Sports TV Endures as Networks Hold Line and Streaming Grows
As much as the generational flight from linear TV would seem to have precipitated a mad scramble to push live sports content to the newfangled streaming platforms, the broadcast and cable networks aren’t chasing younger fans at the expense of their legacy business. To prop up the model that generates tens of billions of dollars in advertising and distribution revenue, rights holders will manage their sports holdings in much the same way that Ernest Hemingway described the process of stumbling into bankruptcy, inasmuch as the shift from TV to DTC will unfold “gradually, then suddenly.”
Even as the leagues continue to grapple with the double-barreled challenges of aging fan bases and ever-diminishing attention spans, the upper crust aren’t in any hurry to abandon TV. “While digital is growing, the traditional TV ecosystem is still incredibly rich, incredibly deep and incredibly broad,” said Hans Schroeder, executive VP and COO, NFL Media. Speaking to reporters shortly after ESPN announced it had renewed its Monday Night Football package last month, Schroeder said the reach of linear TV is impossible to duplicate, noting that the NFL’s overall deliveries exceed 200 million people per year.
“We’re getting 40 telecasts a year with over 20 million people watching,” Schroeder said. “While we’re certainly excited about the opportunity that Disney’s going to have to grow new platforms with our content, the existing, traditional ones are still really big, even if they’re no longer growing like they once were. There’s still a ton of our fans who look [to TV] first.”
The scope of Disney’s reach will only expand under the terms of its new $28.1 billion NFL deal, which includes three standalone Monday Night Football broadcasts set to air on ABC each season. The network’s signal is active in 98 million TV households, which gives it an 18 million-home advantage over its cable sibling.
As much as the enthusiasm for the likes of ESPN+, Peacock and Paramount+ is a function of a need to future-proof the sports distribution model in the face of a rapidly evolving media multiverse, there’s still far too much money locked up in TV to risk destabilizing the legacy system. Last year, the four primary NFL media partners (CBS, NBC, Fox, ESPN) cranked out $18 billion in retransmission consent/affiliate revenue, which is more than three times what the networks paid the league in combined rights fees.
The shrinking pay-TV model effectively will undo many of the significant gains the networks have made on the distribution front. While retrans/affiliate revenue has doubled since 2015, that vein will begin to dry up as the number of paying subscribers continues to dwindle. MoffettNathanson projects that total pay-TV subs (a catchall that includes traditional bundled cable/satellite/telco and virtual MVPD customers) will drop to 71.4 million by 2025, whereupon the 97% boost in carriage fees in the last five years will give way to a mere 9% gain in the next five. (Look for a far more concerted shift to OTT/DTC once the rate of change for affiliate growth hits the low-single digits.)
Aside from all the money the networks earn by simply turning the lights on, there’s also the ad sales revenue to consider. Including the Super Bowl, in-game NFL ad units last season brought in some $3.7 billion.
“The preponderance of the revenue is still in the existing pay-TV system,” said John Kosner, president of the digital- and sports-media consulting firm Kosner Media. Speaking earlier this week during a forum hosted by BWG Strategy, the former ESPN exec said Disney’s considered approach to the distribution question extends to its unwillingness to pin itself to any self-imposed deadlines.
“ESPN has not specified a date when they’re going to move all-in on OTT, and I expect that they’ll put that off for some time,” Kosner said.
In the early going, the NFL’s broadcast partners will augment their live coverage with simulcasts. In other words, fans who don’t subscribe to the OTT services needn’t fear that they’ll miss out on much of the action, as the number of games that will be made exclusive to the streaming platforms is minimal. NBC for the first several years of its new contract will allocate one exclusive game to Peacock per season, while ESPN+ is expected to air a London game that won’t be picked up by any of Disney’s linear TV channels. ViacomCBS, for its part, is positioning Paramount+ as a pure simulcast play.
While the sports side of the TV business acclimates itself to the OTT world, entertainment programming is expected to migrate at a far faster clip. As scripted and reality shows are no longer time-sensitive—if the DVR just about killed off the water-cooler show, the pandemic administered the coup de grace (after all, it’s been more than a year since office drones have huddled together around a bubbler)—TV will assume its final form as a delivery system for live sports, news and events. Pushing the bulk of the general-entertainment fare to OTT theoretically will also drive up ad pricing, as the constriction of available impressions should coincide with an increase in demand for sports programming.
In time, fans will have to get used to hopping from app to app in order to find a game, but that vision of sports-Frogger is a long ways off. “TV isn’t going to go out of business any more than wireline telephony has, but it’s no longer going to be the dominant medium,” said Desser Media president Ed Desser during the Monday BWG confab. “The people remaining in pay-TV are likely to be heavy sports and news consumers, and the cord-cutters may have to buy three streaming services in order to keep up with everything they want to see. … Ultimately, consumer options are expanding.”
As a former NBA media capo, it stands to reason that Desser’s assessment of what lies ahead would jibe with Schroeder’s take.
“Many of our fans are still spending the majority of their time on traditional television platforms, but we also know that younger fans especially are experiencing our games in different ways,” Schroeder said during last month’s presser. “As media companies continue to launch new platforms, they’re creating opportunities for us to plug our content into everything they’re doing, and, you know, that’s really incredibly exciting.”
For his part, Kosner believes that many of the questions about the evolution of the sports distribution model will come from well beyond the bounds of the traditional TV space. “Amazon is going to bring choice, convenience and interactivity to NFL broadcasts in a way we really haven’t seen before,” Kosner said. “What they wind up doing, especially as it pertains to Twitch, could begin to provide some of the answers we’re all looking for.”
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