Media Uncategorized

Future of sports TV: digital, a la carte and increased competition

As media companies look to cover TV rights cost, they may have to get creative in their offerings.

(Photo by Casey Rodgers/Invision for TWC)
(Photo by Casey Rodgers/Invision for TWC)

Media rights for live sports have risen consistently the past 20 years. Now most leagues have billion dollar contracts and rely heavily on revenue generated by their distribution deals. However, we are at a crossroads in terms of how fans consume entertainment. This four-part series takes a look at the overall market, regional sports networks, national television rights and what could be next for sports entertainment. The final section, will focus on what the future may hold..  Click here for Part 1 on the overall market.  and here for Part 2 on regional sports networks, and here for Part 3 on ESPN.

If the bubble does burst on sports’ TV right deals, it most likely will not be the leagues that suffer. The NFL’s distribution deal runs until 2022, the NBA’s deal is valued at $24 billion and runs for another nine years, and other conferences and league deals pushing into the not-distant future include the NHL, SEC, and English Premier League. That means the networks will have to make up the money elsewhere.

The first consideration would be to operate sports properties as a giant loss leader. That would entail broadcasting games knowing the network would take a loss, but hoping the viewer tunes-in early or sticks around later for companion programming that would be much cheaper to produce and distribute. The issue is that content generally isn’t sticky with the viewer. The game may help lead some viewers to the next piece of programming, but it doesn’t force them to hang around. It would be a difficult proposition for networks to just accept that they will consistently lose money when airing live sports content.

Another option would be to just bombard viewers with advertisements. Fans are starting to see this now. For example, a State Farm commercial was essentially done with live talent Sue Bird, Damian Lillard, Stephen Curry and Chris Paul at the NBA All-Star three point contest. The integration was clunky, but that may be the future of advertisements to make sure the fan is engaged and the corporate sponsor ponies up a little bit of extra cash for the extra benefit. Soccer games have advertisements during play due to the lack of commercials, but that could be another option media companies explore with other sports. There could be some backlash from fans, but integrated advertising could also just turn into what fans come to expect. Many fans are already being passively advertised to through signage visible during games.

Another option could be extending digital distribution. Fans are already beginning to see this: The NBA will offer single games for $6.99 this season. Those games will have blackout rules and won’t be nationally televised, but should be a good test case.

We will also see where ESPN and other networks go with their digital offerings. As of now, to access WatchESPN or FS1’s digital app, fans must have a cable log-in for authentication. If these networks are seeing cable subscriptions decline, they may need a digital-only offering to keep their advertising power. The question then becomes, how much will the sports fan pay for ESPN? Many fans will pay for their sports experience, but if it gets too expensive some fans will use illegal websites that pirate the feed. Dealing with a few pop-ups and tracking cookies may be worth it if a fan has to pay $30 a month for ESPN. Add another $10 for FS1 and $10 for NBC Sports and a viewer is already nearing a cable bill.

The leagues will still win. As more competitors enter the market and digital distribution increases, it would not be a surprise to see Apple, Google and Yahoo! enter into the distribution space. Yahoo! will already air a Bills vs. Jaguars game exclusively this year. These tech companies have expertise in digital distribution and a lot of cash to throw around if they ever desire to get exclusive rights to a major sport. The idea has been explored; it’s just finding the right subscription and financial model to make it work.

The marketplace is changing and shifting as we speak. It will be Disney/ABC/ESPN/FOX/NBC/CBS’ job to stay on top of the sports media market, but the competition is growing constantly. Consumption methods are changing at a staggering rate, and the methods millennials and younger fans consume media is moving from traditional means to platforms such as Snapchat. Are we at the precursor of a media bubble or just a bump in the road? We may find out shortly.

Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.

Follow @MikeColange or @fog_sports on Twitter and like our Fields of Green Facebook page for updates.

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