In October, ESPN, TNT and the NBA announced a nine-year deal worth approximately $2.7 billion per year for the league’s broadcast rights. It’s no surprise that money is going to TV, as many agencies and brands still believe that this is the most effective medium for reaching a critical mass of users in key demographics. The surprise is how much the NBA received, and how valuable live sports TV inventory has become.
Contrast the NBA’s new terms with the NFL’s nine-year deal (signed in 2011). That deal, worth $3 billion per year, is only $300 million more than the NBA's despite the NFL’s greater popularity.
A surging market around live TV is great for the networks and the leagues, but it’s not always good for the advertisers who buy media looking to reach consumers. As live TV grows in importance and cost, advertisers will seek alternatives, which will be a major win for Facebook and Twitter, who may profit just as much as the NBA’s players.
First, let’s understand why live TV is so valuable. While demand for TV remains constant, a trio of factors is putting a squeeze on inventory:
1. The younger generation is watching less TV, with 18- to 24-year-olds’ viewing dropping 11.7% year-over-year in Q2 2014, according to data from Nielsen.
2. Viewers are turning away from the traditional broadcast model toward premium cable and streaming services (both legal and otherwise) that leverage different ad models.
3. Less than half (47%) of viewers still watching on the TV set choose to watch shows live. Many instead choose to DVR, creating an opportunity to skip commercials altogether.
Live sports programming is immune to these factors, retaining the distinction of appointment viewing. Most sports, the NBA included, come complete with set ad blocks, and the NBA’s ad time will be controlled on the national level by two broadcasters with cable channels for the next decade. ESPN and Turner’s willingness to spend $2.7 billion for broadcast rights signals that they plan on growing ad revenues, and likely increasing prices from what they are now. Simply put, the island is shrinking on advertisers who want high-impact, high-reach TV buys -- and those looking to reach males 18-35 with video content need a new option.
This is where Facebook and Twitter provide a great deal of value to marketers. U.S. adults will spend an average of 21 minutes per day on Facebook this year, according to eMarketer. That accounts for 2.8% of the 12 hours and 28 minutes of media consumed per day. TV will still account for 4 hours and 33 minutes, but again, DVR and high media costs mean TV is no longer a high ROI option for every advertiser.
Both social nets are benefiting from multitasking audiences as well. Nearly 20% of TV viewers are multitasking while watching, and are doing so 20% of the time, according to Symphony Advanced Media.
Both companies are making significant pushes into video advertising, and advertisers are benefiting in terms of performance. Growth in click-throughs for video ads has outpaced clicks for other types of page posts on Facebook, according to early numbers we’ve seen. As the cost to advertise on TV gets more expensive, digital video advertising becomes an increasingly attractive media format.
Facebook and Twitter aren’t just a suitable replacement for TV, they actually represent an upgrade in several ways:
- The social networks provide the same scale, but much more granular targeting. Instead of trying to reach 20 million people with one message, brands can break out specific messaging to different groups. Even different headlines on the same video add a great touch of focused targeting.
- Sequential targeting allows marketers to cap the number of times a consumer sees one piece of content. Brands can serve the consumer different content based on who has seen which videos or taken which actions, in turn driving home the brands’ business objectives.
- Reach, resonance and reaction. No venue can offer more detailed reporting about activity, both on content and further downstream, than these social platforms. Twitter and Facebok can show everything from how much of a video certain users watched to how much they purchased within a month of viewing the video, to which messages resonated best with which audiences.Two years ago Sheryl Sandberg said that Facebook’s audience is three times the Super Bowl’s viewership, and that happens every day. As TV media costs increase faster than digital's, look for Mark Zuckerberg and Dick Costolo’s contracts to grow as fast as LeBron James’s.