Group Created with Sketch.
Volume 21 No. 47

Media

Media rights for the first time have overtaken revenue from fans filling empty seats and will top $20 billion in 2018, according to the annual PwC Sports Outlook.
Photo: Getty Images

Media has stormed the gate. Or at least that’s the case when it comes to North American sports revenue.

 

According to a report scheduled to be released today by PricewaterhouseCoopers, the media side of sports in the U.S. and Canada overtook gate revenue in 2017 as the industry’s largest slice of revenue, and this year’s media haul is expected to top $20 billion for the first time.

 

That’s just one takeaway from the PwC Sports Outlook, an annual study that tracks sales of media rights, sponsorship, tickets and merchandise generated by U.S. and Canadian-based professional and college sports properties. The report forecasts that the four categories will combine to see growth every year from 2018 through 2022, topping $70 billion for the first time this year and reaching $80 billion by 2022.

 

If the report’s predictions stand, the industry will have enjoyed 13 consecutive years of growth — thanks in large part to the more than 100 percent increase in the media segment in the last decade.

 

“New players are going to help drive up rights fees,” said Michael Keenan, the sports practice leader at PwC. “Tech companies and properties are going to find ways to partner with existing rights holders because leagues want to provide access to all fans in the way that each individual fan wants to consume it.”

 

The report uses Amazon as an example of what media rights partnerships could look like when the next wave of negotiations begin.

 

The company, which already has formal relationships with several major sports properties, brings a diverse set of products to a media rights conversation: Its artificial intelligence assistant Alexa provides fans with on-demand NFL information; Twitch streams NBA G League and esports events; and Elemental has provided both live and on-demand video streaming for the Olympics. Throw in subsidiary Whole Foods as a potential sponsor/advertiser, plus Amazon’s home delivery capabilities, and its portfolio looks nothing like a legacy rights holder.

 

CBS also offers an add-on subscription option for Amazon Prime members, delivering another way for customers to access live NFL games and giving the two companies an opportunity to generate incremental advertising dollars.

 

Similarly, AT&T’s potential broadcast rights ecosystem includes Turner, DirecTV, Bleacher Report Live and, of course, mobile and internet technology.

 

Finally, regional sports networks will continue to add to the category’s growth. Sixteen team deals across Major League Baseball, the NBA and NHL are set to expire over the next two years, according to the report, and the FCC-mandated sales of 22 RSNs expected to occur next year as a result of Disney’s acquisition of 21st Century Fox could spark a change in RSN business models. Fox Sports Detroit, which has aired Tigers games since 1998 and the Red Wings since 2003, is on the block, and the Ilitch organization, which owns both clubs, announced last month that it’s exploring the creation of an RSN to replace it.

 

Among other segments, ticket sales still generate the second-most revenue for the industry, projected to be $19.3 billion this year. The report does not include the annual cost to lease premium seats or fees for personal seat licenses. Its gate-revenue calculations are based on the face value of tickets.

 

The segment is expected to grow 9.6 percent from 2018 to 2022, buoyed partially by the sustained strength of the sports construction market as $16.2 billion is currently committed to building or upgrading 118 stadiums, racetracks and arenas in the U.S. and Canada, according to Sports Business Journal research. Nicer buildings tend to attract more fans.

 

But Keenan says attendance and in-venue spending, “which have leveled off — and even decreased — as competition from game broadcasts and price pressure on certain ticket buying segments have continued to increase,” could receive a jolt from the U.S. Supreme Court’s recent decision to allow states to legalize sports betting.

 

Venue development, like that of Milwaukee’s Fiserv Forum, will help gate revenue reach a record $19.3 billion this year, according to PwC’s estimates.
Photo: Dylan Buell

As of now, five states — Delaware, Mississippi, New Jersey, New Mexico and West Virginia — have joined Nevada in legalizing sports betting. New York, Pennsylvania and Rhode Island have legalized sports betting but haven’t started taking bets. Those states are home to 22 franchises in the five biggest sports.

 

“Sports wagering has the potential to increase fan engagement, provide benefits to fans who participate and offer additional entertainment to fans on game days and beyond,” according to the report.

 

PwC says a gaming company could partner with a team to design an app that allows any fan to wager on a variety of team and individual outcomes during a game. But to incentivize fans to attend the game and use the app, “a dollar credit to the fan’s individual account could be applied to be used for wagers.” The team also could offer concessions and retail credits for fans to encourage them to arrive early and stay late to wager.

 

The sponsorship category also will benefit from the new inventory related to gambling, via advertising, uniform rights, incremental in-venue signage and naming-rights opportunities. In the past six months, the NHL, NBA, WNBA, Dallas Cowboys, Baltimore Ravens, New York Jets, Philadelphia 76ers and New Jersey Devils have each signed a marketing deal with a casino.

 

The $20.1 billion that the sponsorship category is projected to generate in 2022 would represent an increase of 17 percent from this year and would pull it almost even with the gate revenue sector.

 

Finally, licensed merchandise sales make up the fourth-biggest contributor to the industry’s overall economy, according to the study. Such sales are projected to increase 4.6 percent by 2022, from an estimated $14.6 billion this year to $15.2 billion. One reason for the sustained growth is that properties have become better at analyzing CRM data to adjust the types of items they offer to fans, Keenan said. He also cited nimble behavior such as Fanatics’ ability to ship World Series champions-emblazoned apparel seconds after the Red Sox won the title on Oct. 28 as a reason for the category’s sustained growth.

 

PwC’s data dates back to 2005.

When they aren’t attending Rams or Chargers games in person, Los Angeles NFL fans can watch the sport by streaming it.
Photo: Getty Images

This month the NFL will assess the results of its first-ever streaming of DirecTV’s Sunday Ticket as the league considers upending its long-running out-of-market package.

 

The NFL and AT&T, the owner of DirecTV, quietly agreed over the summer to move back the league’s option to end the deal early from this fall to next spring. As part of that agreement, the league allowed


DirecTV to stream Sunday Ticket in seven markets: Boston, Hartford, Los Angeles, Louisville, Philadelphia, Phoenix and San Antonio, said a source familiar with the deal.

 

The NFL wants to analyze how much demand there is for offering games digitally rather than just through satellite before making its decision. With the option originally available in the fall, the league decided it did not have enough time to make an informed choice.

 

“It was less a value conversation,” the source said of the decision to postpone the option period, “and more of a calendar-like pragmatic decision on when we would get the [streaming data].”

 

The league is in the midst of its silver-anniversary season with DirecTV.
Photo: Getty Images

The NFL struck its first DirecTV package in 1994, allowing the satellite broadcaster to offer all games to subscribers in addition to the ones shown on broadcast in their markets. In 2014, the NFL agreed to extend the satellite deal for another eight years at $1.5 billion annually through 2022, a 50 percent increase from the previous 2009 renewal. The option allows the league to slice the last three years off the current deal. That means if the NFL exercises the option, next season is the last under the current deal.

 

The NFL declined to comment. DirecTV wrote in a statement, “We do not comment on rumors or speculation.”

 

It’s unclear when exactly the option arrives next spring, but chances are the NFL will decide by or at the annual owners meeting that is scheduled to begin on March 25.

 

The league is already streaming its Thursday night package on Amazon, while broadcasting it on Fox. And this year, in-market games are available for mobile streaming on any cellular carrier. That’s why experts expect the league to perhaps split the digital and satellite packages.

 

“Maybe you sell satellite rights to DirecTV and digital rights to Apple, and instead of a billion and five you can generate two, two and half billion in total,” said media analyst Rich Greenfield of BTIG. “If I am sitting in the NFL’s shoes, there is a lot of reasons to want to bring in new buyers like they have for ‘Thursday Night Football.’ It is harder to do that on things like Sunday afternoon. But I would think a Sunday Ticket is an obvious place for experimentation and trying new things.”

 

It’s unclear how many DirecTV subscribers were aware of the streaming. Because it was limited to seven markets, DirecTV’s national advertising campaign did not mention it, Greenfield said.

 

After the NFL staff analyzes the data, the next step is to involve the broadcast committee. New England Patriots owner Robert Kraft is the chairman of that committee. The NFL has an owners meeting scheduled for Dec. 12, and committees typically convene in the weeks before those gatherings.

NBC Sports is organizing a motorsports property summit for the upcoming offseason to explore ways the leagues can cross promote and share best practices.

The idea is the brainchild of NBC Sports executive producer Sam Flood, who oversees on-air production for all of NBC’s major sports. The network has media rights deals with several racing properties including NASCAR, IndyCar, IMSA and a handful of grassroots motorsports series.

A specific date hasn’t been announced, but the summit likely will be held after NASCAR’s season ends in late November and possibly at NBC Sports’ corporate headquarters in Stamford, Conn.

“With all the motorsports properties under the NBC umbrella, we have a unique opportunity to get all forms of racing working as one collectively to grow the industry,” said Flood, who is also president of production for NBC and NBC Sports Network.

The idea comes as series such as NASCAR try to spark a reversal in key performance indicators while IndyCar and IMSA try to boost their growing but smaller series.

“If you get a bunch of us in the same room with a broadcaster that is critical to portraying us and helping us reach the public and grow our audiences, it’s a great idea,” said Mark Miles, CEO of Hulman & Co., which owns IndyCar and Indianapolis Motor Speedway. “We’ll see what comes out of it.”

The summit’s formation was first revealed by NASCAR President Steve Phelps during a podcast with NBC reporter Nate Ryan, after Phelps was asked about the possibility of holding a dual NASCAR/IndyCar race weekend. IndyCar and track operator International Speedway Corp. have discussed the idea.

“Sam Flood is going to do a motorsports summit to try to look at some best practices to see if there’s ways to cross promote,” Phelps said during the podcast. “I think it’s fantastic.”

In January, the College Football Playoff championship will move to Silicon Valley, an area that does not have the same fervor for the sport as last year’s market, Atlanta, which is in the middle of SEC country.

 

Rob Temple, ESPN’s senior vice president of sports marketing, said his network’s biggest sponsors are reacting well to the game’s Santa Clara location.

 

“It is different,” Temple said during an industry conference last week. “A lot of our partners see the game going to the West Coast as an advantage for them. A lot of them are East Coast-based and Southeast-based and they want to be relevant in that market, so it’s opened up some new opportunities for them.”

 

Now in its fifth year, the CFP championship game has become a reliable ratings juggernaut for ESPN. The title games featuring Ohio State vs. Oregon in 2015 and Alabama vs. Georgia in 2018 are ranked as the top two telecasts in cable television history. Overall, the CFP championship or semifinal games hold six of the top-10 slots.

 

ESPN points to how Marvel leveraged Kendrick Lamar’s performance at last year’s halftime show to build interest in the “Black Panther” movie.
Photo: Getty Images

Temple said the game positions are filled with advertisers that have seasonlong commitments.

 

“It’s nuanced — most of our CFP partners are entirely invested in college football,” Temple said. “They don’t just buy the national championship game in that location. They’re buying on a multiyear basis the whole breadth of the season.”

 

Temple brought up last year’s halftime concert with Kendrick Lamar as an example of how important the championship game is to advertisers.

 

“Last year, we used the first Kendrick Lamar performance to perform a song that was in ‘Black Panther,’ and we had an original trailer that came right after that song that led to the most successful 24 hours of advanced ticket sales for any Marvel film,” Temple said. “That worked really well for Disney and Marvel and Kendrick Lamar. He launched a pair of shoes off of that performance.”

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

It seems obvious that Turner’s coverage of “The Match” — the planned pay-per-view golf match between Tiger Woods and Phil Mickelson on Nov. 23 — will attract a tiny audience, at least in broadcast television terms. But last week two sports business executives applauded Turner’s strategy of making the event available via its B/R Live streaming service.

“The [sports] industry is under incredible pressure,” said Dan Cohen, a senior vice president at Octagon. “On the content side, it’s about the technology — following the fan and being where the fan is and delivering that at a high cost of entry in terms of rights fees. … There is all of this pressure to generate new revenue, catch up with technology — where the fans are all going. That requires taking some measured risks. If you don’t take measured risks now, you’ll be paying for it five years from now.”

Cohen talked about the advantages of having Turner use HBO to market the event through a reality series with Woods and Mickelson; Bleacher Report to market programming to younger consumers; and B/R Live to host the event. The PPV sells for $19.99.

“Nothing’s ever been distributed across so many different channels uniquely and uniformly like this,” Cohen said.

Geoff Reiss, general manager and vice president at Yahoo Sports, agreed.

“My hope is that if it disappoints them, they don’t throw the baby and the bath water out together,” he said. “There are plenty of ways to create a connected journey across all of those touch points. … I don’t know if building that machine around a pair of 40-year-old golfers is necessarily the thing I want to see them building right now. If HBO was still in the boxing business, for example, a fight would be a phenomenal way to build that same machine.”

When NFL Network launched 15 years ago — on Nov. 4, 2003 — Hans Schroeder was a low-level employee in the league’s nascent media department.

Now COO of NFL media and business, Schroeder is the only business executive who still is with NFL Media.

I caught up with Schroeder last week to ask him to relate memories from his front-row seat as he watched the network grow from a new, independent sports channel to one that became the second-most-watched cable sports network during the last NFL season — the highest ratings position in its 15-year history.

The first memory Schroeder brought up actually predated the network. He talked about the NFL’s “Sunday Ticket” deal with DirecTV in 2002, which saw the satellite provider commit to carry NFL Network. The idea of an NFL-focused TV channel was a novelty. At the time, ESPN dominated the cable sports landscape, as Fox, NBC and CBS had not yet launched their sports channels. The NBA had a small channel that was not rated.

The channel launched Nov. 4, 2003, with host Rich Eisen saying, “Your dreams have indeed come true.”

The channel, though, did not have live games and had trouble convincing cable operators to carry it. In January 2006, the league’s owners voted to put a package of Thursday night games on the network exclusively — a move that was directly responsible for the network’s growth.

“There was a lot of interest in that package,” Schroeder said. “But the owners ultimately decided to put the games on NFL Network. That was incredibly exciting.”

Schroeder also remembered pulling an all-nighter at Time Warner Cable offices in September 2012, when the league signed an affiliate deal with the sole remaining cable operator that had refused to carry the network. The two sides finally agreed to a deal just before 6 a.m., meaning that NFL Network would be fully distributed for the first time, Schroeder said.

Schroeder reflected on the NFL’s growth in media, which ran parallel to NFL Network’s growth. It took the league’s internet business and club sites in house, launched NFL RedZone in 2009 and saw NFL Films grow.

“This story is not just about the network,” Schroeder said. “From commissioners [Paul] Tagliabue and [Roger] Goodell to owners like Robert Kraft and Jerry Jones, the league made a commitment to build out the media business.”