ESPN has gotten too big for its own good

ESPN’s costs are defrayed whenever it passes on surcharges to cable operators. But as viewers begin to squawk over rising cable bills, cable operators protest that the sports giant has gotten too pricey and too coercive in its terms. Outspoken Liberty Media CEO Greg Maffei, who oversees Starz and QVC, has called ESPN’s fees “a tax on every American household”—the key word being “every.” Because cable channels are bundled into packages, tens of millions of people who never watch sports end up paying for it anyway—and paying a lot more than they would for a package that didn’t include sports channels, ESPN the most expensive among them. Cable carriers who balk and threaten to drop ESPN must also contemplate losing its corporate brethren: the Disney Channel and ABC Family.

“ESPN, through … sheer muscle, has been able to say to us, ‘You will carry this service on the lowest level subscription you offer, and you will make all of them pay for it,’” says Matt Polka, CEO of the American Cable Association, a trade group. “My next-door neighbor is 74, a widow. She says to me, ‘Why do I have to get all that sports programming?’ She has no idea that in the course of a year, for just ESPN and ESPN2, she is sending a check to Disney for about $70. She would be apoplectic if she knew … Ultimately, there’s going to be a revolt over the cost. Or policymakers will get involved, because the costs of these things are so out of line with cost of living that someone’s going to put up a stop sign.”…

While government action rides in part on November’s elections, a more pressing concern to ESPN and cable operators is the risk, in a down economy, that consumers will simply cut the cord. ESPN’s executives reject the idea that their product is expensive, noting that a viewer’s entire monthly cable bill might be less than the cost of attending one game in person. And they definitely don’t like the notion of pick-and-choose plans that have been floated. “We’re the best value, bar none, in town,” insists CFO Christine Driessen. “At the end of the day, with regard to à la carte, the viewer will pay more and get less.”