I promised myself I wasn’t going to get into this mess, but I just can’t help myself…
Last year Pac-12 commissioner Larry Scott laid out a beautiful vision for Pac-12 sports. All football games to be televised nationally! ABC/ESPN and FOX/FX to carry our “big” games and the rest to be on the nationally available Pac-12 network. A deal has been cut with the big 4 cable companies to ensure just about everyone (subtext: who’s willing to switch providers) will be able to get the Pac-12 network! Plus there will be streaming available too!
Sound great, right?
Yes it does… only one problem, they made a deal with the devil, or at least his video content branch office: the cable companies, who are very adept at making it sound great, but in truth it’s nothing like promised.
When the network launched last week we quickly found out how UN-foolproof the contract Scott negotiated with the ‘big 4′. Apparently the weren’t obligated to carry the Pac-12 network just about anywhere, even in areas well within the “league footprint”, much less across the country. At the same time, the Pac-12 is bound that they can’t stream to non-cable-subscribers, even for a fee, even in regions where they have no ability to get the content, at any price, from a cable company. And I won’t even start (at least in this post) about the whole regional channel problem, where much content will be unique to regional channels and there are currently ZERO providers who offer the ability to get more than one regional channel at any price.
But this isn’t even my complaint for this post. The retort to all the above complaints is that this was the best way to get the Pac-12 to the most homes in the quickest fashion and similarly the best way for the Pac-12 to capitalize (literally: make money) on the Pac-12 network right now.
Frankly, it’s a fair argument and they’re probably right.
But it’s also very short sighted.
Everyone in the know acknowledges that the cable companies are in a tough spot right now. Internet streaming is gutting their business. Netflix streaming was the first salvo that dramatically undercut the cable companies. Over time there will be very little the cable companies can do to prevent customers from getting what they always wanted all along: a-la carte programming directly from the vendor.
But the problem is that the percentage of viewers who are ready for an all-streamed solution is small, particularly outside technically savvy regions like Northern California. So what do you do when you’re the Pac-12 network? Do you eschew the cable providers and go all-streaming knowing that in the short term you’re going to lose some viewers? Or instead do you make a deal with the devil’s local branch office?
I’m actually OK with making the deal, with one caveat… you have to come up with a transition plan/strategy. How are you going to get out of that deal in 5-10 years when just about every American household is streaming capable and all the cable companies are doing is holding you back?
And unless Scott is a super-genius who’s written in some key time-bomb/exit clause into his contracts (which the way the last month has unfolded seems exceedingly unlikely), that’s the problem.
This contract was written explicitly to ensure that the Pac-12 CAN NOT make the transition. The reason is simple: you have to have an agreement with a cable company for the Pac-12 to be able to stream content to you. In other words the cable companies have ensured that they’re the arbiter of the Pac-12 Network. There’s no escape. The only way out is a cold-turkey approach, one that will tick off people who are stuck in multi-year contracts with the cable company when the Pac-12 finally decides to stop selling the Pac-12 network to the cable companies and stream independently. Those customers will, for a year or two, be stuck paying their cable bill without getting the channels they signed up for AND be asked to pay independently for the Pac-12 streaming service.
The right solution was to start off all-streaming and charge for that stream. There are enough die-hard Pac-12 fans who are young/savvy enough to start off with meaningful revenue in 2012. Work aggressively to get a plug-in on all the major streaming boxes from the Roku to the Bluray players and the TVs to make it available to the somewhat savvy. The NHL did it that way, and I don’t know how successful it is right now, but I guarantee you in the long run they’re going to look like geniuses.
But not the Pac-12.
5 years now when business magazines and websites will be lauding the NHL for re-inventing itself after their strike and getting ahead of the technology transition, from being locked in to the cable companies, the Pac-12 will be mired in binding contracts and we’ll be wondering what the heck Larry Scott was thinking in 2012 when he made the remarkably short-term decision to make a deal with the devil.