ESPN Unbundles from Cable. Can Comcast Compete?

One thing that’s kept cable from going the way of the music industry in recent years, observers agree, is this: Hulu, Netflix, and other mainstream video streaming services don’t do live sports. People will pay for live sports, which is why the networks pay huge fees to pro and college sports leagues for the rights to air those games.

Now everything is changing. The Washington Post reports:

In a partnership with Dish, 12 major cable stations including the Food Network, CNN and, crucially, ESPN, will now stream their programs on a $20-per-month service called Sling TV. This is big news for many rabid sports fans who pay as much as $90 per month for a bunch of cable stations when all they really want is ESPN. They will now be able to watch sports on anything from an iPad to a smartphone — without paying cable companies such as Comcast and Verizon FIOS for television service.

How’s Comcast going to compete? Three quick thoughts:

• They don’t have to compete because they still own the pipes. That advantage could disappear based on next month’s net neutrality vote before the FCC of course, but for now, if you live in Philadelphia, you probably get your Internet service from Comcast — even if you don’t have cable. That’s the case in a lot of cities. So even if you “cut the cord” to cable to watch ESPN and your games via the Internet, well, you’re still paying Comcast a fee. The company might be even more tempted to implement data caps (or cap-like options) now so that it can charge higher fees who to customers who spend hours and hours watching bandwidth-hogging live sports video.

• They can compete with hyperlocal options: Dish, which is offering the new SlingTV service, doesn’t get along well with Comcast. Here in Philadelphia, the satellite network doesn’t carry Comcast SportsNet Philadelphia, which televises the Phillies, the 76ers, and the Flyers. The two companies recently made arrangements to let Dish broadcast Comcast’s regional sports networks in Chicago, San Francisco, and Washington — but would Comcast extend that deal to SlingTV? Maybe, under the previous “they own the pipes” theory, but maybe not. If you’re a local sports fan and want to see your team’s games live, subscribing to Comcast cable might still be your best option.

• They can hang on to older customers. The Atlantic points out why SlingTV even exists: “There are 10 to 15 million American households with a broadband Internet connection and no cable. Right now they are paying TV companies practically nothing. TV companies would like them to pay something. So they’ll try to thread the needle by creating a product that is good enough for this group — a.k.a.: the cord-cutters or the cord-nevers — but not so good that cable subscribers trade in their $90 monthly payments.” So it could be that, like the newspaper industry, cable will watch young customers melt away to other alternatives, forcing it to rely on an increasingly older customer base to survive. You can make plenty of short-term profits that way, but it makes long-term survival a bit harder.

The real danger may not be to Comcast, but to the jillion or so low-viewership channels that exist on your cable dial. If ESPN fans want only ESPN and can pay just for that, they may be less tempted to purchase cable packages that force them to pony up also for HGTV. How much money does HGTV make simply because it gets subscription fees from viewers who want to see Monday Night Baseball? We may be about to find out.