Lemur Blues

The Wall Street Journal

Renewing sports broad- casting deals with Major League Baseball, NASCAR and other entities is getting more expensive for ESPN. With ad revenue down, that could put the cable network in a bind and have repercussions for parent company Disney.

ESPN spends about $2.2 billion annually for broadcast rights to major sports in U.S., including $300 million for 80 Major League Baseball games, $270 million for the final 17 NASCAR races and $1.1 billion for the National Football League's Monday Night Football.

ESPN's NFL payments nearly doubled during the last round of negotiations, and each of its other major rights fees rose by at least 20%. "You have increasing competition for a finite set of sports properties, and that is going to squeeze margins," says Lee Berke, sports media consultant.

Competition is likely to increase. For example, Comcast's 24-hour sports network Versus, saw its audience grow 22% in 2008, and it tried to acquire the rights to the NFL in 2005. Versus executives have vowed to bid against ESPN for additional rights in the future.

So how will all this play out? Well, the Lemur's not just going to stand still and lose money. I'm thinking that they will have to play hardball with cable providers, in the same kind of winning move that made NFLN such a welcome addition to nearly no cable packages.

When push comes to shove, I suspect all will go along with it, because the Lemur demographic is just too important to lose for advertisers, even in a down economy, and there's too big of a chance that guys who are Lemur-less will tell their cable provider to go pound sand.

So then the cable company will have higher costs... which they'll pass along to everyone. Some subscribers will slide over to the dish, or with increasing frequency, to the Web for a la carte programming.

And eventually, by which I mean within ten years, the broadband pipe will be big enough to put that cable provider in the same place as the music industry. (Which, considering just how many people really, really, really hate their cable provider, can't come fast enough.)