Intense Popularity Won’t Spare TV Sports From Big Challenges Ahead


This should be an epic time for sports on TV: This week’s Monday Night Football rematch of February’s Super Bowl set a viewership record. The NBA’s first in-season tournament promises to become a lucrative new fixture. College football’s massive conference realignment, and next year’s greatly expanded playoffs, should drive big viewership. Even stodgy old Major League Baseball had a viewer renaissance this summer, thanks to big rules changes that livened and shortened games.

Overall, sports-rights spending is projected to jump from $15.3 billion this year to $22 billion by 2027, according to data released by consultancy Parks Associates at its recent “Future of Video” conference in Los Angeles.

“Sports has never been more valuable,” said sports startup investor John Kosner at the conference. Kosner, a former ESPN senior executive, co-founded Micromanagement Ventures with former NBA Commissioner David Stern.

“It’s live, you have to watch it live,” Kosner continued. “Athletes have to rest, so there are natural parts where you can put ads in. Sports is the only (programming) that will offer everybody’s attention live, and that’s only going to grow in the future. It’s not part of the mix, it’s going to drive advertising.”

And yet.

Media companies that depend on sports rights to keep audiences tuning in are downsizing fast in a swiftly changing landscape. Not all of them will be able to afford the escalating prices on those rights in the future, or perhaps even continue paying for the ones they’ve already commissioned.

Even Disney, the traditional media giant that owns ESPN and ABC and is best positioned among Hollywood companies to compete for sports rights, filed an SEC 10K document Wednesday saying it will cut program spending across cable, broadcast, and streaming from $33 billion to $25 billion next year. That’s a whopping 24% cut. The company also will produce fewer shows for the same money, as it pays more to cover inflation and new labor contracts.

It’s a similar situation for smaller-scaled Hollywood media competitors trying to finance sports along with everything else they do in a straitened time, executives at the conference said.

The situation is even more dire among the endangered cable species known as regional sports networks. Warner Bros. Discovery
walked away from its small group of cable sports channels, and Sinclair’s Diamond Sports filed for bankruptcy. Others are limping along.

“I think the RSN model is going away,” Kosner said. “It remains an okay business in large markets like (Los Angeles) and New York. But I believe it’s a form that’s going away.”

The trouble started when virtual cable providers such as YouTube TV and Hulu + Live TV became more popular. The so-called vMVPDs needed national, even international sports rights rather than just local ones. At the same time, RSNs’ traditional home, local cable operators, have been cutting the channels or moving them to more expensive tiers.

It’s all beginning to put pressure on long-held expectations –especially by leagues, teams and athletes – that sports rights will continue to rise ever upward.

In a Tuesday research note after meetings with West Coast entertainment executives, MoffettNathanson senior analyst Michael Nathanson said one takeaway was that “questions remain if we are finally seeing signs of the (sports rights) bubble starting to pop.”

Industry sentiment suggests the NBA is increasingly well positioned for a lucrative renewal of its TV rights, the biggest package up for negotiations right now, Nathanson said. The new in-season tournament holds promise that it’ll get carved out to create a new digital package that could be sold to bidders that might involve Netflix

Disney is expected to renew its NBA rights, Nathanson wrote, while Warner Bros. Discovery may not (given its $43 billion in debt). But also possible is a third, digital-only package licensed to one of the tech giants, and maybe even a fourth, for NBCUniversal.

But for all the other leagues that have rights negotiations coming, Nathanson wrote: “Outside the NBA, we are starting to see some warning signs that the days of locked-in meaningful increases for every renewal will (not) continue, especially for those sports stuck more in the middle.”

It’s the same story in lots of other corners of entertainment these days, the outlets and content “more in the middle” getting pinched hard between rising costs, fracturing audiences, and deep-pocketed competitors. But sports are especially important to broadcast and cable operators trying to hold on to their audience.

Those deep pockets are the tech giants with streaming operations – Apple
, Amazon
, Alphabet’s YouTube, even Netflix. They’re increasingly embracing some sports, though they’re doing it in less than traditional ways that have wider implications.

This past weekend, Netflix debuted its first live sports event, the Netflix Cup, which paired Formula 1 race car drivers and PGA golfers in a golf tournament. Previously, it had focused on so-called “shoulder” sports content, like the hugely popular behind-the-scenes series about Formula 1 racing, Drive to Survive. More live events are expected as Netflix explores ways to draw in sports audiences, without necessarily embracing traditional live sports rights.

Amazon took a different approach, and is now in the second season of its NFL Thursday night streaming offerings, paying $1 billion a year for crummy matchups most weeks but still growing viewership as it innovates on how to present the games.

“Amazon Prime is setting a bar” for innovation and fan experiences, said Brightcove
SVP Marty Roberts, whose company provides streaming tech to the NHL, English Premier League and other major sports. “It’s four (video) streams, all simultaneous, all synched to the frame. Announcers are talking over each track, data is coming in live. We talk to different teams who say, ‘I want that,’ Well, maybe that’s not in your budget.”

Alphabet has used its first season of the NFL’s Sunday Ticket package to drive subscriptions to YouTube TV. It is paying a reported $2.5 billion a year for seven years to do so.

For all those investments, it’s important to note they’re largely either for the NFL – television’s most popular programming by far – or for events that aren’t part of traditional TV rights, as with the Netflix Cup. Sports deals for the tech giants need to draw in massive audiences, or give near-singular control to the distributor, or both (see the sweeping deal that Major League Soccer signed with Apple TV+).

One big domino is about to tip over: Disney has acknowledged it will decouple ESPN from the fading cable bundle, and make it available on streaming, with the high-profile leagues and games of ESPN finally on the underfed ESPN+. Disney CEO Bob Iger also has been seeking financial, distribution and content partners to help underwrite the spinoff of ESPN into a standalone entity. The results likely will reverberate across the sports TV landscape.

“How they distribute (a streaming ESPN) to the marketplace remains a question,” said Mike Levy, an SVP of global rights acquisition for FloSports, which operates 20 sports-focused streaming channels. He estimated a streaming ESPN, without the subsidies provided by its presence in the cable bundle, might cost $30 a month.

Hardcore fans will definitely pay that, but might not also have the wallet to pay for other companies’ sports offerings, like the package of NHL, NBA and MLB games that WBD’s Max just added for free, ahead of a $10-per-month charge beginning January.

“There will be a segment of fans who will absolutely will be super-served,” Levy said. But “I don’t know how any of this becomes profitable. I don’t know about the business models for Amazon, Apple, YouTube. I think those models are challenged.”

That’s why most in Hollywood expect mergers, other consolidations, and even outright shutdowns among smaller media companies in months to come. That has implications for sports rights and the sports leagues and players too. It’s a tenuous time, Kosner said, especially for everyone not connected to the NFL.

“The Pac-12 (college sports conference) imploded over a weekend,” said Kosner. “My alma mater, Stanford, is going to play in the Atlantic Coast Conference. Everyone’s going to have to work harder. The NFL is taking more money out of the system at a time when there’s less money in the system. That’s going to squeeze everyone else.”

LightShed Partners’ Rich Greenfield, in speculating about the uncertain future of Paramount
Global, suggested in a note Tuesday that its admirable collection of sports rights won’t be enough to get a tech giant to buy the entire company.

“While investors talk about all the sports rights a tech platform could capture by buying legacy media, assets, we are unsure exactly how big their appetite is for sports rights, and firmly believe these companies are focused on waiting for sports rights deals to expire and simply licensing what they want directly” Greenfield wrote.

A Paramount Global looking to sell, as controlling shareholder Shari Redstone reportedly is, would likely save billions by shutting its streaming service and dumping “in the middle” rights it aggregated for Paramount Plus, including Champions League European soccer and March Madness college basketball, Greenfield wrote.

Leagues themselves could take over more content production and distribution, but that’s not a cure-all for the challenges ahead, said Brightcove’s Roberts.

“Running a (direct-to-consumer) business is not for the faint of heart,” Roberts said. “On the fan-engagement side, what’s your data strategy? How are you connecting it back up to your ticketing system? Some teams underestimate how hard doing data in a privacy-compliant way is.”

Michelle Gable, the director of media & entertainment for the NFL’s Los Angeles Rams, agreed that the new audience paradigms are challenging teams as much as the new economics are. Younger fans, for instance, typically prefer to watch highlights, fantasy sports rundowns, shoulder content and similar programming instead of just the four-hour game itself. Teams have to adapt and give fans what they want, and do it multiple times a week.

“Fandom is everything,” said Gable, a former Snap executive who paired the Rams with a live, in-game Snapchat feed from SoFi Stadium this season. “This brings a different and immersive element into the game. Last year, we turned fans into Na’vi from Avatar in a deal with Disney.”

And younger users in particular want a better experience on mobile. Even if they’re watching the game on TV at the same time, they want a unified experience that brings together game feeds, statistics, merchandise, social sharing, betting information and more.

It’s all yet another area of uncertainty at a time when little in the business of sports on television is clear.

“We’re in a bunch of transition and it’s not totally clear where it’s going to go,” said Kosner.


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