Commentary

Do Major TV Sports Retain High Value?

by Wayne Friedman , Staff Writer, September 21, 2017

TV networks focused on high-priced sports programming maintain a content addiction that won’t go away. What’s the end game?

Much depends on the big professional games via the NFL, NBA, Major League Baseball, NCAA’s Men’s Basketball Tournament and Nascar -- to name a few -- that keep broadcast networks and some cable networks relatively healthy.

The major rub? License fees for those big sports franchises continue to grow sharply higher. However, national TV advertising revenues are not keeping pace.

For example, Magna Global projects the NFL's total national TV advertising -- for all networks -- at $3.9 billion for this season. The license fees for the year come to $4.4 billion.

To be fair, TV networks increasingly find other monies to defray these costs. They include growing retrans fees from pay TV providers -- cable, satellite, and telco companies -- for carriage of their networks. Also, there are “reverse-compensation” fees from local TV stations' affiliates.

Other tangential benefits include overall promotional value, when TV networks air on-air promos of TV shows and other TV-related business in major sports events.

TV networks also depend on sports programming because it is live programming -- increasingly the new “premium TV” for many marketers that place lower value on entertainment programming that may be time-shifted.

Does this mean future sports events will move into more of a "loss leader" description?

For its part, the NFL is already looking at other media extensions -- digital media platforms, such as Twitter, last year and Amazon, which will stream 10 regular-season “Thursday Night Football” games this year. Those games will also be carried on NFL TV networks.

One more wrinkle: The NFL -- long the gold standard of TV sports viewing -- has been seeing a somewhat startling decline, already down more than 10% this season. A year ago, the NFL also witnessed similar declines, only to recover later in the year.

Can TV networks find a new way of handling big sports franchises without going bankrupt?

Perhaps a planned subscription-fee approach -- or a new hybrid ad-subscription model -- would be a solution. It’s either that or a frantic end-of-game two-minute drill.

advertising, sports, tv

6 comments about "Do Major TV Sports Retain High Value?".

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Ed Papazian from Media Dynamics Inc, September 21, 2017 at 9:11 a.m.
For many years the major TV sports packages that the networks negotiate with the leagues have been loss leaders when it comes to profitability at the network level.But even if a network loses money---or barely breaks even----on these deals they attract a breed of advertiser that would not constitute a major presence on the network where many of its other programs are concerned. More important, the networks' O&O stations and other affiliates make a lot of money selling spots to local advertisers at prmium CPMs in the station breaks adjacent to the sports content, some of which flows back the the networks in their corporate bottom lines and serves to reinforce the powerful bond they maintain with independently owned affiliates. What would the stations replace the sports attractions with if they were no longer available, how much would such programming cost and how many ad dollars would be generated?
Reply

Dan C. from MS Entertainment, September 21, 2017 at 10:07 a.m.

The issue is not replacing sports with something else, the question should be "why haven't the networks revamped its sports offerings to appeal to a changing audience that does not consume entertainent the way their parents did?"

It's all very Norma Desmond-ish.

Ed Papazian from Media Dynamics Inc, September 21, 2017 at 12:23 p.m.

Dan, I assume that by "revamping" their delivery of TV sports you mean why dont the TV networks present these attractions via digital means----mobile, for instance---rather than the same old way. The reason that they dont---though this does not preclude new business models for TV sports in the future---is that digital exposures, alone, would not deliver anything like the audience levels attained via "linear TV" and, accordingly, would not earn enough ad revenue---even if the ads could be seen----to pay off the leagues. You might well ask why the networks don't offer the games both ways on a live basis, and this is a possibility----but only if the revenues earned are sufficient to honor the contracts with the leagues. That may be something for the networks to test, but so far, they are playing it safe ---and, so far, I can't fault them on that.

David Scardino from TV & Film Content Development, September 21, 2017 at 3:04 p.m.

All bubbles must eventually burst and it will happen with the sports bubble. The only questions are of of timing and the order in which the individual sports packages will be affected. Because of medical issues, football probably has a tougher burden.

Ed Papazian from Media Dynamics Inc, September 21, 2017 at 6:13 p.m.

David, I suspect that you are correct. As the leagues become greedier and greedier---mainly in order to pay the players those absurdly inflated salaries----and continue to over saturate viewers with basically irrelevant in-season games, extended play-offs with hordes of teams participating, off-season games, phoney all-star games, etc. the public's appetite for such heavy doses of inconsequential content will be manifested in lower and lower ratings. This will depress the vaule of the games to the networks due to declining ad support to the point where the other considerations I mentioned in my earlier post, no longer tip the balance in the leagues' favor.Then the leagues will try to sell their numerous garbage games to TV at a lower price while offering the better games to streaming subscribers for a hefty price----only to discover that this formula doesn't generate the required dollars. It will be fun to watch the players deal with the situation that will then develop. No more long term contracts without performance guarantees, no more $15 million-a-year- deals for baseball "stars" with batting averages of .215, who slug 25 home runs per season but can't field their positions, etc. I can't wait.

Paula Lynn from Who Else Unlimited, September 22, 2017 at 11:49 a.m.

Perhaps subscribers who do not watch sports are tired of paying so much for them for the people who do, not to mention the increased choices for their viewing time. The balance of cost, profitability, tenacity, interest is out of balance.