Growing up, my friend Jamie’s mom made the best pumpkin pie. Two pies meant 16 generous slices. James always brought me a slice — warm — with a cool side of whipped cream ready to be dolloped on top.
When Jamie and his sister started families, I stopped getting slices. How does that story play out if I just passed on unpassupable pumpkin pie?
Impossible, right? Oh, maybe not. Actually, maybe Ozempic. That’s the diabetes super drug people are using to say no to things they love.
Still unsure? In the last week, Axios, CNN, and all sorts of other big media outlets have been writing about Ozempic upsetting the apple cart and all the sugary, syrupy things we add to those apples to make things we like better. When our tastes change, industries change. The Washington Post says Ozempic will disrupt food, clothing, and airlines.
“Oh, I get it, Charles. This story is about Olympic athletes, food, and media…” - You.
Nope. This is about TV sports rights.
Sports has its own Ozempic problem. Somehow people are passing up watching sports.
American viewers are watching 22% less NHL. NBA is mostly flat. MLB’s offseason changes to speed up the game goosed viewership by 7%.
None of those numbers will get the people who run television to open up their wallets.
This couldn’t have happened at a worse time. The TV landscape is fractured.
Cable subscribers paid for cable bundles. Cable companies paid rights holders. Rights holders paid leagues. Leagues paid players. But people are fleeing cable. Fewer dollars trickle down.
Like when Rupert Murdoch paid 60% more for
NFL rights than CBS so he could get the FOX network going. That same strategy is why Apple, YouTube, and others ponied up big bucks this last time.
The NFL sells all its games for all its teams. All teams share the dollars equally. Other leagues sell some games and let their teams sell rights to local TV stations or to a regional sports network (RSN).
In May 2019, Sinclair Broadcasting paid about $10B to buy 21 RSNs from Disney. Sinclair had $2B lying around. They borrowed the other $8B. That’s like having thousands of car payments or a really big mortgage. Sinclair has to make regular interest payments. In March, they couldn’t make their payments, so they tossed their RSNs into bankruptcy.
Dozens of baseball, basketball, and hockey teams stand to lose out on $55B in rights fees -- fifty-five billion.
Sinclair didn’t jettison every RSN -- just the RSNs where payouts were big and ad dollars or interest were small.
Teams can produce their own games and sell ads. That mostly means putting games on free TV. In this model, the team pays to produce games. They don’t get cable fees. In most markets, ad revenue alone likely won’t replace their old fee deal.
The perpetually near-extinction Phoenix Coyotes signed a deal to put 81 of their 82 games on six local Sinclair stations. Yep. Same Sinclair.
Incestuous, right? The Yotes are touting that being on broadcast TV will mean more viewers.
Seattle’s Mariners own 79% of the Root Sports Northwest. Their problem is that their local cable system put them into a higher tier. People who want to watch the Mariners, Kraken, and Blazers will need to pay an additional $18.50 per month. They’re going to get fewer viewers.
The whole thing is a mess driven by supply and demand. Sinclair didn’t jettison every RSN. Just the RSNs where payouts were big and ad dollars or interest were small.
It’s fair to say that sports leagues that don’t use an oblong ball are likely to see rights deals go down. We’re seeing that now.
If you take Ozempic, you lose weight. Clothes fit better. You’re healthier. What happens when rights fees go down?
It’s sort of unprecedented. Until now, rights fees in the four big leagues have risen unabated. Like an LB who jumped the snap heading to the QB.
I found an example: the CFL. Americans intermittently know the league when the NFL goes on strike. Or when the Canadian league expanded to cities like Memphis.
In 1983, the CFL got a then record $33m three-year TV deal. The league’s nine teams shared that money. So, a little north of $1m per year per team. The average player salary was a little north of $60,000 (Cdn).
When that deal expired in 1986, the CFL TV rights weren’t worth much. The CFL created their own TV network. That made nothing. Teams got nothing. The league held fundraisers to stay afloat. Really.
Now, I’m not saying the Diamondbacks will hold a telethon. Or that this will be the Coyotes ninth life plus one. But, it took the CFL 25 years get back to their $1m per team TV deal. In 2018, the average CFL player made $80,000 (Cdn). Adjusting for inflation the average CFL player makes about half of what they made in the 80s.
No one thought people would walk away from great pumpkin pie. When it happens things go awry. No one thought people could abandon sports. What happens if they do?