The impact of dot-com companies dipping their toes into sports media rights negotiations cannot be understated. By threatening to fundamentally alter the financial mechanics of sport and change the way the fan consumes their sporting content, internet streaming corporations provide the biggest opportunity to the sports business industry. There exists a media rights bubble, with rights deals, which form the majority of leagues’ revenue, charting a 4.6% CAGR from 2014-2023, while overall viewership is falling dramatically, with a 40% dropoff in the 18-49 year old category. This essay aims to determine the financial and marketing impacts of internet streaming companies bidding on sports broadcast rights on the sports business community.
Currently, TV broadcasters use big-ticket sporting leagues and events, such as NFL games, as loss-leaders. Most just about break even, with some, like ESPN, losing several hundred million dollars a year on buying and producing football content. The providers stay afloat by using marquee sporting events to market other products, as well as charging exorbitant rates to fans to buy cable packages. With the entrance of internet companies into the broadcast rights bidding, rights’ prices are likely to increase further, as a result of increased competition, and at a certain point, it will no longer be financially viable for some broadcasters to retain their sporting content in the next rights cycle. This will mean that they face losses in subscription, as well as a large content reduction. Conversely, if they are to continue to pay heavily for broadcast rights, they stand to lose as well, as subscriptions are likely to continue to fall. For the cable companies, this could see an extension of the cord-cutting phenomenon, and they stand to lose as well. A potential solution is to explore their own streaming service, as ESPN has with ESPN+, which is now coupled with Hulu, to compete with tech giants. As things currently stand, both the cable companies and TV broadcasters are hemorrhaging money they can ill-afford as sports continue to be on hold due to the COVID-19 pandemic. This loss could mean a reduction of liquidity that could further hurt them in negotiations.
With the intrusion of the FAANGs into the broadcast rights market, sports teams, leagues and players stand to benefit. Their revenues stand to increase, and so too can their geographic footprint, with companies like Amazon, which stream content internationally, having more than a $1 trillion market cap to splash out for rights, which can only drive prices up. They stand to earn more through sponsors, who could be attracted to the ‘smart’ advertising experience promised by tech companies, and selling merchandise would be easier using tools like Facebook Marketplace and Amazon.com. However, it also poses a risk: while revenue may increase, early streams, such as Amazon’s Thursday Night Football broadcast, have shown that its eyeballs couldn’t compare to TV ratings, which may hurt sports leagues, teams and players’ popularity if dot-com companies cannot get enough fans to cross over. However, there are large opportunities for digital companies to cash in on securing sports media rights, especially with 5G rollouts promising universal high-speed internet. As sports dominate the airwaves, forming approximately 90% of the most watched programs every year, companies like Amazon can rely on fans, particularly in the 18-49 year old demographic, to subscribe to their platforms to access sports, which in turn will increase subscription revenue, as well as revenue through cross-selling other services on their platform. Conversely, by being able to direct their already large subscriber bases towards sports, they can increase eyeballs on sporting content as well. By being able to capitalize on the social media surge that occurs during live sports, they can ameliorate fan engagement, as well as increase viewers by accessing the ‘second screen’ used by many viewers today, providing the 24/7/365 experience that TV companies have failed to achieve. Furthermore, getting access to millions of new consumers allows these companies to access more big data on users, which FAANGs use for profit. For the fan, the digitization of live sports means unprecedented access to tailored premium content, social media interaction, cheaper subscription rates, easier betting and fantasy play, the potential for VR/AR and better video gaming opportunities. This might, however, be off-putting for traditional fans. In turn, VR/AR companies, video game companies and betting and fantasy companies stand to increase their involvement in sport, with content directly linking to their respective platforms through these dot-com giants. This also stands to be an intellectual property and sponsorship revenue source for teams, leagues and players, particularly college athletes who can earn through their likenesses. Furthermore, the FAANGs give access to niche sports like beach volleyball and rugby that otherwise could not get TV airtime, but can now be viewed on demand through streaming.
While TV advertisements are increasing in price, there is a shift towards online advertising. Online ads are controlled by the big dot-com companies, who would be able to integrate advertisers onto their platforms easily. Businesses that rely on older viewers might have to find alternate places to advertise, but the majority of advertisers would find themselves using targeted ‘smart’ ads, that uses user data to increase ad efficiency and reduce costs, and could also link up directly with services like Amazon.com or Facebook Marketplace. For stadia and the businesses that go along with them, there is the fear that a more universal, high-tech, layered production may mean that fans are disincentivized from going to the stadium, which could hurt gate revenues and subsequent revenue streams for local businesses.
While Netflix and Google have shown reservations in going into the media rights landscape, Amazon, Twitter and Facebook have dived in headfirst, and despite initial reluctance from leagues, internet streaming of live sports through tech companies is now a naescent reality. Over time, one can only imagine that the experiment will turn into a new normal, fundamentally altering sports from something that viewers watch passively, to something they actively take part in.
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