Sports, TV, Money; What Happens Next?

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There are currently two undeniable facts regarding the television business, viewership is on the decline and sports television revenue is at an all-time high. At first these two facts seem to be in contrast with each other. But upon a closer examination it is easy to see how viewership decline has actually helped sports television rake in the money. What I am interested beyond that connection however is what does all of this mean for the future of sports on television.

Television advertising is a $65 billion business. Advertising targets viewers in their ideal demographics with hopes the consumers will purchase their products. It’s as simple as that. However television viewership has been on the decline as more and more people “cut the cord” and drop their cable and satellite providers. According to the New York Post television viewership has had a double digit decline for five consecutive months (as of March); with network television falling 12% since last year at the same time and cable dropping 11% at the same time one year ago. So if viewership is declining how is that good for sports on television? Simply because sports is the last frontier for live viewing. Unless a television channel produces a hit show with wide appeal (such as Mad Men, Breaking Bad, Walking Dead, Orange is the New Black, etc.) households are content to record the show and watch it later, skipping past the commercials. Sports however is a live event, drawing viewers in real time where they are unable to fast forward through commercials. For this very reason advertising dollars have come flooding into the sports world.

You may have read how the sports leagues are piling up their money stacks from their new television deals. Heck the NBA is counting solely on its upcoming television deal to help turn around the fiscal situations of teams in their league. Sport leagues no longer put a premium on actual attendance but rather on viewership. A sold out 20,000 seat arena will only pull in a finite amount of money but a 10.0 rating on a sporting event will bring in millions of dollars in advertising. The NFL, the king of all sport leagues, was at the forefront of how impactful television viewing can be for revenue. In fact the NFL recently split their television revenue among their 32 teams, handing out over $225 million to EACH team…for just the 2014 fiscal year.

We have established the fact that advertisers are flocking to sports like it’s the 1849 gold rush, pouring money into the final frontier of live television. Fox Sports’ President David Hill has even stated, “sport is the last frontier of reality on television…about the only thing that can guarantee an audience.” And sport franchises are loving that fact, just look at the Los Angeles Dodgers who have no problem over paying their players and collecting the best talent they can buy. But what happens in the future? Will that money always be there?

I think by looking into the television market as a whole we can get a glimpse into the future. And for me, a sports fan who likes to watch multiple teams in multiple leagues, it is a scary place I see.

As stated previously household television viewing has gone away from cable and satellite providers and towards online options. Almost 40% of households have some sort of streaming service now. Whether it is Netflix, Hulu, Fire Stick, or taking the feeds off an internet site; viewers are no longer in desire of the 500 plus channels but rather are heading more towards specific programming. They are selecting what they want to see and that is all that matters to them.

We have already seen this carry over into the sports television world with the Dodgers deal, the creation of the South East Conference network, and the YES Network. These specific networks have become prominent because the teams or athletic conferences are able to capture more the advertising revenue by producing their own content than by using another outlet. As with all business models now, it is about streamlining the system and having full control. By producing your own programming you control your product every step of the way and collect more of the revenue. Therefore more and more teams and leagues will follow this direction, creating their own specific content geared toward their product.

So if there are specific content based channels, what does that mean for the sports fan? This is where it could get tricky for the average sports fan. If every organization or college athletic conference creates their own station how do you watch it? Right now games are spread across ESPN, NBC Sports, CBS, Fox, etc. Well simply put to watch what you want you will have to subscribe. And for those who say leagues will never abandon prime time television and the basic channels, I have this question for you…25 years ago did you ever think a World Series game would be broadcast on cable? Even 10 years ago did you ever think March Madness games would be somewhere other than on a broadcast network like CBS? Today, both World Series games and March Madness games are being shown on cable channels. (NY Times “Postseason Vanishing From Broadcast Networks”)

I believe that sports, and television in general, is headed towards a pick and choose format. The first example of this already occurred this week when the NBA announced they will allow fans to purchase and watch any game in the league for $6.99 or any out of town fan to purchase a team package that includes every game of that team for $119.99 (ESPN “Single Game Pay-Per-View”). So the NBA, which still has the NBA league pass, a channel that broadcasts all games, has decided that the consumer prefers a specific content channel even if they can get every game in the league for just $80 more. The trend is coming.

What happens when sport leagues see that television itself is moving towards a pick-and-choose viewership? That means more revenue directly into the pockets of the programmers so do sports leagues then make that move away from the typical television package and begin selling their own packages and specific content?  If teams do move towards specific content channels, do they still share in the revenue? A Dallas Cowboy channel would certainly outsell a Jacksonville Jaguars channel; but right now the NFL is thriving because of their sharing. Sports television is at the peak right now, flush with money for both the owners and players. But as with all business ventures you better be looking ahead and not be content with the present.

Right now advertisers are throwing money at professional sport leagues and teams because it is their last hope at reaching a live audience. But we have not had enough time to fully study the results. Are the advertisers getting their money’s worth? That is an interesting question because I know I am a sport fan but there are a great number of people who are not. Does this mean advertising revenue will take a dip once the numbers have been studied?

So what does all of this mean? Well if you want to watch The Big Bang Theory, you subscribe to the CBS package. A fan of the Kansas City Chiefs, time to buck up for the Chiefs package. Want to throw a Super Bowl party? Better have $99.99 ready to buy on pay-per-view. Right now leagues are still locked into their prime time tv deals, whether it’s Monday Night Football, Sunday Night Baseball, or March Madness. But the day is coming when all of these events will likely be available only through their own specific channel or pay-per-view. So sport fans start saving your money because that March Madness subscription package is going to certainly make you mad!

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