After seeing double-digit growth rates for the past three years and a compound annual growth rate of nearly 8.6% between 2010 and 2015, media rights for North American sporting events for TV and streaming are forecast to moderate slightly through 2020 to a CAGR of 5.5%, a new study says. Despite the slowed growth, media rights of $20.53 billion are expected to become the largest slice of the $73.60 billion sports revenue pie by 2019, outstripping gate revenues ($20.32 billion), sponsorships ($18.13 billion) and merchandising ($14.62 billion), making up nearly 28% of all revenues. By 2020, PwC forecasts, media rights for sports will reach $21.29 billion, more than 28% of the overall $75.67 billion sports market.
Those numbers, PwC said in its At the Gate and Beyond: Outlook for the sports market in North America through 2020 study, reflect the relative calm in the market that follows signing of collective-bargaining agreements in the major pro sports leagues and other national media rights deals.
PwC noted that emerging distribution partners – like Twitter, Facebook and other social media sites, as well as subscription- and ad-based online distribution, like deals forged by Major League Baseball, the NHL and NBA for full- and partial-season packages – are heating up the competitive environment for rights deals alongside traditional broadcast companies.
That piece is likely to accelerate as new deals come up for negotiation, said PwC.
Currently, many sports properties are focused on new digital and immersive products that are incremental to the traditional broadcast. Those efforts – like offering consumer-controlled camera angles, cameras that focus on the activity along sidelines or in dugouts and other non-traditional interaction between fans and players or coaches, are among the new efforts to personalize content, hopefully reaching new audiences, deepening engagement, and displacing any rights fee premium lost in next cycle of broadcast deals as pay-TV evolves away from or within the bundle.
Virtual reality, augmented reality and even 3D video are aimed at increasing value pools across the sports market value chain.
The NFL’s fall from grace
PwC bases its forecast on the expectation that consumer and advertiser engagement with game broadcasts and other sports media content will remain strong.
The reality is that, in recent years, most pro sports leagues – even the seemingly bulletproof NFL, which for years has seen strong TV audience increases – are struggling with declining viewership.
The NFL has seen its average fan age trending higher, away from demographics most sought by brands, and viewership – across all of its products – has declined.
SportsBusiness Journal/Daily research shows that the NFL has seen a double digit percentage slide in viewership for prime-time games this year. “Sunday Night Football” is off 10% after being the highest-rated prime-time show for five years running, wrote SBJ, and ESPN’s “Monday Night Football” is down a whopping 19%. “Thursday Night Football,” where the league is experimenting with streaming games via Twitter, has seen its traditional audience decline 15% through the first two weeks of the season. Nielsen reports Fox Sunday down 3% and CBS Sunday down a like amount.
It’s not just pro football.
Viewership of the Rio Olympics was down significantly from the 2012 London Summer Olympics and SBJ found viewership of other sports equally off.
Major League Baseball, which has seen its average fan age increase dramatically (50% of last year’s World Series audience was over 55, and only 6% was under 18), NASCAR (which has been talking about fans “aging out” since 2011), the U.S. Open and the Men’s NCAA Basketball Tournament all saw big drops in viewership in the first three quarters of 2016.
“Sports go through cycles,” Artie Bulgrin, ESPN’s SVP of global research and analytics told SBJ. “It’s impossible to suggest that there’s anything going wrong here, particularly in light of the fact that we are in a really odd year in terms of the protracted presidential race, which has captured the attention of Americans going back a year now. Plus, it’s an Olympic year, which clearly had an impact during the summer.
“Outside of the fact that we’re in this very strange year, I’m not seeing anything unusual,” Bulgrin said.
Millennial’s and the digital migration
While that analysis could explain a single-digit drop in viewership, it doesn’t fully fly with the big slide major sports have seen this year. Accelerating cord cutting and increased adoption of streaming services – like Netflix, Amazon Prime, Hulu, Sling TV, PlayStation Vue and others – likely are playing a far bigger role than the presidential race.
And, as other services, like AT&T’s DirecTV Now and Hulu’s linear service, come on like the economics and viewership will continue to roil the waters.
Millennial cord nevers, cord cutters, and an increasingly large audience of viewers choosing to opt for “skinny bundles” of content that don’t always include stalwart sports broadcasters like ESPN, or even all of the Big 4 networks, are creating problems for operators and broadcasters that have placed big bets on sports as a revenue foundation.
ESPN this year has seen viewership among men 18 to 34, the gold standard for brand’s, decline 24%.
“If kids don’t start coming back in, you’re going to have an issue,” Lee Berke, a sports media consultant told the Wall Street Journal.
Well, get ready, because, just like the newspaper industry that saw readers cancel subscriptions as they flocked to the Internet, and legacy phone companies that have seen almost all revenue from wired-residential-phone revenue disappear, those viewers just aren’t coming back. They’ve evolved, and if the traditional TV establishment continues to wait for them to return, well, they’ll be experiencing many more “strange” years.