Ball in Its Court: How Sports Media Needs to Evolve

Sports programming is to the rest of TV what the Golden State Warriors are to the rest of the NBA: seemingly unbeatable. In 2016, 92 of the 100 most watched broadcasts in the US were sports or sports-related. But as with the Warriors, who ended their 2015-16 season with a 73-9 record but were stunned by the Cleveland Cavaliers in the NBA Finals, what seems a sure thing today may not be such a sure thing tomorrow.

The sports-media ecosystem is more unstable than it has ever been. As television engagement continues to decline, as new distribution technologies continue to emerge, our great love affair with sports is on the verge of a major shakeup. Sports content, long the life raft for the traditional media ecosystem, is approaching a turning point in which it will need to adapt in order to thrive, and in doing so it may upend much of the remaining stability in the TV ecosystem. While sports and television have been so intertwined as to effectively be synonyms, it is unlikely that the two will remain neck and neck in the near future.

Carrying the Team

No other content has been more popular, monetizable and lucrative. Americans watched more than 31 billion hours of sports content in 2015, according to the Los Angeles Times. In 2016, 10,869 sports events were broadcast nationally, up 8% YoY. Twenty-seven of the top 50 broadcasts belonged to the NFL. Of the top 10 networks by affiliate fees, six had major sports rights (the NFL alone delivered more than 60% of Fox’s live and same day ratings points). Sports accounted for nearly 40% of total TV ad spending, according to Adage, and PwC estimates that networks’ 2016 revenue from sports was over $30bn.

The NFL’s TV contracts were worth more than $5bn per year, the NBA’s nearly $3bn and the Olympics nearly $1bn for the US rights alone. In total, leagues and teams received nearly $20bn in licensing fees. Sports programming is the most valuable audience cultivation tool for networks hoping to launch other content and a critical customer acquisition play for pay-TV distributors.

Down in the Count but Not Out

But this state of affairs is approaching its expiration date. As sports rights continue to grow in both value and length—the current NCAA basketball deal with CBS and Turner is 14 years long—the TV bundle is showing serious signs of fraying. Overall television viewing in 2016 was down among key audiences, with time spent watching down more than 40% from 2010 for 18-24s and more than 30% for 25-34s. Cable penetration has not dropped as precipitously but it, too, continues to decline In 2017, for the first time since the turn of the century, more than 25mm consumers are outside of the pay TV ecosystem.

While sports content has long been the lone ray of sunshine against this bleak backdrop, that sunlight is diminishing. ESPN is down to 88mm subscribers from its 100mm peak and its losses are accelerating. NFL viewing dropped 9% in 2016, with the league experiencing an alarming 12% dip across all windows before the presidential election and a softer but still worrisome 5% drop post-election, according to Recode. National windows performed particularly poorly, with ESPN’s Monday Night Football down 13% and NBC’s Sunday Night Football down 11%. This isn’t just an American, or football, blip. English Premier League viewing was down around 11% in the UK and similarly in the US.

Americans certainly love sports and we will not wake up tomorrow in a world that eschews football, basketball and the rest of the big American pastimes. The 2016 NFL season was still the third most-watched ever, the World Series enjoyed its biggest ratings in 25 years and game seven of the NBA Finals set a league viewership record. Unique among TV programming, sports has a built-in, deeply vested audience. And unlike other entertainment content, it’s nearly impossible to create a competitive product. You can’t create a new pro sports league as easily as you find a new script or come up with a reality concept.

But the media ecosystem is not as healthy as it once was and sports is no longer an invulnerable exception. It can’t weather shocks as it once did. Presidential elections historically have reduced football viewing by 2%, but in fall 2016 there was a double-digit dip. At REDEF, we’ve written about the dead cat bounce of the entire media ecosystem, and sports will not go unscathed. It has taken longer, but sports content will need to adapt to the realities of the digital age.

by Tal Shachar, REDEF |  Read more:

Image: Lukas Schulze/Bundesliga/Getty Images