TV money may soon fade out

Lu­cra­tive deals in sports sim­ply can’t be sus­tained

USA TODAY International Edition - - SPORTS - Nancy Ar­mour nar­mour@ us­ato­day. com USA TO­DAY Sports

Get those car­toon­ish con­tracts while you can, be­cause the clock is tick­ing.

While even run- of- the- mill NBA free agents fig­ure out how to spend their new largesse — $ 23 mil­lion for J. J. Redick, re­ally? — and the NFL divvies up $ 7.8 bil­lion among its 32 teams, it’s noth­ing but bad news for the TV part­ners that make those ridicu­lous num­bers pos­si­ble. The cord cut­ting is ac­cel­er­at­ing, not slow­ing, and live TV view­ing is drop­ping.

Which means that the bub­ble be­neath the mas­sive player con­tracts is bound to pop. It might even ex­plode.

“I do see a sig­nif­i­cant cor­rec­tion com­ing,” Michael Leeds, a sports econ­o­mist who chairs the eco­nomics de­part­ment at Tem­ple, said Thurs­day.

“With the cord cut­ting and all of the chaos at ESPN, I think that there’s ev­ery rea­son to be­lieve that we’re see­ing a ma­jor change, a sea change,” Leeds said. “And the ( leagues) … could be in for ma­jor changes the next time things come around.”

For decades, ESPN, ABC, NBC, CBS, Fox and Turner Sports have been happy to write in­creas­ingly larger checks for sports broad­cast rights. With good rea­son.

Sports is best watched live, mak­ing it the one type of pro­gram­ming view­ers are less likely to watch on a DVR. Fans would rather grit their teeth and sit through yet more inane ads for credit cards or in­sur­ance than risk a friend un­wit­tingly spoil­ing the out­come of the game or a spec­tac­u­lar play.

It also gave the net­works solid pro­gram­ming to fill their sched­ules. Put the Knicks- Pis­tons on in March, when both teams are out of play­off con­tention, and it’s still likely be a bet­ter draw than an in­fomer­cial or a re­run. Lost in the hys­te­ria over the sag­ging NFL rat­ings early last sea­son was that the games still pro­duced num­bers that would be a bo­nanza for any other of­fer­ing.

This wasn’t lost on the var­i­ous sports leagues and or­ga­niz­ing bod­ies, who ei­ther ex­acted a pre­mium for ex­clu­sive re­newal or pit­ted the net­works against each other to jack up the rights fees. The NFL makes more than $ 7 bil­lion each year from its deals with CBS, Fox, NBC, ESPN and DirecTV. The NCAA will get more than $ 850 mil­lion for next year’s March Mad­ness and will av­er­age more than $ 1 bil­lion a year within the decade.

The NBA just fin­ished the first year of its mas­sive new TV con­tract, which will pay the league $ 24 bil­lion through 2025. That’s more than $ 2.6 bil­lion a year.

That in­flux of cash has a trick­le­down ef­fect. Which is how Redick ends up with a $ 23 mil­lion con­tract for one sea­son and of­ten- in­jured Blake Grif­fin gets $ 173 mil­lion over five years.

It’s also how the small- mar­ket Green Bay Pack­ers can be com­pet­i­tive. Ac­cord­ing to the fi­nan­cials re­leased Wed­nes­day by the Pack­ers, the only pub­licly owned team in the NFL, each team got $ 244 mil­lion from rev­enue shar­ing last year, a 10% in­crease from the pre­vi­ous year.

But these deals were ne­go­ti­ated long be­fore the bot­tom be­gan drop­ping out on tra­di­tional TV view­ing habits, ca­ble TV in par­tic­u­lar. As stream­ing be­comes more pop­u­lar — and the op­tions to do so eas­ier — peo­ple are de­cid­ing there’s no rea­son to pay $ 150 a month for dozens of chan­nels they don’t use.

In the first quar­ter of this year alone, pay- TV providers lost 762,000 sub­scribers, ac­cord­ing to a re­port from Mof­fet­tNathanson’s Craig Mof­fett.

Lose that kind of rev­enue, and you’re even­tu­ally go­ing to have to rein in your spend­ing.

“This era in which you had huge rights fees be­ing paid for the NFL, for the NBA, for the NCAA tour­na­ment … that’s go­ing to be, to a great ex­tent, a thing of the past,” Leeds said.

There will be new rev­enue streams through dig­i­tal and sub­scrip­tions, of course. But it won’t match the lot­tery- like jack­pots the net­works have been throw­ing around.

“I think there’s go­ing to be a pause in growth,” said Frank Hawkins, a co- founder of Scalar Me­dia, a New York- based con­sult­ing firm that spe­cial­izes in tele­vi­sion, new me­dia and sports.

The good news for the leagues — and play­ers — is that they still have a few more years be­fore the gravy train comes to a halt. The NFL’s deals run through the 2022 sea­son. The NBA’s con­tracts go un­til 2025. Fox has rights to the next three World Cups. The only thing more en­dur­ing than the Olympic flame is NBC’s hold on the Games.

But ev­ery boom is fol­lowed by a bust. And it’s com­ing.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.