Peter King has covered this pretty well in the last couple of Monday Morning Quarterback articles over at www.si.com.

Basically, NFL Networks doesn't want to restrict this at all. They want it to be widely available to all. The issue is pricing; the cable companies want to pay a little and the NFL wants to charge a lot. The only leverage that the NFL really has is that if the cable companies don't pony up, the viewers won't see some pretty stellar games (although the Falcons / Colts game was not one of those games. Stupid Falcons...). Customers get mad and call the cable company, and the cable company has to attain the broadcast rights. If the NFL made alternate distribution available, they'd lose all leverage with the cable companies as customers would be much less upset as they can still watch the game.

I've also heard (although now I can't find it) that NFL Networks does have some access to the game during their broadcasts. I think that you can watch one full offensive possession and the last couple of plays that lead up to any touchdown.

And I wouldn't claim that knowledge of the industry I work in necessarily makes me smarter than you. But thanks.

But why fuck around with having an NFL channel at all? This isn't some startup MMA organization that can't get a broadcaster to carry them.

I understand the whole vertical integration thing. If they can carry their games on their channel, then they're making more money than if they sell the broadcast rights ... I guess maybe that's my answer right there. They force the cable companies to carry the channel and they have control over how they show the games. They no longer create a product and sell it, they now control the packaging of that product as well.

And they force the sale based on the games they're showing, but with that comes all the other crap they're selling. So the sale is based solely on 8 games and has nothing to do with all the other content. The rest of the content is just enough to flesh it out to be a channel.

The NFL is asking for about 61 cents per subscriber per month and pushing to be included in basic cable subscription. That would place them in about 115 million homes. That's revenue of $840 Million a year. To put that in perspective, the networks pay $3.1 billion a year for the rest of the season, that's 257 games, including the playoffs and Superbowl. In addition, the NFL gets some portion of the ad revenue from the channel.

The Satellite industry is about a quarter the size of the cable industry. So if they can close the whole market, they'll make a quarter of their broadcasting revenue on just 8 games. The ad revenue is probably enough to support the rest of the operation of the station. So I think the answer is not just that they can make more money broadcasting the games themselves, but that they can make a shit load more money broadcasting the games themselves.

This is so weird to me. Why would a channel get paid per subscriber and not per viewer? I'm sure there's a good reason for it historically, like there was no way to measure who was viewing what, but aren't we past such antiquated days? I have a hard time believing that all these cable boxes that sit in our houses (not to mention DVRs) don't track our viewing habits, at least in the aggregate.

And isn't the NFL betting on a business model that's on it's way out? I thought we were on the brink of a la carte cable, where I can get just the channels I want and not pay for anything else. It doesn't make much sense to fight for X per subscriber if the whole model is about to get blown away.

There are a number of reasons:

1. The cable box has, traditionally, been a dumb terminal in that it doesn't communicate back to the cable system. With the dumb box approach, it is impossible to tell what a user is watching. This is no longer the case with the new cable boxes, but the pricing model exists from the prior age. Additionally, not everyone has a smart cable box yet (for instance, anyone that just uses the built in cable tv tuner on their television).

2. A la carte plans don't currently exist, so the cable company bundles packages and sells them to a consumer for a monthly fee. The consumer is paying for the channel regardless of whether or not they watch it. If you're the content provider, you want a cut of that pie. If the cable company tells you that your channel is only watched in 44% of households, you just point out that they are still charging 100% of their subscribers for your content. The level of content penetration helps determines the value of the channel instead.

3. There are privacy laws that stop the cable companies from getting data associated with non-pay per view content and associating it with individual customers. So Comcast may know that 32% of people watched ESPN over the last week, but not who.

4. Change is hard. Particularly if you're trying to pay someone less than traditionally for content. If Comcast said that they wanted to pay NFL Networks based on the number of viewers rather than subscribers, you can be sure the price per viewer would be much higher than the price per subscriber. I'd imagine that NFL Networks would price it so they got their $840M whatever pricing model they used. So the mechanism of pricing is probably splitting hairs unless you assume that either the content provider or the cable company would screw up the model.

Finally, I'm not sure you'll ever see your a la carte model. News over the past few days does not bode well for the FCC regulation. As I said the yesterday upon hearing the news, "What a surprise, the people with the money won." I'm not really sure that a la carte programing is a good idea anyway, but that's another discussion.