Does traditional sports broadcasting face an existential threat?

By The Earnie Team

The model has been one of the most lucrative in media history. Rights holders sell broadcast rights to networks who in turn generate revenue through subscriptions and associated advertising deals. But are we now seeing this tried and tested method losing ground? We’ve all seen the metronomic growth of online streaming for TV shows and films in recent years resulting in increased online media consumption. In fact, half of all Americans now subscribe to a streaming service, and since 2013 more people have been leaving traditional TV mediums than subscribing. At Earnie we have been talking about how sports are not only competing against other sports but also against entertainment as a whole for a while now (Tips for sponsorship success, Is your sport event good enough). This is becoming more and more prevalent – most recently the US election affected TV ratings of American sports. So, does the sport broadcasting offering need to modernise in order to keep up with the shifts in television viewing?

But isn’t televised sport booming?

The answer is yes and no. The cost of sports broadcast rights is becoming increasingly more inflatedwith the competition for rights becoming ever more intense between the likes of BT Sport and Sky, not to mention terrestrial networks like the BBC and ITV teaming up in order to compete. This has resulted in huge sums for the Premier League, the Six Nations, and the Champions League. There’s a clear correlation between increasing terrestrial TV viewership (as the programmes are widely accessible) and the decrease in viewership as certain sports change from terrestrial to paid for networks (Formula 1, the Ryder Cup and Champions League have all seen sharp downfall in recent viewership figures since the switch). Another problem that broadcasters face is that the medium through which sport is largely transmitted is becoming less and less relevant to certain age groups. Since 2011 traditional TV viewership has dropped by 40% for those aged 18-24 (see figure 1 below). Overall sport viewership has largely remained unaffected by this as networks are allowed to limit broadcasts due to traditionally contracted exclusivity. In fact it has become an ever more important aspect for networks as sports events have become one of the few unique selling points of the traditional model (see figure 2 below). However, alternatives to this model are starting to enter the market now. OTT broadcasting has started to take effect with Amazon recently winning the rights to stream Thursday Night Football (for a reported $50 million) beating off other non-traditional sports media platforms Twitter, YouTube, Facebook. The likes of Sky and BT, despite the risk of upsetting their traditional business model, have accepted the need to attract younger audiences by setting up Now TV and online BT Sport in which people can buy sports only packages to stream. In the US, Walt Disney have invested £1 billion in BAMTech to collaborate with ESPN in providing a live digital streaming service.

 

Figure 1: Nielsen: Total Audience Report: 2016

 

Figure 2: Nielsen: The Year in Sports Media Report: 2015

So, whilst the need to attract younger consumers to the market is clear, the traditional TV model isn’t going away anytime soon. With an ageing population whose viewership of all TV (including sport) is increasing, the market is still sizeable and offsets much of the reduced viewership from younger generations. Moreover, media companies like Sky and BT are able to gain some market share by packaging up broadband and TV, providing overall cost efficiencies for customers and increasing the incentive to switch from other providers. A positive for broadcasters in providing an online platform that consumers deem reasonable is that it could reduce the incidence of piracy with respect to sports streams. This can be seen in the effects that Spotify and Netflix have had on piracy of music and television. With the increased fragmentation of sports media, a consolidated marketing plan that takes into account all media avenues, with a flexible central creative, is essential to achieve cut through for sports. At Earnie this insight sits at the heart of what we do – see where we have done it before here. One thing is clear; with the increased availability of sport through streaming and traditional methods, the consumer is the one who is really going to benefit moving forwards.