New Numbers Suggest Cord-Cutting Revolution Not Imminent by Craig Edwards July 24, 2015 Ratings news were a mixed bag for Major League Baseball over the past few weeks. The Home Run Derby was the number-one rated cable show of the week and saw a significant increase from the previous year with more than seven million viewers. The All-Star Game itself was a disappointment in the ratings, as the broadcast was at its lowest-viewed level of all-time — although it did have more viewers than any other program that week, and the ratings were in line with the past few years. The best news MLB received in the ratings department came in the form of local broadcasts, which are once again dominant. The most troubling item over the last month was the news that ESPN had lost more than seven million subscribers in the past four years, perhaps a sign of the crumbling cable model. Breaking each one down: All-Star Game and Home Run Derby The Home Run Derby was a clear success for MLB after a disappointing rain-delayed derby last year. The derby did a 4.9 rating, a big increase over the 3.9 from 2014 and aided by the excitement of a new timed format that kept the event lively. The show averaged another 75,000 viewers digitally over the WatchESPN app, per Forbes, with more than 250,000 unique viewers. The derby’s viewership nearly doubled the second-highest rated cable show of the week (TNT’s Major Crimes) and was the seventh-most watched show of the week when including broadcast network shows. A Jeter-less All-Star Game hurt television ratings in New York, and overall the ratings suffered a drop from 7.1 last year to 6.6 this season, the lowest in history for the All-Star Game. While the drop is discouraging, it is in line with its fairly steady ratings over the last five seasons. The All-Star Game won the ratings for the week, both in the 18-49 demographic and overall viewership with roughly 11 million people tuning in for the exhibition. One of the more interesting pieces from the All-Star Game ratings is thatits competition held fast to their typical ratings, meaning people were specifically turning their televisions on for the event. Local Television Ratings The biggest argument in favor of MLB’s continued health and popularity are probably revenue and attendance, but likely not far behind are the television ratings baseball delivers in some of the biggest markets in the country. With a presence in the 18 largest television markets and 25 of the top 35 markets in the country, baseball does very big ratings. At the halfway point of the season, MLB broadcasts ranked first or second among cable programs for 26 of the 29 United States-based teams, and first or second among all programming for 13 teams — with 10 teams ranking in first place, per Forbes. The full ratings are in the graph below. Kansas City has captured the attention of the city with their World Series run and competitive season, leading the way in television rankings. The Dodgers remain an embarrassment, with millions of households in Los Angeles unable to get Dodgers’ games due to failed negotiations between Time Warner Cable Sportsnet LA and cable providers. Not all markets are the same, so the ratings points above show how popular each team is within its particular market. Average total-viewer numbers are shown in the graph below (data also from Forbes), where unsurprisingly, the Yankees’ local broadcast has more viewers than any other team. While the Rays are often the butt of jokes for their attendance problems and poor stadium environment, they are much closer to the middle when it comes to ratings and viewers, an indication that the stadium is the problem, not the team or the market. While MLB can broadcast just 15 games per day, the reach of each games is very wide due to each team producing a broadcast of the game. Adding up the numbers from the last graph, there are nearly 2.5 million people watching local baseball on a near-nightly basis. Those figures also do not include the number of people watching games in secondary markets nor do they include the nationally televised broadcasts from ESPN, Fox, FS1, or the MLB Network. All told, there might be more people watching professional baseball every night than the Tonight Show, and baseball fans are watching for three times as long. As long as the current cable model is alive, baseball should continue to see large local television deals. However… ESPN Losing Millions of Subscribers Potentially most harmful to MLB’s current revenue streams would be a threat to cable’s current bundling model where consumers buy a big package of channels for one price as opposed to picking and choosing the channels they wish receive. ESPN’s recent news that they have lost more than seven million subscribers over the last four years, including three million over the last year, per the Wall Street Journal, is discouraging news for those who hope for continued megadeals to broadcast local MLB teams. While the ESPN losses at this point represent just a small percentage of their subscriber base and, for the most part, the losses have more to do subscribers leaving cable altogether rather an issue specific to ESPN’s programming, if the numbers represent an irreversible trend, the cable model could evaporate rather quickly. An article at Awful Announcing by Dave Warner, who also writes at What You Pay for Sports, a site whose mission is to keep consumers aware of how much their local cable bill goes towards sports programming, paints a difficult road ahead if the loss of subscribers keeps increasing at current rates. If the losses keep increasing, Warner writes, ESPN will have lost more than half of its current subscribers by 2020 and face a significant downturn in revenue. If losses go at that rate, the current bundling model will die a very swift death, likely benefiting consumers who will then be able to pay for what they choose to watch. On the other hand, Comcast just reported minimal cord-cutting in their last report and we do not yet know whether losses will grow or remain steady as people seek other digital entertainment options. If ESPN continues to lose 3.5% of their subscribers every year at a steady rate and continue to increase their per-subscriber charge like they have been, their revenue will continue to grow over the next five years just as it has over the last five. For ESPN’s part, they continue to invest heavily in live-game broadcasts, and those broadcasts continue to provide solid ratings and the resulting advertising revenue. Regional sports networks have the current advantage of live sports programming, but they are disadvantaged relative ESPN, as much more of their revenues come from per-subscriber costs to cable companies as opposed to advertising. MLB teams are benefiting from the power of companies like Comcast and Charter and the cable-provider model to force consumers to pay for a wide variety of channels. When that model ends, so do the exorbitant local television rights fees. Some say the revolution is at hand, while others are banking on the model continuing for quite some time. MLB.tv is well positioned to get fans their baseball fix, although in a considerably less profitable manner, should the current model deteriorate. For right now, however, the model is still only showing signs of slowing. A full stop might be some time away.