It should be a great time for sports on TV: This week monday night football February’s Super Bowl rematch set viewership records. The NBA’s first in-season tournament is expected to be a lucrative new competition. College football’s major conference realignment and next year’s significantly expanded playoffs should bring big viewership. Even boring old Major League Baseball saw a resurgence of viewers this summer thanks to major rule changes that livened up and shortened the games.
Overall, sports rights spending is expected to jump from $15.3 billion this year to $22 billion by 2027, according to data presented by consultancy Parks Associates at the recent Future of Video conference in Los Angeles. .
“Sports has never been more valuable,” sports startup investor John Costner said at the conference. Costner, a former ESPN senior executive, co-founded MicroManagement Ventures with former NBA commissioner David Stern.
“This is live. You have to see it live,” Costner continued. “Athletes have to rest, so there are obviously areas where advertising can be inserted. Sports is the only (programming) that can provide everyone’s attention live, and that’s only going to increase in the future.” Instead of being part of the mix, you end up promoting the ad. ”
And yet.
Media companies that rely on sports rights to keep viewers tuned in are rapidly scaling back in a rapidly changing landscape. Not all of those companies will be able to afford to pay the escalating prices for these rights in the future, or perhaps even continue to pay for the rights they have already committed.
Even traditional media giant Disney, which owns ESPN and ABC and is best positioned among the Hollywood companies competing for sports rights, filed an SEC 10K document on Wednesday, increasing its programming spending across cable, broadcast and streaming. Next year, the company said it would cut its annual budget from $33 billion to $25 billion. That’s a whopping 24% reduction. The company will also be paying more money to cover inflation and new labor contracts, so it will produce fewer shows for the same amount of money.
Conference executives say the situation is similar for smaller Hollywood media competitors trying to fund sports and all sorts of other businesses in tight conditions.
The situation is even more dire for the endangered cable species known as regional sports networks. Warner Bros.’ Discovery WBD exited its small group of cable sports channels, and Sinclair’s Diamond Sports filed for bankruptcy. Others walk with a limp. In markets like Phoenix and Salt Lake City, teams have taken over the casting of local games or struck deals with local broadcasters.
“I think the RSN model will be phased out,” Costner said. “In big markets like (Los Angeles) and New York, it’s still an okay business. But I believe it’s a dying form.”
The problem started when virtual cable providers like YouTube TV and Hulu + Live TV became popular. The so-called vMVPD required not only regional but also national and even international sporting rights. At the same time, local cable operators, the traditional home of RSNs, are cutting channels or moving to more expensive tiers to save money.
Long-held expectations, particularly those of leagues, teams and athletes, that sports rights will continue to rise ever higher are beginning to come under pressure.
Moffett Nathanson senior analyst Michael Nathanson said in a research note Tuesday that one of the takeaways from a week of meetings with West Coast entertainment executives was that “the (sports rights) bubble has burst. “It remains questionable whether there are finally any signs of it starting to happen,” he said.
Nathanson said industry sentiment suggests the NBA is in a good position to renew its television rights, the biggest deal currently under negotiation. The league’s new in-season tournament is expected to be a new digital package that could be sold to a potential bidder that could involve Netflix NFLX.
Nathanson wrote that while Disney is expected to renew its NBA rights, Warner Bros. Discovery may not because it is $43 billion in debt. But his third digital-only package licensed to one of the tech giants, and even his fourth for NBCUniversal, is also conceivable.
But Nathanson warned all other leagues about to negotiate rights: “Outside of the NBA, there are warning signs that the days of locking in big increases with every renewal will continue (and won’t continue). “We’re starting to see that, especially in these sports.” I’m more stuck in the middle. ”
This is true in many other areas of entertainment these days, with channels and content sitting in the middle between rising costs, audience fragmentation, and deep-pocketed competitors.
Those deep-pocketed tech giants with streaming businesses include AppleAAPL, AmazonAMZN, Alphabet’s YouTube, and even Netflix.they are increasingly accepting Several However, we do the sport in a less traditional way.
Last weekend, Netflix premiered its first live sporting event, the Netflix Cup. The event pits Formula 1 race car drivers against PGA golfers in a golf tournament. Previously, we focused on so-called “shoulder” sports content, like the most popular sports. drive to survive, About F1 racing. More live events are expected as Netflix looks for ways to attract sports viewers without necessarily accepting traditional live sports rights.
Amazon is taking a different approach, now in the second season of its NFL Thursday night streaming service, which pays $1 billion a year for boring games most weeks, by tweaking the way the games are presented. The number of viewers is still increasing.
“Amazon Prime is setting the standard for innovation and fan experience,” said Marty Roberts, SVP of Brightcove BCOV, which provides streaming technology for the NHL, English Premier League, and other major sports. ing. “It’s four (video) streams, all simultaneous, all synchronized to the frame. The announcer is talking about each track, and the data is coming in live. We’re talking to different teams and , say, ‘I want that,’ but it probably isn’t in the budget.”
Alphabet used the first season of the NFL’s Sunday Ticket package to drive subscriptions to YouTube TV. To do so, the company is reportedly paying $2.5 billion annually over seven years.
It’s important to note that all of these investments are primarily for the NFL, which is the most popular show on TV, or for events that aren’t part of traditional TV rights, like the Netflix Cup . The tech giant’s sports deals must either attract massive audiences, give distributors near-sole control, or both (like Major League Soccer’s comprehensive deal with Apple TV+). reference).
One big domino is about to fall. Disney has confirmed it will take ESPN out of its declining cable bundle and make it available for streaming, and ESPN’s high-profile leagues and games are finally available on the underserved ESPN+. Disney CEO Bob Iger is also looking for financial, distribution and content partners to take on the spinoff of ESPN into an independent entity. This result will likely have repercussions for the sports television world as a whole.
“The question remains how to deliver[Streaming ESPN]to the market,” said Mike Levy, SVP of global rights acquisitions at FloSports, which operates 20 sports-specific streaming channels. He estimates that streaming ESPN could cost $30 per month without the subsidy provided by being included in cable bundles.
Hardcore fans will definitely pay that, but the more you pay for other companies’ sports products, like the NHL, NBA, and MLB games package that WBD’s Max just added for free ahead of its $10 monthly fee There may not be a wallet. Early January.
“There’s going to be a segment of our fans that will definitely get the best service,” Levy said. But, “I don’t know how this is going to be profitable. I don’t know about the business models of Amazon, Apple, YouTube. I think there are challenges to those models.”
As a result, most Hollywood insiders expect to see mergers, other consolidation, or even outright closures of smaller media companies in the coming months. This also affects sports rights, sports leagues and players. Costner said these are tough times, especially for everyone not connected to the NFL.
“The Pac-12 (collegiate athletic conference) collapsed over the weekend,” Costner said. “My alma mater, Stanford University, is going to play in the Atlantic Coast Conference. Everyone has to try harder. The NFL is taking more money out of the system at a time when there is less money in the system. We’re taking it out. It’s going to put pressure on everyone else.”
LightShed Partners’ Rich Greenfield speculated about ParamountPARA Global’s uncertain future, suggesting in a note Tuesday that the impressive sports rights the company has amassed won’t be enough to convince a tech giant to buy the entire company. .
“Investors are talking about tech platforms being able to acquire rights to any sport by acquiring legacy media and assets, but we don’t know exactly how big their appetite for sports rights is. “There are, and I’m sure these companies are focused on waiting for sports rights contracts to expire and just directly licensing what they want,” Greenfield wrote.
Paramount Global, which controlling shareholder Shari Redstone is considering a sale, is reportedly shutting down its streaming service and closing its streaming services, including European soccer’s Champions League, college basketball’s March Madness and Greenfield, on Paramount Plus. It is likely that billions of dollars could be saved by letting go of the “intermediate” rights that had been aggregated in order to I have written.
Brightcove’s Roberts said the league itself could take over more content production and distribution, but that’s not a panacea for future challenges.
“Running a (direct-to-consumer) business is not for the faint of heart,” Roberts said. “In terms of fan engagement, what is your data strategy? How do you connect to your ticketing system? Some teams underestimate how difficult it is to process data in a privacy-compliant way. I am evaluating it.”
Michelle Gable, director of media and entertainment for the NFL’s Los Angeles Rams, agreed that the new audience paradigm is as challenging for teams as the new economics. For example, young fans usually prefer to watch highlights, fantasy sports overviews, shoulder-to-shoulder content, and similar programs rather than the 4-hour match itself. Teams need 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 this season combined live in-game Snapchat feeds from the Rams and SoFi Stadium. “This brings a different immersive element to the game. Last year, we turned our fans into Na’vi. Avatar Currently under contract with Disney. ”
And young users in particular want a better experience on mobile. Even if they’re watching a game on TV at the same time, they want a unified experience that brings together game feeds, stats, merchandise, social sharing, betting information, and more.
This is another area of uncertainty at a time when little is clear in the field of sports on television.
“We’re in a big transition, and it’s not entirely clear where it’s going,” Costner said.
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