Telecommunications: Impact of Sports Programming Costs on Cable Television Rates

U.S. Government Accountability Office

Telecommunications:

Impact of Sports Programming Costs on Cable Television Rates

RCED-99-136: Published: Jun 22, 1999. Publicly Released: Jul 16, 1999.

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Pursuant to a congressional request, GAO provided information on the impact of sports programming costs on cable television rates, focusing on: (1) the extent to which sports programming costs are contributing to higher cable television rates; (2) how prices paid for sports programming differ for small and large cable operators; (3) the extent to which sports programmers require cable operators to bundle sports programming with other cable programming and how this practice affects cable rates; and (4) whether the salaries of players in major professional sports have risen over the last 4 years, and if so, whether this has contributed to increases in cable rates.

GAO noted that: (1) the data GAO obtained on 15 cable systems and the results from the Federal Communications Commission's nationwide 1999 Report on Cable Industry Prices indicate that sports programming has had a limited impact on the rates subscribers pay for cable television service; (2) some cable industry officials believe that the impact of sports programming costs on cable rates may increase as the result of recent contractual agreements between cable networks and major sports leagues; (3) because of the limitations on the availability of information on prices paid for programming and on the terms and conditions of cable programming contracts, GAO cannot provide definitive judgments on the differences in what small and large cable operators pay for sports programming; (4) according to industry officials, in some cases, small cable operators pay more than large cable operators for sports programming; (5) many small cable operators have been able to lower their programming costs by participating in the National Cable Television Cooperative, an organization that purchases programming on behalf of its members, most of which are small cable operators; (6) officials of the Cooperative believe their organization does not always receive discounts comparable to those given to similarly sized, large cable companies; (7) sports networks and networks that offer general entertainment and sports events frequently require cable operators to bundle their networks with other programming networks into service packages that are offered to cable subscribers; (8) opinions on bundling vary among officials in the cable industry, with some stating that bundling keeps cable rates down by providing an economically efficient means of distributing programming because it lowers transaction and equipment costs for both cable operators and subscribers; (9) others believe that bundling limits the choices of cable customers and can result in higher cable rates for customers who are only interested in receiving certain types of programming; (10) over a 4-year period (1994-1998), the average player's salary in each of four major professional sports leagues has increased by a range of 14 to 64 percent, depending on the sport; (11) during the same period, the prices cable networks pay to carry major professional sports events have also increased as have the rates subscribers pay for cable televsion; and (12) however, the opinions of sports and cable industry officials differ on the extent to which players' salaries have contributed to cable rate increases.