A change-up is coming to Charter Communications‘ cable TV packages — particularly for sports networks.
The cable and broadband company said Monday that it plans to start offering a new, two-tier cable package system that will allow customers to select a cheaper, sports-lite TV option without regional sports channels.
The pivotal move comes as the industry has been contending with more people opting to cut cable in favor of streaming services. That’s weighed heavily on sports channels and has hit regional sports networks, which have which have long provided lucrative fees to leagues and teams, especially hard.
Diamond Sports Group, the owner of the largest regional sports networks portfolio, filed for bankruptcy protection earlier this year. Other networks have been launching direct-to-consumer streaming options that come at price points that won’t upend the longtime lucrative pay-TV model. But they’re often considered expensive for consumers and could turn off potential streaming customers.
Charter, which owns two regional sports networks of its own, is looking to change the formula. Beginning in the third quarter, the company said its Spectrum-branded cable TV business will be relaunched as two new services.
Spectrum Select Plus will include the provider’s full slate of sports programming and regional sports networks, while Spectrum Select Signature will exclude certain sports programming for a reduced rate.
The two options will launch on a market-by-market basis throughout the majority of Charter’s U.S. footprint.
Customers who pick the option with certain sports programming will receive direct-to-consumer streaming apps for the local sports networks in their area for free. Charter will also be able to market and sell these regional sports networks app to its broadband-only customers. Major networks like ESPN and FS1 will still be available on Spectrum Select Signature.
“This new model paves the way for a more flexible approach to the outdated packaging model for sports, and it puts the focus where it should be, on the customer,” said Tom Montemagno, Charter’s executive vice president of programming acquisition, in a news release.
The company noted that, historically, sports networks’ agreements require distributors to pay for the rights to the content and make their programming available to a large majority of subscribers — typically more than 80%. That’s the case even if many of those customers never turn on the channel.
Pay-TV bills usually break down the cost of regional sports network fees. National sports networks, such as Disney‘s ESPN, are known to be some of the most expensive for pay-TV distributors such as Charter and DirecTV to carry.
Charter noted that the new two-tier system still gives sports fans what they want while giving non-sports viewers a more affordable option. The company also said the model supports the sports networks that are pursuing streaming options.
As both a distributor and owner, Charter is exposed to the issues sports networks are facing. The company inherited two regional sports networks — Spectrum SportsNet and SportsNet LA, which air Dodges and Lakers games — when it acquired Time Warner Cable in 2016. Charter is also planning to launch a streaming alternative for those channels.
In addition, Charter and DirecTV on Monday announced a new distribution agreement for those regional sports networks.
As part of the deal, Charter agreed to a “significantly lower penetration threshold,” which will allow DirecTV to “better target their subscribers who want Lakers and Dodgers programming.” It will also allow DirecTV to provide cheaper and more flexible options for customers who are uninterested in sports.
Spectrum Networks executive Dan Finnerty said in a news release earlier Monday that while viewing habits are shifting, regular season sports programming is still popular.
“That said, given these customers represent a relatively small percentage of the overall video subscriber base, and recognizing the marked increase in direct-to-consumer choices, the model for RSNs needs to evolve to reflect the realities of the current marketplace,” said Finnerty, the senior vice president and general manager of Spectrum Networks. “With this agreement, we are taking a step to shift the business model so that customers have more control.”
Correction: This story was updated to reflect that Charter’s Spectrum Select Signature tier will still offer some sports networks.