TV2020: As Sports-Rights Values Skyrocket, Here’s What To Expect in the Next Rights Cycle
Industry experts sound off on the impact of cord-cutting, DTC, betting, and more
In today’s rapidly evolving media landscape, there are few certainties. The business is in a state of flux, with consolidation, changing consumer viewing habits, and the rise of digital giants like Amazon and Netflix dramatically reshaping the industry. One certainty, however, seems clear: the value of sports rights will continue to increase. With the next bidding cycle for the NFL and other major rights looming, analysts are projecting that top leagues will be able to generate a further $4 billion per year in rights revenues by the end of the 2025 (according to Ampere Analysis).
At last week’s TV2020 event, a TVNewsCheck conference at NAB New York, sports-rights insiders debated whether broadcasters will retain the rights to NFL and other major sports franchises as big tech companies grow their presence. Also on the agenda were how legalized gambling will affect sports-broadcasting and media revenue streams and the impact of direct-to-consumer OTT platforms. Here are some highlights:
On the power of the NFL and the value of its media rights:
Doug Perlman, CEO, Sports Media Advisors: The NFL is in a different business than virtually every other sports property … and it operates on a totally separate plane. Two strengths that they have are, one, the size of their audience; the NFL dwarfs everyone else, and there’s really no comparison. And then, important in a world where new entities are entering the distribution of live video and the distribution of sports, the NFL is uniquely well-situated to move people to new platforms. … Viewers [will migrate] to whatever platform [the league appears] on.
What to expect from the next round of NFL rights deals, in 2021-22:
Chris Bevilacqua, co-founder, Bevilacqua Helfant Ventures (BHV): There’s no question [the NFL is] going to make a lot more money this time around. What I’m most interested to see is what’s going to happen … with all these new potential [digital] distribution platforms. I think that they will be a market maker of sorts somewhere in that ecosystem. I can see the NFL rearchitecting the way they package all their games: rejiggering the packages by daypart [rather than] by AFC and NFC. That allows them to come into the market with a much different look. I’m most curious to see how they rearchitect and how they go into the market because I do think they will have multiple tech players at the table here. The question is, what piece are they going to be trying to sell them?
Pearlman: If I were working with the NFL, I’d want to focus on a couple of things. Obviously, they are famously focused on reach, and they will continue to do so. Broadcast TV will be a part of the mix, but they also are going to want to explore new platforms and really leverage their capability to make or break a platform and drive their fans to that platform. I think there will probably be a combination of those things in this next series of deals, and there will undoubtedly be massive increases in their future. And then, of course, by strengthening these new platforms, they will be emboldening new bidders, which is always great for sellers.
On the potential for a digital-media company to win a primary NFL rights package:
Bevilacqua: I’m not convinced that [the NFL is] going to sell a primary package on Sunday afternoon to a big tech player, [which doesn’t] have the kind of reach that the NFL is looking for. I don’t see them doing that. I see them trying to carve that out like they like have today with Thursday Night Football, where they have a broadcast partner, a cable partner, and a digital partner like Amazon. I think you’ll see it’ll look more like that than Amazon’s just buying Monday Night Football.
Pearlman: I couldn’t agree more. The NFL has done a number of digital deals with the Amazons and the Twitters, but those have not had as much consequence in terms of dollars or the role that they play within the NFL’s television world. I think, this time around, there will be a material package secured by a digital player, but it will not be one of the primary packages. … I think people often talk about the digital bidders as if they were all the same, but they’re very different. They have different ambitions, different levers that they can push, different objectives, different business models. So as you start to think about which bidders might make sense for the NFL, I think you need to think about who can make the most out of the rights that they would secure. People throw Google, Facebook, and Amazon into the same bundle, but it’s really a mistake.
Adam Schwartz, SVP/director, sports media investment team, Horizon Media: I have a slightly different take. I think that there might be one window that they do exclusively sell to one of these [digital] bidders just because the money is going to be so big in the grand scheme of things. I wouldn’t be surprised if they broke off a portion of the Sunday-afternoon window and tested it out. I don’t think it will be a long-term deal similar to what they’re doing with broadcast, but I do think that they might test these things and we’ll see some shorter deals similar to what they’ve done with Thursday Night Football over the years.
On which league is most likely to sell an exclusive rights package to a digital platform:
Chad Deweese, senior manager, Sports and Strategy Practice, Deloitte U.S. Sports Practice: The NBA is already there, it seems. The NBA is by far the best at reaching their fans in a digital way. When it comes to media rights and getting the commercials and the ads in there, I think they’re still trying to figure it out. But their fans are mostly trained to want to be in that medium and watch games.
Schwarz: I think some of the other leagues will take more chances with [shifting] smaller packages [to digital platforms]. We’ve already seen baseball do things with Facebook. I think that’s going to become commonplace as we move into the next five to 10 years.
On the pros/cons of selling rights to a broadcast network vs. an OTT platform:
Schwarz: I think broadcast is going to remain the number-one asset, especially as technology advances with some of the televisions [that don’t require external] antennas. So you don’t even have to go out of your way to get [broadcast networks]. It’s still going to be the biggest mass-reach vehicle for any of these sports. So [leagues] are going to have some kind of presence there if they want their sport to be seen by the masses. Now, that’s not to say [leagues] are not going to have niche packages in terms of digital and cable, but broadcast is still going to be an important part of every sport’s overall plan.
Bevilacqua: Think about the non-NFL [rights]. The NFL has got 256 games and a bunch of playoff games. They just don’t have the amount of inventory. But MLB has 2,400 games and the NBA and the NHL another 1,400 games or so. The PGA is on 40-50 weeks a year and NASCAR 45 weeks a year. So you have a lot of tonnage where you can have a little bit of each: you want to have your reach [on broadcast], then you want to have your linear cable, and then you want to have all your other digital and mobile platforms. The more inventory you have, the more you can spread it around like that.
Pearlman: I think Disney has made it very clear that [direct-to-consumer OTT services] are their number-one corporate priority, not just for ESPN but all across Disney. It’s a hedge against the future. We all understand the strategy behind it, but today it’s only in a few million homes, and so any content that you put on that platform is, by definition, going to reach a much smaller audience. … If you’re the property, you are going to say, why would I do that with premium content? ’Cause I want my [existing] fans and new fans to be able to see it and engage with it. Then it becomes a dynamic of “what is it worth to you?” Any DTC platform is going to have to pay a real premium to get that better content. And properties need to be very, very careful about taking that short-term dollar before thinking about the long-term implications.
On the impact of cord-cutting on the value of sports rights:
Pearlman: We’ve seen this cycle where it used to be only per-niche programming on cable, and then [cable] started to get higher-quality events, and then there was a migration over time where you have major championship events played out on cable. And cable guys were willing to pay a premium vs. broadcast because they were trying to build that platform. But, with cord-cutting, the delta between broadcast and cable is growing, which makes broadcast that much more valuable to a property if you’re looking at reach and all the things that mass audience does to support your fan base, your sponsors, and other businesses. It’s becoming more and more important now that the delta is getting bigger.
Bevilacqua: Everybody’s talking about cord-cutting and cord-shaving, but there are still 85 million people in this country paying to have paid television, and they’re paying their $120-$130 a month. That’s still a big business. Even it loses the 4%-5% per year over this next cycle of rights deals, you’re still at 60 million or 70 million people paying for the big bundle. And that doesn’t even account for the virtual [MVPDs], which are growing.
Deweese: Right now, we’ve seen a bit of an equilibrium in terms of people who still have the cable package but also now have all the streaming options, too. Cable is declining, and streaming is growing at a significantly higher rate. At some point, that equilibrium [will shift]. If sports gets out of the traditional cable package and into streaming, who knows what’s going to happen from there.
On how the rise of legalized sports betting will affect the value of rights:
Pearlman: I don’t think there’s any question [that betting will drive viewership]. I can’t tell you the magnitude, but there’s no question it’s true: you will watch a game that you wouldn’t otherwise have interest in, and you’ll watch for a lot longer.
Bevilacqua: The NFL just did their data deal with SportRadar, which was only a two-year deal, so they’re obviously trying to line that up for the media companies like Fox Bet and others to buy. Those sets of rights is where I think the tech companies come in because they have a more flexible architecture [and] can do things with video and data that maybe traditional broadcasters can’t do.
Schwarz: From a network standpoint, we keep talking about how all the rights deals are going to go through the roof. The networks are looking for where that extra revenue stream will be for them. Betting is going to play into that. … I think you’ll see more programming around [betting], and, within game, they will be talking about it because the networks are ultimately going to want to generate more revenue. If they can get another stream with the gambling, that’s going to play a big role.
Bevilacqua: I think, early on, [the sports-betting revenue] is going to be in the advertising markets. When Sinclair bought the [Fox] RSN portfolio for $10 billion, in their press conference, they were laying out the rationale and had a whole slide on sports betting. They forecasted that, by 2025, about a billion and a half dollars was going to be spent just by advertisers in sports, the vast majority of that coming locally and regionally. So I’m sure they think that they can pick a big chunk of that up because they have a large portfolio.