Commentary
How Important Will Sports TV/Streaming Be 10 Years From Now?
- by Wayne Friedman , Staff Writer, June 5, 2024
Increasingly, you can see why pay TV distributors and their long-time subscribers can be of two minds when it comes to the importance of live sports.
Of 1,206 pay TV
users recently surveyed by Aluma Research, nearly 50% say the airing of live sports is “very/extremely important;” with 19% saying it is “moderately important” and 32%
“not/slightly important.”
The desire for live sports is
the most intense with NBA: 68% says the NBA is “very/extremely important.” The NFL also scores well: 59% on the same "important" scale.
The results are somewhat less for Major League Baseball and NCAA football, which get a 54% and 52% score
respectively.
The report didn’t disclose when the survey
was taken other than a 2024 noted year. One can assume that much of this research could have gathered when the NBA was in full-throttle of its season-ending games.
Many sports leagues/teams know the strong negotiating position they are currently in.
The NBA, in particular, has it figured out, perhaps expanding its TV networks/streaming platform exposure to possibly four media outlets from the current two.
This would mean ABC/ESPN, NBCUniversal, Amazon Prime Video, and Warner Bros. Discovery
TNT each gets a piece of the action.
Cost for the existing NBA TV
rights holders ABC/ESPN and TNT would almost assuredly nearly double in the annual rights fees they pay -- possibly as high as $2.5 billion a piece for each TV/video platform. That said, reports
suggest WBD’s TNT might still be hedging a bit, on the fence in deciding whether to make such a high-priced deal.
Currently, sports viewing is extremely important and strong, which has big brand advertisers spending ever
higher media dollars on this live content.
The question for many
business analysts is whether the possible decade-long or more contract deals will track with consumers' continued sports viewing behavior.
On the other end of the business equation, what if there is a growing alternative for major advertisers?
Current new tests in factoring AI (artificial intelligence) into designing media plans could make a big impact. This could shift more media spending into social media, digital audio or outdoor, or
perhaps another media innovation that lurks in the weeds looking to explode.
TV/streaming platforms can only hope their now customary financial burdens -- and losses -- don’t get wider. Perhaps the umbrella effect of sports viewing will allow them to package
even more advertising and sponsorship into other areas of the companies business efforts.
Play the odds in this current business environment? Maybe all these high-price content moves are just a random jump ball.
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7 comments about "How Important Will Sports TV/Streaming Be 10 Years From Now?".
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Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, an average adult devotes about 12% of his/her TV viewing time to sports ----with men higher and women lower. Yet, because of the high individual game ratings that team sports attains---mainly the NFL---a lot of people assume---wrongly--that's its all about the "audience" and that linear TV will die if it loses exclusivity re sports to streaming. Compounding this is the commonly held belief that sports is a demographic targeting vehicle and that its the only way to reach sizeable segments of consumers. The latter assumption is totally fallacious. There are plenty of ways to reach the TV sports audience---or those who favor individual sports like the NFL or NBA---at far less cost that the sellers demand for sports placements.
So why do advertisers support TV sports? It's simple---its the imagry, plus their promotional associations with the leagues, teams and players.It's not just a matter of audience attainment or demographic targeting. They are going after mindsets---- not only of the viewers but also, members of their organizations, the sales force, distributors, store chains, Wall Street, etc. Sponsoring NFL games is "big time" advertising and many advertiasers relish wearing the highly merchandisable mantle of big time advertisers.
Ok, but what about the future? How long can "big time" advertisers continue to pay what are, clearly exhorbitant CPMs to fund TV sports sponsorships? This is the key question, not where consumers will get their TV sports fixes---linear or streaming. I think that we are close to that tipping point where many TV advertisers may have to say, "Sorry, we can no longer pay what you are demanding". Then what? Charge subscriptions? Will that work in combination with flat ad revenue growth?Or will the greedy players and their greedy agents finally have to temper their outlandish salary demands---or --gulp!----accept less---not more for their services.
Ed, you write "clearly exhorbitant CPMs" but wait, really? That language begs follow-up. Are you a cost accountant? What does it mean to have a price that is exhorbitant? You use "greedy" twice. I'm sensing a lack of objectivity here. You make the point yourself - there is a lot of monetary benefit that goes along with Big Time advertising that is hard to see or measure.
Every bubble bursts. The only question is when.
Brian, it all depends on what you are trying to accomplish with your ad dollars. If all you care about is targeting, reach, frequency, reasonable CPMs compared to alternatives, etc. and you do media mix modelling on that basis no computer will "buy" TV sports and, for that matter many high priced"specials". Yet the promoters of TV sports constantly harp on the higher ratings that the football games, in particular, get relative to other forms of content and I have had discussions with sports sellers who actually believe that it'a all about the audience---the only way to reach men, etc. etc.
In a way they are correct as that's exactly how the sports sponsors see it---"the only way to reach men"---but they mean the context and image---not, just the size of the audience. To bask in the context and promote your brand in that manner---as "the sponsor"----so far has been worth the very high CPMs. But this inflationary game can be played only so far by the leagues. Doubling their demands at every new negotiation when TV ad dollars are no longer so readily available and the audience is iincreaingly fragmented is forcing some advertisers and, evidently, some TV networks---Warners/Discovery for example--- to rethink their traditional use of sports as a form of loss leader for their total ad revenue bundles. Yet Warners/Discovery is being heavily criticized for passing on the NBA---without considering the profitability issue or the fact that the vast majority of TV viewing---especially that of women---- is to content other than sports.A lot of networks and programming services do just fine without sports. The classic example is cable news which continues to rack up a 50% gross profit margin year after year despite an average minute audience that is mostly over the age or 65 and is far smaller on an average minute basis than the NFL, NBA, etc.
Two items. 1)Curious to know what the average ROAS for national advertisers is for each of the major sports noted in this article.
2) Some research has noted GenAlpha & GenZ don't show same enthusiasm for major sports as do older demos...how is that going
to look by the end of this decade?
Brian, scarcity is a value in virtually everything ... gold, diamonds, 100 year old champagne, a Van Gogh painting. That also occurs in TV audiences, their reach and their cost.
If you were to graph them, you don't get a linear line but you get a right-tailed ogive. What does that mean? In TV (and indeed all advertising) it means that if you have advertising in a pretty standard reach program you pay a pretty standard CPM. But as the reach of programs increases you are advertising to the 'hard-to-gets' that improve the campaign's reach ... and they cost more ... just like buying gold, aged champagne etc.
James, I doubt if anyone knows the answer---or if anyone can even quantify the benefits of TV sports sponsorships as they are based not so much on quantitative metrics but highly subjective ones. It's like trying to calculate the value of having a certain image or standing, relative to others.