(This was not done in one sitting or even one day, so if it reads a bit out of sorts, I apologize. I tried my best to maintain focus so it would flow well.)
Read this, don't read it. I don't give a shit. It's something I need to get out of my head and can turn/link to as a reference in the future.
I want to break down the industry and get rid of the confusion. Because you're not seeing where I'm coming from and how I can say those two statements without them being conflicting.
I'm going to switch terminology a bit to help get rid of some of the confusion. So...
"Broadcasters" are the parent companies of stations.
"Networks" are the
national channels you watch from NBC to USA to Spike to Golf Channel to SyFy.
"Production Companies" are the people who make and sell the content.
"Affiliate" is a local channel you watch that has the rights to air the content of a broadcaster.
"Middle men" is the derogatory term I'm going to use for the companies that make their money by owning affiliates.
"Content providers" are the cable companies and satellite companies.
Focus on the current model ONLY for now. I'll throw the monkey wrenches in later.
To really sum up quickly:
Broadcasters buy content from Production Companies, which they then air. Middle Men purchase Affiliates in various markets and pay the Broadcaster to air their content. Advertisers pay both the Broadcaster and the Affiliate (national vs local) to show commercials during popular shows. The Middle Men sell the rights to air the Affiliate's signal to Content Providers. You, the consumer, pay the Content Provider directly.
Now let me break down what's actually happening:
Broadcasters (NBC Universal, Paramount, Turner Systems, etc.) make money from their channels via various methods:
1. Advertising revenue - This is the largest source of revenue, and thus, the most important.
1a. Product placement - When you see a person holding a can of pop and the label is turned towards you.
1b. Direct sponsorship - Like when Subway saved Chuck.
2. Broadcast rights - They get paid by other entities to air their content.
2a. Middle Men - Companies that pay a fee to rebroadcast the live feed from the network.
2b. I believe they can also get a piece of redistributed properties like when they hit Netflix, Hulu, reruns, etc. However, that's on a show by show basis. For example, when you watch Archer on Netflix, it is NOT branded with FX/FXX, but South Park is branded Comedy Central on Hulu. I think it has to do with who produces the content.
3. There are a lot of other minor ways, but they're extremely small compared to the ones above.
Broadcasters and networks, typically, don't create their own content. They do for some things, but usually it's a third party production company that creates a pilot/concept and then try to sell it to a network/broadcaster. If the network/broadcaster buys it, then more episodes are ordered. The network/broadcaster usually buys the rights to air the show from the production company. Sometimes they will also help pay for the production. Point being, this is why Scrubs could switch from NBC to ABC, American Idol could switch from Fox to ABC, etc.
Now that we've established that advertising is HUGE and drives the (current) business model, let me break down what advertisers want.
They want eyes and they want them now. Not later.
Now.
You get the eyes part, obviously. But why "now"? Because advertisers think their messages expire, and they're mostly right. If they're advertising a holiday sale, they don't want you to see if after the sale. Who here hasn't binged a show you DVRed all year and noticed Christmas ads in a show you're watching in the summer?
Advertisers, quite recently, only cared about live viewers despite the proliferation of DVR. However, that has finally changed. Last I had heard, advertisers were ok with people watching a show up to 7 days after it aired. After that, your viewing doesn't count. So what's that mean?
Advertisers pay a rate based upon the number of viewers a show has, and this applies to national and local sales. This is all based on Nielsen ratings. So if you're being tracked (and that's a whole other discussion) and you don't watch your favorite show within this time limit set by advertisers, then you're actually hurting your show. Granted, you are a very small piece of the puzzle, but you are a piece.
This applies online as well.
Want to take a guess what content can demand the most from advertisers, not just because of ratings, but also because people are watching live and can't FF through the commercials?
Ok, we all clear so far?
Now, did anyone notice I didn't mention cable/satellite companies as a way broadcasters make money? That's because that is not a revenue source for them. (The key to why I can say both things and not contradict myself.) It IS a revenue source for Middle Men. American Media, Sinclair, and Raycom Media are examples of these middle men. They own affiliates in markets and per the law and contracts have the right to air a broadcaster's content in the market. They sell their affiliate's content, which is mostly the broadcaster's content, to content providers.
So using Gordon's current(?) situation...
20th Century Fox and Fuzzy Door are jointly producing The Orville. FOX has purchased the right to air this show. American Media owns the an affiliate in Toledo and pays FOX for the right to air their content. They then charge Buckeye Broadband (formerly Buckeye Cablesystem) and Direct TV for access to that content in this market.
So if Buckeye and Direct TV refuse to pay American Media for the FOX content, nobody in Toledo can see it through traditional means. You might be thinking, but Buckeye airs FOX to its Michigan customers and Direct TV airs FOX to the rest of the nation... All true. That's because they have deals in place with the affiliate in those markets. (Yes, Buckeye's Michigan customers are considered to be in a different market...kinda. It's a loophole. We watch NBC and FOX from Detroit, but CBS and ABC from both Detroit and Toledo.) However, those deals for those markets don't supersede American Media's ownership of the rights to FOX content in the Toledo market.
This is where I've been thumping my bible, but people (not necessarily here, but everyone I know who bitches about cable/satellite bills) are too busy blaming the wrong people to listen, these middle men are the ones fucking us over. They are charging WAY too much money, which means you, the consumer, have to pay more to offset those costs. If the content providers balk and try to fight rising costs, the middle men pull the content, run banners telling you how evil your content provider is, and you start bitching about them ("I pay this much and can't get FOX!") never realizing the middle man is the one with his dick in your ass.
So going back to what I said earlier about advertising being the key to all revenue in this industry and online counting as well, that's why I kept telling Gordon to go watch The Orville on the Fox site instead of Plex. Every single viewer on those websites count, unlike TV ratings where most households aren't counted. Also, it should be noted that online viewing counts all the time because the ads you're forced to watch there are not dated.
If we don't consume their media via the methods they can track and within a time frame they decide, then our viewings (votes) do not count.
I'll pause again to ask if everyone is still following?
I honestly don't know the whole history of how the industry got so convoluted, but it is what it is...
Ok, so where do sports fit into this? Pretty obvious by now, yes?
Sports are "right now" content that a majority of viewers want. They want to watch games live or almost live. It's heaven for advertisers. Their audience isn't DVRing the game, they're watching it live and for once technology is working in favor of the TV industry and its advertisers. The internet and cell phones mean "Watch the game live or have it spoiled". It also provides a way to draw in viewers. Twitter blows up during games. Ditto for FB. That gets people's attention. Even D&D players get told about something historic happening in sports ball and will tune in...
Sports are ingrained in our society and a bond among fathers-sons, friends, family, neighbors, strangers, cities, etc. That sounds dumb to non-sports fans I'm sure, but it's absolutely the truth. This is not an American thing either. Love of sport (and this is important...sports are competition) is a human condition. The NBA, NFL, NHL, and MLB aren't only loved here, but overseas as well. Soccer is the world's sport. People race everything under the sun. The Olympics are where humanity sets aside their differences to have friendly competition. And so on.
"I hate sports!" But you probably enjoy competition, so you should be able to relate.
"Sports show off our worst qualities. I'm going to get online and play LoL now."
"Sports are dumb. Oh good, Chopped is on next!"
"Sports are for savages. Honey, come quick The Bachelor is starting!"
And so on...you probably participate or watch some competition, which is essentially sports. Some competitions require physical endurance, some mental, most both.
The point is that there's something ingrained in us all to enjoy competition. Now think about how much a competition would suck to watch if you knew the results.
Now monetize that and Voila! Sports = Money.
Gordon made the point that TV existed without sports previously, but it really didn't. Sports were being televised almost immediately when TV was coming into homes. TV was invented in 1927 and the first sports broadcast was 1939. Prior to that and even today, sports were being aired over the radio.
But TV didn't survive off sports back then, right? Right. Here's why: There was nothing else to do. People used to huddle around their fucking radio to listen to shows, and then got to watch them. This model lasted a loooooong time (in the grand scheme of things), but started to change in the late 80s/early 90s.
Hello VCRs, computers, internet, video games, etc.! TV wasn't the focal point of society anymore.
The top rated non-sports show in 1980-1981 was Dallas with a 34.5 rating. The top rated non-sports show in 2016-2017 was The Big Bang Theory with an 11.5.
Let's just stop for a second and say "Holy Fuck!" That is one hell of a drop off in viewers.
The fact is that we, as a society, just don't consume TV the same way as we used to. We're too busy. We have too many other options. We can catch up on Hulu or binge on Netflix. We can watch episodes we missed On Demand or on the web.
That's why sports are coveted. People "have" to watch them live. They "have" to watch the commercials.
So now you get my position, right? Sports cost the most because they draw the most coveted audience. The money made trickles down throughout the companies involved allowing them to make new shows and spend more on the quality of said shows.
We, the consumers, pay more to Content Providers because of sports, but the money made off sports is what's keeping the Broadcasters going. It's a giant circle. (THIS IS WHAT I'VE BEEN DEBATING.)
That's all the old and current model of TV.
Now let's monkey wrench it...
Subscriptions are that monkey wrench. Netflix doesn't have advertising because they have subscriptions.
Now this model was always around in the form of HBO, Starz, Showtime, etc. (HBO and Showtime survived for a long time thanks to sports, mainly boxing.) However, they were short sighted. They didn't see the business in commercial free, binge-able reruns that Netflix did. Once Netflix got their foot in the door, they didn't rest, they started making original content.
Hell, I really only use Netflix for that original content anymore. I'm typically logged into YouTube TV watching live sports or Hulu watching more recent TV offerings than Netflix has these days.
Now that's working for Netflix, but for how long? I've heard other people say things like I just did, so what happens if that original content starts slacking? What happens when people start cancelling?
Netflix uses a ratings system as well, but they don't make their numbers public. First day, week, month viewing is very important to them, but again, I have no idea what they're looking for or what is deemed a success or failure.
Hulu, YouTube TV,
Philo (an experimental low cost, no sports channels service which should show me if Gordon is paying attention...), DirectTV Now, Sling TV, and some off shore ones that seem very illegal, are all working off of subscription models.
If you really examine it though, it's just the old model re-imagined. It's mainly cutting out the middle man and replacing the content providers.
Seriously, the model is changing, but is it? Isn't what you pay to your current content provider just a subscription? Combine that with the cost of your internet access and there's your content provider bill. Hopefully, minus fees to the middle man.
Anyway, I'm seriously losing focus at this point. I think I've gotten to the core point of why sports costs us more, but makes the companies involved more in profits, and how that leads to more and better non-sports content for us. Right? Hopefully?
I mean, if they cancelled ALL sports forever, the business model would just change to reflect that, but that's never going to happen. Thus, sports will continue to be the driver of this boat so long as it attracts the largest audiences live.
It's why FOX, who is struggling for viewers outside of sports, are currently in talks to steal the WWE from NBC Universal. They want it to replace the low rated UFC (lack of stars is killing that sport).
It's also why Facebook, Amazon Prime, Netflix, Twitter, etc. are looking to enter the bidding war with networks for the rights to sports. They want the live eyes that sports grab. Sports are the "gateway drug".
Three days later and I've forgotten where I was and where I was going. Too much typed to abandon though.
I'll say this:
Sports is a profit maker for Broadcasters, and thus, helps to produce TV shows you want to watch. However, those same sports at the Middle Man level means they are going to raise their rates, and that's where you pay more. Take away the sports and you lose ALL the live viewers advertisers covet. Under the current model, which is where my stance is taken, everything falls apart and nobody has the money to produce new shows (certainly not at their current quality level).
Until Broadcasters can figure out how to get you to watch TV, and really the ads, live again, sports will be the key to profits.
Cakedaddy wrote: Your graph only looks at 5 of the 100's of channels that are watched.
It focused on the networks.
Most channels are statistically insignificant. Without the cable model, they wouldn't exist because they wouldn't be profitable. There are a lot of channels like that who get carried by their sister channels (same parent company). That goes for sport and non-sports channels.
That's why you see channels re-branding all the time like Spike/Paramount/and whatever it was prior to Spike. It's also why you see channels dedicated to something throw that out the window when they realize their business model is failing. The best example of that is The History Channel, unless you think the Ice Road Truckers were an important part of human history. TLC, A&E, AMC, etc. are more examples.
A lot of channels are going to fail if we go to a "pay per channel" model.