Live Sports Remain Ace In The Hole For Cable Companies Against Cord Cutters

With Apple’s recent announcement that it will soon launch a paid streaming music service (Apple Music), it’s pretty clear where that industry is headed and who the dominant players will be. Apple and Spotify will battle it out for supremacy, with the former enjoying a massive built-in advantage of already having nearly 800 million existing customers.

If only a small percentage of those customers sign up for Apple Music, Apple will once again wipe out its competition, and listeners will eventually warm to the idea of paying $10 per month to access millions of songs and videos on multiple devices. In the end, this model is pretty good and easy for consumers to understand, so everyone wins – everyone, that is, but the artists, who will continue to face an uphill climb in today’s environment.

Meanwhile, the future of television is much cloudier, with various competing interests making the landscape far messier and difficult to predict. Given the uptick in so-called ‘cord cutters,’ most simply assume the future of TV includes more a la carte options. Consumers, for instance, will bundle together Netflix, Hulu and HBO Go, the network’s new standalone app, to create the ultimate viewing experience, all without having to paying for channels they don’t use.

Looking at the a la carte model a little closer, however, it becomes clear that it has limitations and won’t satisfy everyone. For one, it’s not as affordable as some make it out to be. The combined price tag of those platforms and broadband costs approaches $100 per month.

The bigger issue is live sport. Without a cable or satellite subscription, it’s very difficult to view live sports online. The National Football League limits access to Verizon Wireless users and those who sign up for the NFL Sunday Ticket on DirecTV, while home-market pro baseball, basketball and hockey games are blacked out online.

Meanwhile, unlike HBO, ESPN doesn’t offer a standalone app. Neither does Fox Sports 1, NFL Network, MLB Network, the Golf Channel or a bevy of other targeted sports networks. Plus, ESPN, due to its reliance on the industry’s highest carriage fees, is very unlikely offer such a product any time soon.

There is a possible ray of hope for would be cord-cutting NFL fans. The league will broadcast a Week 7 matchup between the Jacksonville Jaguars and Buffalo Bills on Yahoo, which reportedly beat out rivals Facebook and Google for the streaming rights. Could this be a new model for the future that will allow more people to shut off their cable and satellite services? Perhaps, but it’s hard to ignore that this will likely be one of the least attractive games of the upcoming NFL season, pairing two teams that have a relatively small national following, not to mention a recent history of losing. It’s entirely possible the league is attempting to put lipstick on a proverbial pig rather than piloting a program that could eventually be applicable to all of its games.

It might be time to admit that coming up with a consolidated platform that provides on-demand access to a wide variety of old and new shows, as well as movies and live sports, is proving to be more difficult than most of us assumed. The landscape has multiple layers and a host of competing interests, and at this point it seems almost impossible to sift through them all.

In essence, technology has made it easier and more convenient than ever to watch TV, but for now, it hasn’t made it more cohesive or affordable. Think about it another way: No company in the world is as powerful or innovative as Apple. If it hasn’t figured out a way to bring all these parties to the table and deliver a viable solution to the marketplace – and it’s not for lack trying – who can?

Unfortunately, there is no definitive answer. All of which is good news for the status quo and bad news for the consumer. Indeed, while there’s no question that the universe of cord cutters will continue to grow, it’s equally clear that the powerful pull of live sports will prevent that trend from becoming too widespread. Ultimately, this means the high cost of televised entertainment won’t be going down anytime soon, while companies such as DirecTV, Comcast, Dish Network, and Time Warner Cable TWC will continue to have a powerful position.

By: Ross Gerber

Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an independent investment advisory and wealth management firm with approximately $360 million in assets. Gerber Kawasaki clients and employees may own positions in various companies mentioned in the article.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.