediacom is between a rock and a hard place, and the other cable providers will be also. Let's say for example that Mediacom has 1 million subscribers in BTN territory, which is about right I think. If 5% of these customers are die hard sports fans and go to Directv to get the channel, then Mediacom would loose 50,000 subscribers at a conservative value of $3,000 per subscriber, or $150,000,000 in value for the company. Mediacom would also lose the chance to sell internet and phone service to those 50,000 customers. At $80 per month of average revenue those 50,000 customers would cost them $48 million a year in revenue, about half of that is EBITDA, so even if they have to eat the $5 -$6 million in fees they are ahead. But they will for sure pass on the cost.
BTN Economics-
It is no coincidence that Directv is carrying the BTN because Directv is owned by Fox, and surprise, surprise, Fox owns 49% of the BTN. Directv would love to have no one else carry the BTN and they pick up all those die hard sports fans that would probably also buy the full sports package they sell. There are probably 20 milion cable subscribers in the BTN target. If Directv picks up 5% of those cable companies customers that do not sign up for the channel, they would gain 1 million customers. The value of every Directv customer is valued by Wall Street at around $4,000 last time I looked and that means they would pick about $4 billion in value.
Does anyone think that Fox is not going to do everything they can to have Directv pick up as many of those customers as they can? Over time I think they are planning on a bigger than 5% take rate because of the BTN. If all the cable companies cave they still get value out of their interest in the BTN.
Does anyone think they will not do this in the next few years for all the major conferences? That is why all the big cable companies are fighting this. The guys at Fox are no dummies, and if they have to loose a couple hundred million getting the BTN started, look at the return on the Directv side. Do not be surprised when it is announced for the SEC or BIG 12 channel that the big cable companies end up owning a piece of the pie.
Anyone who thinks the BTN will fail does not understand all the reasons for doing it. Of course it is just another way to get more money out of the consumer for things that used to be advertiser funded. But hasn't that been the whole model of ESPN since it started?
