Stream a Little Dream: Declining Sports Rights? We Think Not
Updated: Feb 1, 2019
by Ed Desser and John Kosner
From the beginning of sports media, new technology has enabled more
consumption. Early live sports TV consisted primarily of weekend events
on the three national broadcast networks and club/school events on local
stations and syndication. Then, widespread cable and its dual revenue
stream opened the floodgates, introducing multiple 24/7 national sports
networks and RSNs, delivering thousands of additional games and
ballooning sports revenues (and player salaries).
In the last two decades, digital technology multiplied sports channels and
ushered in multi-game subscriptions like Sunday Ticket and League Pass.
Meanwhile, the internet made worldwide scores, news, and highlights
instantly accessible, mobile untethered viewing, and social media enabled
“virtual” sports bars.
Today, streaming technology is changing the sports media paradigm again,
like cable did four decades ago. The incumbent networks (e.g., ESPN,
Fox) remain well-positioned, but the digital tech titans have entered the
field of play, so far focused on shorter-term rights, experimentation and,
non-exclusive grants (e.g., YouTube has regional rights to some MLS teams
and virtual MVPD cousin YouTubeTV has become a major sponsor of the
World Series and NBA Finals). Amazon bought EPL and TNF rights, and
Facebook has daytime MLB games. Among legacy players, ESPN+ has
daily MLB and NHL games, MLS Direct Kick, and UFC. Turner’s B/R
Live includes Champions League, 65 NCAA Championships, and
intriguingly, partial NBA League Pass games.
While the techs have the money, recognize the importance, and therefore
have an interest in live sports, they are not yet willing to spend massive
amounts of it for major exclusive rights packages. There are at least five
1. Most live sports viewing exists on linear TV and none of the tech
giants possess that asset yet (though Amazon has shown an interest
in buying some Fox RSNs);
2. The traditional incumbents continue to have substantial budgets to
continue buying these rights, based upon broad distribution, high
subscriber fees and large advertising income; and
3. They have the motivation to do so: existing sports networks are
dependent on exclusive sports rights because their very identities
remain directly tied to sports TV. In addition, as broadcast networks
get priced-out of the top entertainment programming by Netflix,
Amazon, Apple, HBO, etc., sports is even more important, as must-
have programming to stay in skinny bundles; and
4. In an offense/defense strategy, linear players are expanding their own
streaming/DTC capabilities to better serve fans and attempt to keep
the tech goliaths at bay; Finally,
5. The techs view sports acquisitions more as R&D expenditures than
their primary business. There is not a proven digital business model
that generates the kinds of live sports revenues (and viewership) that
legacy linear media still can.
Therefore, as NFL, NHL, AAC, NASCAR and NHRA rights are soon
negotiated, the traditional networks will continue to provide substantial
payments and wide distribution … the twin media goals of most sports
enterprises. The question remains, will today’s tech dabbling prove to be
just an appetizer, or will they stay on the sidelines when the big bidding
begins? We expect to see the following:
Traditional linear players will keep most of the major packages, generally at higher prices (the roll-out of legalized sports gambling will provide new rationale), but with some significant modifications, such as leagues carving out streaming rights, or creating a new package of events which are excluded from TV;
The rich will get richer and those properties in the middle (e.g., NASCAR) will get squeezed;
New digital packages, like MLB on Facebook and NFL TNF, will be created/expanded specifically for streamers. Unlike cable which largely replaced broadcast as the primary platform for live sports, over the next contract cycle, digital packages will expand and supplement, not replace TV.
Amazon, YouTube, Facebook and Twitter will expand their sports programming offerings, including through acquisition of events they can distribute worldwide, such as eSports, tennis and volleyball;
New entrants will also take their piece of the programming pie, such as FloSports buying up Olympic sports, DAZN taking more boxing;
More sports will super-serve their biggest fans through targeted niche streaming offerings like NHRA All-Access and PBA Xtra Frame. NBA League Pass is a truly global, robust offering customized for different territories;
Most sports fans will continue to demand wide selection of major sports, so expect them to retain the TV “bundle.” Most would not be satisfied just getting certain sports/matches, as Amazon Prime or Netflix subscribers can be satisfied with a single SVOD package featuring a wide range of entertainment programming, nor would it be cost-effective to buy multiple packages. Pay attention to sports- focused Virtual MVPDs like YouTubeTV and FuboTV and sports- specific bundles;
Smaller sports properties, which don’t generate meaningful rights revenues, will transition their events to streaming platforms, developing direct customer relationships, reducing TV production costs, and improving programming hours, scheduling, and net revenues, but sacrificing viewership potential;
Tech players will consider buying traditional linear sports media platforms (e.g., New Fox, Fox RSNs, CBS) to gain entry to the major league sports club.
For almost 50 years, critics have predicted the end of the sports TV rights
bubble. We’re still waiting.
Ed Desser is President of sports consulting firm Desser Media, Inc.
(www.desser.tv). Prior he served 23 years in the NBA Commissioner’s
Office, where he negotiated all league media deals and launched NBA.com,
NBA Entertainment, NBA TV, NBA International, and League Pass. John
Kosner is President of Kosner Media LLC, a new sports and digital
consulting company (www.kosnermedia.com), following 20 years leading
ESPN’s digital efforts, including ESPN.com, the ESPN App, fantasy and
streaming. Together they ran the NBA’s media operations in the 80’s and 90’s.