The ACC and ESPN extended their television rights deal until 2036. They also officially announced a digital channel — launching next year — as well as a dedicated ACC Network which is set to launch in 2019. Think about that. ESPN will have distribution rights 20 years from now when no one has any idea what the cost structure, revenue, distribution methods, or ROI on live sports content will be three years from now — nevermind 20 years from now.
The deal will most likely have to be changed as technology continues to develop. Long term contracts like this are good for the industry for a few reason such as some cost certainty and planning. Businesses crave stability. It allows for marketing, strategic planning, sales strategy and subscription fee targets. These are the things that made perfect sense when television distribution was the norm and people paid their cable bills to watch sports.
The problem is that is not the case any longer. These massive — in both length and dollar amount — distribution rights deals were planned thinking that sub-fees and viewership would grow consistently. After all, live sports content is the only type of content that consistently draws viewers and is DVR-proof. If a media company has sports rights than it will always have viewers and can charge a premium. The party will never stop. The growth will never stop. Everything is fine. It’s similar to the type of thinking that home prices would never drop in value.
Now a deal that provides a company distribution rights until 2036 is going to turn into an what looks NFL contract — it looks longer than it actually end up being. There will be certain guarantees, but if the relationship isn’t working it might have to be severed. Nobody knows what is coming in the future in terms of types of distribution, so how can either side guarantee anything 20 years from now. ESPN has to address cord cutters and losing subscription fee revenue, so I guess it makes sense to make sure that the content variable is taken away, but an entire channel on television is not fiscally responsible. The ACC will have to address paying college athletes and what amateurism in college athletics eventually becomes. It’s planning a mountain hike with cloud cover that somehow reaches two-thirds down the trial. The path is not clear.
The truth is a lot of people making these decisions and spending this money are trying to scrape by now. They won’t be around 20 years from now, so a 20 year deal sounds amazing, but it might not be fully executed for the life of the contract. We’ve already seen some cracks in foundation. ESPN had to provide free advertisements because it didn’t hit its ratings numbers for partners during the past College Football Playoffs. Subscriber numbers are shrinking. A 20 year deal sounds fine for stability and planning, but it might not make sense in our new — and growing — age of digital consumption.