Live Sports the Only Thing Keeping the Lights on for TV Networks

·9 min read

If there’s any downside to the glutton’s buffet that is the Sunday NFL experience, that 12-hour, three-window smorgasbord of circus catches and skeleton-pulverizing hits, it’s the numbing litany of the commercial messages that pay the freight for all the football. By season’s end, the average fan will have memorized every fidgety beat of that unavoidable wireless spot and internalized the sleepy mania of the auto world’s fake-holiday blitz. (There’s probably no faux pas more mortifying than wishing a “Happy Honda Days” to someone who celebrates Lexus’ December to Remember.)

The numbing repetition of the ad breaks in football (and pretty much every other televised sport you can name this side of soccer) is a function of its massive popularity, inasmuch as the cost of buying time in a broadcast with such singular reach is prohibitively expensive. NFL broadcasts averaged 17.2 million viewers in 2020—by way of comparison, the Big Four networks averaged 5.1 million primetime viewers over the course of the 2020-21 season—and because nearly all the viewing was done live, the league’s commercial impressions dwarfed everything else on the tube. (Approximately 97% of televised sporting events are consumed in real time, so in addition to the expense of reaching such an outsized consumer base, there’s an additional tariff to pay for advertisers looking to bask in the luxury of the rare content that’s all but immune to the depravations of the DVR.)

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All of which adds up to a commercial environment that favors those with deep pockets. In fact, seven of the 10 top advertisers in the NFL, NBA, MLB and NHL are among the 10 most profligate spenders in U.S. media. Together, the parent companies Amazon, Progressive, Berkshire Hathaway (Geico), Apple, Deutsche Telekom (T-Mobile), Verizon and State Farm in 2020 spent an estimated $1.74 billion on in-game ads, which works out to 45% of their combined TV budgets. When sized up with their overall measured media spend of $6.2 billion, these conglomerates invested 28% of their marketing budgets on the four major U.S. sports leagues.

As one might expect, a massive chunk of the sports spend winds up in the coffers of the NFL’s network partners. According to Standard Media Index estimates, the league in 2020 helped generate some $3.4 billion in ad sales revenue, or around $3.96 billion when Super Bowl LV’s in-game spots were factored into the equation. That marked an increase of 3% versus the previous year, a gain driven primarily by the addition of two Wild Card games and a boost in overall commercial units sold. On average, the networks booked 73 30-second spots per regular-season game, up 6% from 69 units in 2019, while commercial avails in the postseason jumped 7% to 77 units.

Which isn’t to suggest that the other leagues aren’t earning their keep. Despite the ongoing pandemic squeeze, the NBA, MLB and NHL are on pace to book more than $2.3 billion in TV sales in 2020-21. College football generates another $1.8 billion in national TV sales and March Madness alone scared up nearly $1 billion in sponsor bucks. And it’s worth noting that all TV sales figures are estimates of the dollar value of the units sold, and do not include a tally for premiums such as halftime show title privileges, integrations or even digital spend, which pour hundreds of millions of additional dollars onto the national TV pile.

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In 2019, sporting events accounted for 29% of the ad impressions delivered on broadcast TV and 54% of all live commercial views, according to Sportico’s analysis of the Nielsen C3 ratings data. Toss cable programming into the mix and sports was responsible for 37% of all impressions served up on linear TV. In other words, in the year prior to the coronavirus outbreak, more than a third of the ads that were actually viewed aired during a sporting event.

If that’s a head-spinning percentage—and it should be, given TV’s sheer metric tonnage of scripted series, competition shows and uncategorizable cable filler (at last count there were a dozen cable programs devoted to cake and cake derivatives and at least seven ghost-hunting curiosities)—the well from which all the sports ad dollars are dredged is deceptively narrow. Statistically, pretty much every other ad that airs during a game is either trying to sell you a car, an insurance policy, or a smartphone. The rest are hustling fast food and wireless service and credit cards and movies and booze, although in accordance with our graying, panacea-crazed citizenry, Big Pharma has stormed the battlements of top-tier sports. (There is nothing more invigorating than watching your team get pushed all over the turf and then being reminded that you’re schlepping around what amounts to a future corpse. The Giants just lost at home by 27 points; now, here’s a CGI elephant with a word about chronic inflammatory lung disease.)

If the sameness of the categories repped in the commercial breaks can give rise to a sensation of couch-locked déjà vu, much of the blame lies with a core assumption of modern advertising. Wireless carriers and insurance companies are convinced that normal people spend much of their time hatching plans to skip out on their service contracts, and this notion shapes how billions of dollars in marketing budgets are allocated. The cost of the endless grange war between the people who drop your calls has led to an escalation in creative; we’ll see your stationary Lily and raise you our Kate McKinnon, and no, we’re not sure why she spends so much time clomping around, either. Familiarity may breed contempt, but it also paid for the house in Montauk.

A similar dynamic is in play at the top insurance agencies, which flood the zone with multiple campaigns meant to prop up specific segments of their business. For example, while the gecko is likely the first thing that comes to mind when the word “Geico” wobbles its way into the cochlea, the array of personalities who rep the brand are legion. In the space of just a few hours, the company this week has aired spots featuring ‘90s singer-songwriter Lisa Loeb, motormouthed ESPN hoops announcer Dick Vitale, gold-medal Olympian McKayla Maroney and Yogi Bear, a 63-year-old anthropomorphic member of the family Ursidae who wears a collar and tie but no actual clothing. And while you may never deduce what these four have in common—only three are carbon-based life forms and then there’s whatever Dick Vitale is supposed to be—the networks welcome the rare show of variety and all the cash that comes with the straining spot load.

Aside from the competitive frenzy that ensures a steady stream of ad revenue, the dollar volume is a reflection of the parent brands looking to fish where the scaly things are teeming. In 2019, before the pandemic temporarily let the air out of the ball, live sports accounted for 89 of the 100 most-watched broadcasts, with NFL games claiming 61 of those high-rated slots. And even in the midst of last year’s turbulence, sports still made up 74 of TV’s top 100 airings. Much of the displacement in 2020 was the byproduct of an even-more-bonkers-than-usual election season, in which 11 of the top 50 broadcasts were tied to the Trump-Biden race.

But there’s more to it than that. Mike Mulvihill, Fox Sports’ exec VP of research, league operations and strategy, noted during the company’s 2019 upfront road show that audience fragmentation, time-shifting and the rise of Netflix have conspired to all but wipe out the legacy TV ad model. As Mulvihill demonstrated to a huddle of media buyers, advertisers and one reporter, even the most critically acclaimed scripted series can no longer deliver an audience worthy of the expense of primetime real estate. In 1998, a commercial unit in the 25 Emmy-nominated TV series delivered some 329 million impressions. Fast-forward to the present and that same calculus delivers fewer than 30 million impressions; in other words, in the span of 20 years, more than 90% of the “respectable” TV audience—Emmy winners tend to over-index in higher-income households—has evaporated.

Run the experiment again, only this time swap in the top 20 sporting events, and the erosion is almost undetectable. A single spot that served up 467 million impressions during a sports broadcast in 1998 drew 438 million impressions in the same environment in 2018. Net decline: 6%, and much of that loss can be laid at the doorstep of Michael Jordan, whose second retirement in 2003 sucked a good deal of juice out of the NBA ratings.

Incidentally, Mulvihill’s math holds up if you switch the parameters from the most-celebrated to the highest-rated shows and narrow down gross impressions to demo deliveries. During the 2000-01 season, the top 20 entertainment programs on broadcast TV averaged 9.67 million adults 18-49. This past season, the top 20 non-sports programs eked out 1.27 million members of the dollar demo. Thus, in the span of 20 years, 87 percent of the viewers most coveted by advertisers have disappeared into thin air like Barret Robbins on the morning before Super Bowl XXXVII.

Even while broadcasters reckon with a contracting audience base—the number of adults 18-49 who watched TV this season was down 17% versus the 2019-20 campaign, a drop which coincides with a shrinking pay-TV base (only two-thirds, or 67%, of all TV homes now subscribe to a wireline cable/satellite/telco service)—the sports ad dollars haven’t budged. Discounting the inevitable volume deflation in 2020, sports investment continues to thrive for all the reasons cited above … and thanks to the simple dynamics of the TV ad market. While it’s a point that is often lost on observers outside of the media space, TV’s adherence to the fundamentals of supply and demand keeps pricing up even when the ratings are down.

Networks sell impressions, and when the supply of those impressions is reduced, the commodity is rendered more valuable still, so long as advertiser demand remains flat to up. Last week, NBC announced that it had sold 85% of its Super Bowl inventory, a flurry of business that was worked over the course of what broadcasters are calling the strongest upfront market in a generation. Supply is down. Demand is up up up. For sports TV, what started off as a recovery effort has blossomed into a renaissance.

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