For the first time in history, online advertising revenues have exceeded traditional TV broadcast advertising revenues. CNET reports online ad revenue for 2013 at $42 billion vs. $40.1 billion for traditional TV outlets.
Some will say that this was a trend that is not surprising; the new media was going to catch the old media at some point in time.
However, it is a bad trend for those who keep to the old business revenue models.
The Cubs grand rebuilding plan centers on getting rid of its existing broadcast contracts in 2020. The Cubs would then form their own network to televise their games and promote all things Wrigley Field Rickettsland. But this is the old Yankees model, which, if you haven't heard, is not going so well in LA.
The Yankees were the first to create their own regional cable channel, the YES network. It generated more than a billion dollars a year into the Yankee coffers. It gave the Yanks a huge competitive advantage, especially overspending on free agents. But even the Steinbrenner kids saw the trend coming recently by selling off part of their network stake to other investors.
The new Dodgers ownership group decided to create their own network. The team partnered with a cable operator to create a regional sports network. The Dodgers reportedly will receive $8.35 billion over 25 years under the deal. The team used that windfall to restock its major league roster with expensive talent.
However, the Dodgers new network has hit an major roadblock as most cable distributors and satellite dish companies refuse to pay the $4 per subscriber per month charge the Dodgers channel wants as carriage fees. The cable operators have balked at paying such a high charge for a specialized sports channel. In fact, many cable operators have seen their consumer rates rise by the cost of ESPN channels alone. As a result, the industry has been averaging more than a million subscriber cancellations per quarter. It was also recently reported that the cable industry had it's first negative month where cancellations exceeded new subscribers by more than 100,000.
People are cutting their cords with traditional telephone and cable companies. This trend is clear. People are finding the alternative entertainment media of Netflix, YouTube and internet streaming a cheaper alternative to expanded cable.
The Dodgers current network can only get to less than a third of the metro LA households. Ratings are down because of the lack of traditional free television (paid advertising) stations. (It is not as bad as the Astros regional cable network which recently had a 0.0 rating for a game last week. The Astros network gets into less than 500,000 homes, but since the team has been bad for so long, game telecasts easily get beat by old syndicated reruns.)
Ricketts' plan is to have a Cub network cash money machine by 2020. There is no reason that consumers will be willing to pay for such a channel. The Dodgers and the Astros are prime examples of how the old revenue model is no longer the great game-changer.
