Fallout from new Canadian TV deal uncertain, but expect prices to rise

With the news yesterday that Rogers and the NHL had agreed on a 12-year, $5.232 billion Canadian television deal, the overwhelming reaction was uncertainty. We don’t know how this will effect TSN or CBC, we don’t know how Rogers will cover the game, and we don’t know if the hockey-watching experience will be better a year from now than it is today.

What we know for sure is that NHL hockey is going to be on Rogers. What we also know, with barely less certainty, is that it’s going to cost more to watch.

The Experts

Jim Jamieson of The Province talked to two business experts: UBC’s James Brander and SFU’s Linday Meredith. The full article is here (and well worth reading) but note the similarity in comments both made.

First, Brander:

The first thing I noticed is the big price tag, and obviously Rogers has to recoup that.

And Meredith:

We’ll see a lot of bundling or extra charges for premium channels. I’m sure Rogers will be pushing hard on all those buttons because they’ve got a lot of money to recoup. Whether it means having to buy stuff you don’t want or premium channels, your cable bill will be going up.

The Logic

It’s pretty straight forward. The NHL’s national television rights cost lots more now than they used to (Chris Botta of Sports Business Journal put the total value of the old deals at roughly $190 million); this new deal increases that to an average of over $400 million per year. Even assuming that NHL hockey was a cash cow for CBC and TSN (which seems likely, given the spike in price), it’s a pretty decent bet that a massive increase in the cost of the product for the provider is going to result in price increases for the consumer.

Commissioner Gary Bettman and the executives at Rogers Communications can pay lip service to the idea that, on some level, this deal was the best deal for fans but it would be a mistake to see it as more than lip service.

The NHL is focused on one thing: money. They’ve demonstrated it time and again, especially with their willingness to force labour stoppages to squeeze as much money as possible out of the sport. Rogers was willing to pay up for the television rights; consequently, the NHL was all too happy to do a deal with Rogers.

Likewise, Rogers is a business with the primary focus of making money. A lot of that money, doubtless, will come from expanding the amount of product available and milking advertisers for all that they are worth. But it would be silly to assume that every available revenue stream won’t be tapped, and that’s likely to include increased prices for the consumer.

A shiny new television deal is unquestionably good for the business of the NHL. It may yet prove to be good for fans, too, if Rogers can deliver a superior product. Right now there’s no way of knowing whether the product will be better or worse, only that it’s likely to cost more.

  • Serious Gord

    guys, don’t worry about be happy. Keith Pelley who is now head of Roger’s media division, used to be in charge of TSN. Pelley was interviewed on Bob McCown and his goal is to use the NFL as his benchmark in terms of tv production. Sure the cable rates may go up but they will continue Saturday HNIC on CBC and they plan NHL on City tv. Looking at the NFL and the States, I don’t think cable rates skyrocketed. TV still makes a lot of money off advertising.

  • Serious Gord

    It’s a business and as long as people support it, they will explore any and every avenue to gouge the fans. If there’s one thing that the fallout from the past two lockouts has proven, it’s that people will whine and complain but when push comes to shove, they will still support the NHL.

    Personally, I love watching hockey but I don’t see myself buying any NHL merchandise or attending any games in the near future.

  • Serious Gord

    You just wrote that because most of the revenue comes from ads, Rogers won’t charge more for subscriptions. Disconnected from any semblance of monopoly behavior understanding. Not surprising considering I’ve heard you on the radio.

  • Sevenseven

    Not that I really care anymore, I got rid of cable and use game center and an american ip, but by my calculations, this deal costs them $887k per game. That really doesn’t seem like a huge stretch for them to cover. I wonder what they pay right now? And for the entire media rights? They’ll do okay. I wonder if I can watch the games for free on my Rogers cell phone?

  • Serious Gord

    “They are not pointing a gun at your head to force you to subscribe it, are they?”

    You don’t really understand how cable TV works, do you? It’s only been 40 years, so I get that you’ve still got your head up your — on this particular file.

  • Old Retired Guy (A.K.A. Die-Nasty)

    Oh yeah…..and all NHL hockey games should be broadcast on HBO so the commentators can get real…ask tough politically incorrect questions, swearing is mandatory, grill the players and coaches with hard hitting between period interviews….stop lobbing them soft balls and excepting their mind numbing cliched answers…High Octane girls could be nude…..and screw the 50/50 crap….there should on site betting windows in every arena…..and did I mention the Beer should be CHEAP!

  • Quicksilver ballet

    Part of me would dearly love to see 60 cent Canadian dollar again. Set the whole league back to square one again.

    Without the 7 Canadian teams to subsidize all the non hockey market US hockey teams, this league would be in ruins. Oh well, who cares anymore, Edmonton hasn’t had an NHL team for nearly a decade.

  • Old Retired Guy (A.K.A. Die-Nasty)

    Its never a good idea to put all your eggs in one basket.There is no doubt in my mind that rogers will create a new revenue stream from this deal. As mentioned earlier, Rogers, or robbers as they are known in Ontario, is all about making as much cash as they can. They are deceptive, untrustworthy and dishonest. (Ask anyone who has a cellular contract with these guys.)
    Consumers may like what they see for now, but Robbers has no interest in consumers, only money.
    New sports packages will arrive in the future, and you better be ready to pay.. there is no other option. Don’t count out the fact that Robbers could start a “pay per view” model in the new future for rivalry games and playoffs. Something like the Winter Classic would be perfect for there “pay per view”.
    Overall I believe this is a bad deal for consumers and hockey in general. These guys (NHL and Rogers) don’t care about the game or those who watch it. In fact I wouldn’t doubt that Bettman and the CEO of rogers aren’t writing themselves big fat bonus cheques right now.