By Mr. Edge, 10/26/2018

Sporting events are big business.

103.4 million people watched the 2018 Superbowl and that was the lowest total since 2009.[1]So why the decline in viewership and what does it mean for how we watch sporting events in the future?

To start, let’s examine the TV contracts each league has with different broadcast companies to get an idea of how much distributing content is worth. ESPN has the largest national TV broadcast contract with the NFL for $15.2 billion from 2014 to 2022.[2] Amazon and the NFL have a two-season contract for Thursday night football for $65 million.[3] The MLB reached agreements in 2012 with several broadcast companies through 2021 for $12 billion.[4] The NBA reached an agreement in 2014 for 10 years with ABC, ESPN and Turner for $24 billion[5] In 2011, the NHL reached an agreement for 10 years with NBC for $200 million each season.[6] There is a trend here. These broadcast deals are worth large amounts of money.

Another trend that is relevant today is streaming. From Instagram and Facebook Live to Twitch, nearly anyone can access the tools that can stream to a large group of people. Even though behind the scenes, streaming to millions of people is actually quite complex, it is much easier for non-technical people to stream content today than even a few years ago.

It is expected that the four major sports broadcast contracts will come to an end in roughly three to seven years (2021 to 2025) and the leagues will need to decide how to proceed. In theory, each league will have the technological know-how to stream and distribute their own games but will they?  It is quite possible. But the leagues also do not want to miss out on the opportunity to be on broadcast cable where any fan can watch. That means renewing contracts with broadcast companies or signing new internet streaming ones.

Imagine each sports league having their own applications giving subscribers personalized access to games. Packages could range from individual team access, groups or bundles of multi-team access, specified number of games, ala carte, etc. These applications could be accessed on from a variety of devices—desktops, wearables, smart TVs, mobile devices, etc. The numbers are compelling. 50 million fans paying a few dollars per season easily matches the NHL-NBC deal.

Some leagues may not want to dive deep into internet streaming, but for those who do, they would also control the subscriber experience. From games to advertisements, the leagues would be in charge. In fact, the advertising revenue alone would be monstrous. The 2018 Super Bowl generated $414 million in revenue.[7]

So what will actually happen? It’s difficult to say but here’s what I think. Clearly there’s lots of money to be made. Leagues will continue to sell their traditional TV broadcasts to the typical players like FOX, CBS, ABC, NBC, Turner and ESPN, because the broadcast rights still generate significant revenue. But I also think the leagues will come out with exclusive deals in the near-term for internet streaming. They’ll figure out what technology it takes to provide internet streaming at scale and then to provide their own subscription applications to fans.

My final prediction is that the NBA is the first internet streamer to do this themselves in the 2025-2026 season. Bold prediction, I know. So remember, you heard it here first.

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[1] https://www.cbsnews.com/news/super-bowl-lii-tv-ratings/

[2] https://www.statista.com/statistics/615678/nfl-national-television-broadcast-deals/

[3] https://www.reuters.com/article/us-nfl-amazon-com/amazon-nfl-reach-130-million-streaming-deal-for-thursday-night-games-source-idUSKBN1HX3EP

[4] https://www.forbes.com/sites/christinasettimi/2012/10/02/baseball-scores-12-billion-in-television-deals/#199bd7771d35

[5] https://www.cbc.ca/sports/basketball/nba/nba-tv-deal-how-the-new-24b-contract-stacks-up-against-other-leagues-1.2790143

[6] https://www.nhl.com/news/nhl-nbc-sign-record-setting-10-year-tv-deal/c-560238

[7] https://www.broadcastingcable.com/news/super-bowl-generated-414m-ad-revenue-171555


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