Sports rights bubble won’t burst anytime soon –

Major League Soccer and Formula One have both signed new media rights deals in the past 90 days that are far more valuable than their expiring contracts. The Big Ten Conference ends in a record-breaking deal in line with the trend, and the Champions League hopes to see the value of its rights rise as well. The increase comes at a time when the pay-TV world is shrinking, inflation is putting pressure on consumers’ wallets, and the threat of a recession that will keep advertising costs down is daunting.

Given the headwinds, it makes sense to wonder when the so-called sports rights bubble will burst, or at least show signs of leaking air. But neither John Skipper (co-founder of Meadowlark Media) nor David Levy (chairman of Genius Sports) see that happening.

Former ESPN president Skipper said that as long as broadcasters and cable networks continue to pursue premium live rights, this will be necessary to collect the lucrative retransmission consents and transportation fees they currently receive. and said there will be more buyers than the rights package. And the value of these rights packages will continue to rise.

Levy agreed, and the former president of Turner Inc. said history shows that even as some traditional broadcasters withdraw their live-streaming rights, new platforms will emerge that can expand the pie. .

JWS take: Broadcasters, cable networks and even some streaming providers have started to cut programming budgets, but sports rights overall continue to see significant increases. But neither former network chief classifies the current rights environment as a bubble. “It’s not easy to play,” Skipper said.

The bull market for live sports rights exists because the genre offers the last staggering audience. Games are generally the highest-rated shows on television.

Live sports rights are considered the safest bet on television. “You pretty much know what the NBA is going for with TNT,” Levy said. Leagues have a “built-in” fanbase. “Do you know what’s not built in? When [a network] Start a new script series. It either hits or it doesn’t, and there are more shows that fail than succeed. “

Live sports are equally predictable and productive when it comes to generating ad revenue. Keep in mind that the game contains a certain number of ad breaks, and the stock that gets the best pay-per-viewer on TV usually sells out.

As a result, broadcast, cable, digital and streaming media companies are all interested in conducting live sporting events. “And if they’re all interested, it creates demand and supply [imbalance]’ said Levi. “If demand is high and supply is low, prices will go up.”

Competition from streamers puts additional pressure on broadcast and cable networks to retain the high-end rights that underpin their businesses. As a result, the two former network heads believe that traditional broadcasters will increasingly focus on the top of the pyramid.

Streamers who want both live content and variety on their platform are more likely to “play on the high end and bet on the low end,” said Skipper.

To be clear, just because live sports programming is more predictable than scripted doesn’t mean rights holders are guaranteed a positive financial return on their investment. That’s it. Streaming providers can reasonably expect him to get two million subscribers with the addition of the NFL Sunday Ticket, but depending on how much you pay and each subscriber’s LTV, the rights to his You may incur losses in your package.

Predictable advertising models for sports can be less predictable. “If you’re in a recession, advertising will [business] Harry Melandri, Advisor, Macro Intelligence 2 Partners, said:

Inflation can also disrupt the equation for potential rights holders. “Who’s the big watcher?” asked Julian Brigden, co-founder and president of Macro Intelligence 2 Partners. “It’s the kids of the crypto-destroyed millennial generation who are plagued by inflation because their wages haven’t risen yet. Is it?”

Levy acknowledged that both concerns were valid, and said the macro situation was likely explained by the short-term budget. But as a network head, “if you’re on a 10-year deal, you have to believe there’s a cycle of good and bad,” he said. “We’ll look at the economic challenges, but assuming it’s a top-of-the-range sports facility, we won’t stop bidding on the package.”

Broadcast and cable providers are expected to increasingly focus on the most predictable assets, but Levy expects most startups and niche assets to continue growing in value as well. “What happens is that when it comes to new platforms, you have to spend more money to get the rights,” he said of streaming.

There are exceptions. Properties that do not make a big enough change to trigger a bidding war may be forced to accept what is offered.

Skipper sees the current bull market in sports rights to continue “certainly in the short and medium term.” But he said rights fees could eventually plateau if some of the more traditional stations merge or give up broadcasting live sports and the number of future bidders declines. said.

But even if broadcasters and cable networks weren’t aggressively pursuing rights, it’s unlikely demand would dwindle, Levy said. “What always seems to happen is new distribution platforms launch.” The 1980s was cable. Next was telecommunications, digital and streaming. “Every time a new platform launches, it either adds to the pie, or expands the pie elsewhere,” he says. “It’s no secret that young men are the early adopters of new technologies and new platforms. For that reason, sports content is always in demand. [other] content. “

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