DirecTV’s New Charge: Good for Investors, Bad for Customers
The increasing cost of sports broadcasting rights has claimed another victim. Following in the footsteps of other television providers, DirecTV (NASDAQ:DTV) has imposed a surcharge for new subscribers who want access to regional sports channels in certain major markets.
DirecTV will impose the charge on new customers in areas where there are multiple regional sports channels, such as Los Angeles, which has four. Customers will be forced to pay an extra $3 per month on non-basic packages for access to those channels. Only about 20 percent of markets in the United States fall into this category.
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The surcharge “only covers a small portion of the cost DirecTV is paying sports programmers to carry” the regional networks, said a DirecTV spokesman, according to the the Los Angeles Times.
The company is trying to compensate for the sky-rocketing cost of obtaining the rights to broadcast the games, falling in line with a $4 monthly charge levied by Time Warner Cable (NYSE:TWC), and as much as $5 per month charged by other national providers.
Regional Sports are Getting a lot of Love
A number of companies have launched regional sports initiatives recently. Toward the end of November, News Corp. (NASDAQ:NWS)(NASDAQ:NWSA) announced that it would acquire a 49 percent stake in the Yankee Entertainment and Sports Network, which is anchored by broadcasts of Yankees and Brooklyn Nets games…
The media moguls over at News Corp. seem to have identified sports programming as a lucrative direction to head. Sometime in December, the company is expected to announce its interest in SportsTime Ohio, a TV channel owned by the Cleveland Indians
For their part, the owners of regional sports networks will do nothing but profit from a bidding war for their content. National television providers who are forced to bid on the broadcasting rights to the games will suffer for it, and so will the customers who they will have to pass the costs on to. This could be why broadcasters are looking to gobble up as many regional sports networks as they can. DirecTV already owns three in Denver, Seattle, and Pittsburgh.
Despite the price hike, customers may be hesitant to ditch their DirecTV service. The company takes pride in its position as a top sports entertainment provider, and competitors like DISH Network (NASDAQ:DISH) have had a harder time obtaining regional broadcasting rights.
How Will This Affect the Company’s Stock?
The new fines started going into place in September and only affect new customers in certain regions. The added charge will open up some new revenue — or, cut some of the cost associated with acquiring rights — but the benefits won’t be seen for a while.
The company’s stock closed up over 1 percent on Tuesday, but it’s unclear if this was catalyzed by widespread news of the new fee. However you took at it, though, higher revenue or lower costs, is a plus for the digital television provider.