Commentary
How Far Will TV Networks Go With Their Sports Investments?
- by Wayne Friedman , Staff Writer, July 5, 2016
For example, Walt Disney has inked a deal to acquire a one-third stake in the video-streaming technology services division of MLB Advanced Media for $3.5 billion, which is jointly owned by the 30 baseball teams.
Disney also has a four-year option to acquire an additional 33% piece in the digital division of Major League Baseball.
All this continues to come in a time of ever-higher sports TV programming license fees. A new nine-year $24 billion NBA deal for ESPN and Turner kicking in for the 2016-2017 season is already having an effect, in the form of teams’ wild spending for players in the just-launched free-agent market.
Not that TV networks are complaining. Sports TV advertising has risen by almost 10% in each of the past few seasons.
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We have seen big ownership deals with media companies in the past -- Turner Broadcasting, for one, which owns the Atlanta Braves and Atlanta Hawks. But we are not sure major TV/media companies will continue to pursue actual equity in sports teams, or whether professional sports leagues -- or existing owners of teams -- will look to make those offers.
Sports on TV continues to represent “premium” TV advertising because it is essentially live. That “premium” pricing shows no slowdown. Sports league/team owners know they continue to have valuable properties.
If, in the future, TV networks don’t want to deal with sports leagues for big TV contracts, those leagues will just start -- or boost -- their own TV networks or online video platforms.
Until then, TV networks realize they need to find ways to hedge those higher TV sports license fees. And Disney -- especially with its most valuable ESPN property -- sees this in a big way.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
The broadcast TV networks expect to lose money on their coverage of pro team sports or, at best, to break even. They do this because their O&O stations as well as their other station affiliates make money selling their local "spot" announcements to home town or regional big spenders like car dealers, banks, etc. thus these events are seen as valuable loss leaders for the networks. However, advertisers are willing to pay only so much for the national airings and finally the networks are starting to resist the exhorbitant player union-driven demands for ever higher license fees. As a result, more and more pro team sports deals now involve national cable channels, regional networks, local stations, etc---often with the same league's regular season games divided up among several outlets.
I doubt that the newtorks are thinking of dropping their big sports attractions nor that they are pondering acquiring ownership stakes in the leagues. However, they are starting to dig in their heels about license fees and this may force the leagues to explore alternative revenue streams---like SVOD---more aggressively. I wouldn't be surprised to see the relatively meaningless MLB and NBA regular season games go this way, though probably not the NFL as its schedules are limited, making each game count for something.