Sunday, January 06, 2008

On the Road

On my way home Saturday from my in-laws I was listening to the Washington vs. Seattle game when I kept hearing over and over again one commercial.

That commercial was a blast against the "greedy" Big Ten Network that is trying to take away college basketball from me. Literally folks they are trying to take "college basketball" away from me, not worthless non-marquee Big Ten games but the whole of "college basketball." The commercial though reassured me that "my" cable company would continue to bring me great basketball matchups along with ESPN/ABC and they would also once again be bringing me March Madness.

Well thank goodness, "my" cable company cares about me so much to bring me those games. Really folks, do the NFL and Big Ten Networks and Cable TV really think the consumers are so dumb? Well yes, and from some of the comments I have read on articles they are right. People are crying about the BTN and NFLN greed and how they just want to suck more money out of consumers. Well to an extent they are right, but folks cmon both parties in these stand-offs are looking to maximize profit. Welcome to capitalism and trying to maximize the bottom line. Cable companies don't want to pay a per-subscriber rate to the networks to carry them on basic tier packages not because they care about "you" the consumer, but rather because they don't want to absorb the cost to carry the network. In order to continue their profit margin they would either have to pass the cost on to all subscribers by raising their already ridiculous rates or they would have to absorb the cost. Both of those would more than likely drop their profit margins. Plain and simple. The "Networks" don't want to be put on a "sports-tier" package because they don't want cable companies to be able to maximize profits off their brand without adequate compensation because of the fear of cable slapping "unwanted" sports networks in the package at a higher rate off of the draw created by the "Networks" brand. It is easy to see that their isn't necessarily a bad-guy or good-guy in the argument. There are two parties trying to maximize profits and that is what this is about. No one party is right, no one party is wrong.

However, guess what Mr. or Mrs Consumer, you do have to suffer if you really want to see said games. It sucks for you, but welcome to capitalism at its best. If you want to see the brand, you have to pay for it. That is life, it sucks but that is life.

Now I have thought of a possible solution to the whole situation (I am guessing one that one of the parties in this dispute had to at least suggest). Why not offer said networks as a single channel add-on (ala-carte style) to the basic cable package. That way the "Network" knows that another company is not capitalizing on their brand without adequate compensation and cable companies don't have to absorb costs across a demographic that might not even be interested in said "Networks." What do you think folks? The NFL Network wants, I believe about $.65-$1.00 per subscriber. Why not meet in the middle, cable offers the channel ala-carte for say $1.50 per month while paying the NFL Network $1.00. Yeah the NFL doesn't maximize profit and obviously neither does Cable, but guess what they both win because they satisfy the consumer.

Just thoughts. I personally don't have much invested in the debate since I have DirecTv and have both networks already. We will see what the future holds.

In other news, I read one article on the net (I can't find the site currently) that stated cable-companies pay $3 per subscriber for ESPN. Now if I were a cable-consumer not interested in sports that would make me mad, but do you think Cable companies would dare take on ESPN? No way, especially now that ABC owns the entity and can use major leverage against cable companies. Captalism folks, Capitalism!


  1. I agree that these disputes are about amounts of money, not about principle (which is why the NFL's propaganda machine message that "Big Cable" is tyrannically keeping the NFL Network from us is particularly annoying).

    With college sports, there are other considerations. My tax dollars help fund the University of Minnesota athletic program: does that program then get to treat itself as a "product" that it must maximize profit on? Is there a further consideration to the taxpayer--do we have a "right" beyond that of a customer to have access to the "product?? Furthermore, the players aren't paid: isn't this a pretty clear place of exploitation for profit, if the Big Ten is treating itself like a "product" whose "profit" must be maximized (it makes their "student athlete" rhetoric a little more difficult to swallow if that's the case)?

    In the dispute between the NFL Network and "Big Cable," it's an entirely capitalistic dispute with no right or wrong: they're fighting not on principle, but over amounts of money.

    In the dispute between The Big Ten Network and cable companies, publicly funded institutions are using unpaid student athletes to try and maximize "profit" on their "product": that's a slightly different thing altogether.

  2. Let me add a quick clarification.

    I don't believe colleges are exploiting their unpaid student athletes. Colleges aren't private businesses with individuals making a direct profit: in theory, any money a university makes gets pumped back into the university. So student athletes aren't "used" to make anybody a profit, but are rather "used" to improve the university. As an graduate who has received donation requests knows, there are all sorts of ways a university hopes its students improve the university.

    The student athletes are, however, being exploited by private industries. The TV networks and athletic gear companies do make profit off the performances and recognition of the student athletes: individuals are making a profit off the student athletes. TV companies make an obvious profit by showing their performances, and athletic gear companies sell jerseys with the star players' recognized numbers.

    So in general, I don't think universities are "exploiting" college athletes, but use them as they use many students to try improve the university. But some private industries (like the cable companies?) are exploiting college athletes, as they make a direct profit on their activities and recognition.

  3. Anonymous10:20 AM

    I agree with you on the difference between the Big Ten Network and NFL Network.

    However, as much as the public institution is funded by public tax-payers dollars, there is no denying that college athletics is a business with a "product." People pay to watch the "student-athletes" perform their skills as entertainment. Another thing to consider is how much of your "tax-payer" dollars actually go into making the sports entities at these institutions run? College Athletics is almost its own economy. In my sleep last night I was thinking about the "student-athletes" and in a way they do get paid (at least some of them) by getting their education for free via scholarship.

    The real question to ask is if these individuals have a desirable "commodity" like their athletic talent they are getting screwed. They don't get to determine the value of their "product" (realize I am using the language of capitalism and economy even though I may not agree with it). Instead, the system of college athletics and businesses like the NBA determine the value of their "product." It is obviously more complex than that, but in college athletics as big business the "athletes" are the big losers.

    Getting back to the big-ten network, one theory of economics is that there is a never ending field of opportunity to create a product and demand. The Big Ten has determined that they have a product that is in demand and decided to "sell" their major games to other networks, but keep their other games to their own distribution. Think of it this way. Yes the Big Ten is a publicly funded entity, but it isn't like we were getting to watch all of their games for free before the Big Ten Network came along. The Big Ten gets paid by CBS/ABC/ESPN, etc. to air their games, they have determined that their less marquee games they would keep to themselves rather than sell off. They are essentially trying to cut out the middle-man. The problem is the middle-man is already aligned with Cable providers because of their "pull" via their capital that is in demand. ESPN gets $3 per subscriber from Cable to air their network, plus then add in advertising and they make a profit off of the games they have purchased. The Big Ten is saying we could just cut out the middle-man and make the profit ourselves.

    Which do you feel better about: your public funds helping ESPN make a profit or your public funds helping the institution your tax-dollars to make a profit thus increasing the overall success/product that the institution can do. With that money created, better athletics could be achieved thus leading to a higher demand for an education from that institution, leading to a need for better educaters, etc. (again more complex than this, but simplified for the sake of discussion).

    I often wonder why we the "consumer" feel entitled to our sports for "free." Say you as a professor were a great lecturer, would you let anyone and everyone just come into your classroom to hear you for free? (this is just a thought experiment, we can see where it goes)

    **addendum** I was writing this before your second post of clarification, we can see where it goes.

  4. Anonymous1:14 PM

    The overhwelming majority of college athletic programs at land grant universities are self-supporting, and do not receive taxpayer subsidies, unless we are talking about stadium subsidies, an area which the universities may have a better record than the NFL. Wisconsin's renovation of Camp Randall, iirc, was done through private donations and revenues generated by the football program itself.

    Also, when University employees, like coaches and athletic directors, are making 7 figure annual incomes, while the entertainers receive scholorships worth 50 or 60k, over four or five years, I think it is safe to say that a cartel is exploiting a labor pool. If there were only 10,000 people in the country capable of doing the work of the typical Best Buy employee, and they were doing that work for 15k per year, while Best Buy's chief executive was making 4 million a year, you'd be safe to assume that a cartel was operating in a fashion which was exploiting labor.

    The cynicism that big time college athletics should warrant dwarfs that which is reasonable for openly professional athletic entertainment. With each year's passing, the more convinced I am that the University of Chicago got it right.

  5. Colleges have a better record on demanding public funds for stadiums (and I would argue that colleges have more of a "right" to the public funds anyway), but then I also believe that municipalities that fund professional stadiums should make demands about usage, too (such as demanding a no-blackout exemption). And even if a university's athletic department is self-funded, it is not a separate entity from the state-funded institution: in fact, you could argue the only way it maintains its ability to be a self-funded entity is through it's association with a state-funded institution.

    You don't have to convince me of a terrible standard in the difference between coaches and players in colleges: it's absurd that a coach can pretty much leave at any point, but a player needs to sit out a year if he/she wishes to transfer (and get the coach's permission to transfer!). I think you could fairly argue that the coaches are exploiting the players.

    However, again, universities don't make a "profit," unlike private industries; if the university itself benefits financially from the activity of a student/athlete, that money is pumped back into the university to improve the university. Certainly there's still a "cui bono?" question, but it's not such a direct profit motive. And universities expect/ask/hope that their students make contributions to make the university better. When you graduate, you're going to get calls and mail asking for donations. I worked in the admissions office at a small public college, and the student tour guides essentially worked for free (at most, they earned $1 worth of on-campus food per tour, which was usually about an hour). So student-athletes contributing to make the university better (through the money raised by their performances) isn't terribly different philosophically than all the other ways students are "used" to improve a university.

    That's why I have a bigger problem with Nike making a profit off of selling "Michigan #4" jerseys without a penny going to Chris Webber: that's a private business making a direct financial profit off the recognition of a completely unpaid party. And there are all sorts of other ways private industries profit from student-athletes (sure, they pay the non-profit conferences, colleges, and NCAA for the right to exploit the students, but they're still making a profit).

  6. According to wikipedia, the state of Minnesota pays 52% for the new Gopher football stadium.

    My (completely fantastical) belief is that once the state subsidizes that stadium, what occurs in that stadium is no longer strictly the property of the teams that play in that stadium. I believe that the state, with its 52% interest in the stadium, should demand that all games occurring in that stadium be available on broadcast television (since technically we the people "own" the broadcast networks, otherwise "our" government body, the FCC, wouldn't regulate them).

    Like I said, it's completely fantastical belief. But I think if states are going to fund stadiums, they have a proprietary interest in what occurs in the stadium; while negotiating over funding the stadium, the state should make certain demands in return for public funds.

  7. Anonymous12:43 PM

    PV, NFL teams would certainly never agree to such a thing, so what you are really saying is that the taxpayer shouldn't subsidize stadiums. I agree completely.