(By Andy Bloom) The 2017 World Series lived up to the name “Fall Classic.” As the Astros defeated the Dodgers in seven games, did you notice YouTube’s new TV service was a presenting sponsor? YouTube’s presence felt peculiar in light of headlines like this from the New York Post (11/1/17): “Cable Companies Freak Out After 1 Million Cut Cord in 3 Months.”
Consider: The Boston Globe reported that WEEI’s 10-year Red Sox radio rights agreement cost $200 million. In 2016, a new seven-year deal was renegotiated at an “average annual value believed to be less than the previous deal.”
The New York Daily News speculated that the deal that moved the New York Yankees’ broadcasts to WFAN pays the team between $15 million and $20 million per year, for 10 years. The Daily News noted that WFAN also had to agree to a three-year soccer rights deal “believed to be the highest radio contract for an MLS team.” Comcast’s SportsNet (since rebranded NBC Sports Philadelphia) signed a 25-year, $5 billion regional cable rights agreement with the Phillies in 2014.
The Los Angeles Dodgers’ new ownership group, Guggenheim Partners, reached an agreement with Time Warner Cable in 2013. TWC agreed to create a Dodgers cable channel (called SportsNet LA) and pay the team $8.35 billion over 25 years.
Major League Baseball may be the greatest bargain in professional sports. MLB signed a nine-year deal (2014-22) with three networks (Fox, TBS, and ESPN) for $12.4 billion. In 2016 the NBA, ESPN, and TNT turned heads with the announcement of a nine-year extension worth $24 billion — $2.6 billion per year.
The NFL is the “Big Kahuna.” CBS, Fox, NBC, and ESPN agreed to a deal that pays the NFL $4.5 billion per year, or nearly $40 billion over nine years between 2014 and 2022.
For perspective: Baseball’s annual rights fee is greater than the GDP of St. Lucia and the Virgin Islands. Basketball receives more in TV rights than the GDP of Greenland or Aruba. The NFL’s deal is richer than the GDP of the countries mentioned as well as Barbados, the Cayman Islands, and Switzerland.
Magna Global Sports estimates that ad revenues will create $1.3 billion in deficits for networks carrying the NBA, $1.1 billion for those carrying MLB, and a mere $500 million for the networks with the NFL rights.
Those with responsibilities for selling sports rights on local radio know what a challenge it is to profit from play-by-play. Well, the networks don’t have it any easier. The enormous broadcast rights contracts have to remain a good business decision for the broadcasters, or the teams or broadcasters will walk away from the mountain of losses soon enough.
Sports organizations often help broadcast partners to monetize their relationships. Just as often, however, they block deals from happening for petty reasons. The leagues devalue broadcast rights by limiting the scope of the “rights” they sell broadcasters and then repurposing the same broadcasts to new media. Broadcasters (usually) pay the production costs on top of the rights fees. The repurposed deals threaten the business models that professional sports and broadcasters have worked under for decades. What’s bad for broadcasters ultimately threatens the reach and revenue of teams and leagues.
It started with each league creating its own network. It’s one thing for ESPN to have to compete with Fox for sports viewers, but is the playing field truly level between ESPN and Fox versus MLB or NFL Networks?
Why Fox Sports would accept a World Series sponsor with the message “You don’t need to watch Fox Sports or even have cable now that MLB has struck a deal with YouTube” is a mystery. Fox had secured streaming rights. Fans without cable should have been directed to the Fox Sports Go app to watch the games. MLB double-dipped, getting revenue and additional eyeballs from YouTube TV. While that may be good for MLB, it’s not good for its broadcast partners.
NFL fans have options too. Last season, Twitter bought streaming rights for Thursday Night Football. This year, Amazon Prime paid $50 million (reportedly five times more than Twitter was paying) to stream Thursday Night Football. Perhaps Amazon is different, because once fans are there it can directly sell them a variety of products?
Radio broadcast-rights holders are bamboozled no less often. In most cases, teams and leagues deny flagship stations streaming rights. The broadcast flagships pay to produce games that are then heard elsewhere (i.e. SiriusXM broadcasts most NFL, MLB, NBA, and NHL games).
TuneIn is partnering with the NFL to broadcast all 32 NFL feeds. What kind of rage do you feel hearing the broadcast you paid to produce, but can’t stream, on SiriusXM or TuneIn?
Westwood One has national radio rights to NFL broadcasts. Several teams with national bases, like the Cowboy and Raiders, sell their local broadcasts nationally through another syndicator, Compass. Theoretically, they can’t broadcast against Westwood One. A friend of mine at Compass will testify that, in practice, it happens all the time.
Similarly, ESPN has rights for five out-of-market teams: the Dolphins, Jets, Giants, Patriots, and Steelers. The Patriots, often on Monday Night Football, can easily be on two sports stations simultaneously.
Some with a grasp of sports may think I don’t understand. In most cases the deals with secondary sources (Twitter, Facebook, or Amazon), are primarily distribution deals, designed to boost audience levels. If the new media sources have inventory, it’s not much.
Inventory misses the point. By agreeing to rights deals that allow teams to repurpose broadcasts, broadcasters are creating their own obsolescence. Instead of maintaining exclusive rights and building our digital platforms, we’re letting audiences learn to go elsewhere to stream sports. Advertisers are learning they can find the same inventory cheaper. Even the most obscenely priced rights agreement effectively screams: “No, really, don’t watch the World Series on the Fox Sports app. Cut the cord. Go to YouTube TV. Who needs cable or Fox (or any legacy broadcast platform)?”
ESPN does a good job of including streaming in its deal. Some of its programming decisions have no doubt led to defections (including budget cuts resulting in layoffs of popular personnel), and ESPN is still losing viewers at a rapid rate — they have lost somewhere around 11 million over the past decade-plus. Before the football season, ESPN was churning perhaps 7,000 viewers per month. With the NFL player protests, ESPN is losing closer to 15,000 a month now. Hundreds of online articles have tried to explain ESPN’s losses. Perhaps it’s simply that viewers now have other places to go?
Estimates suggest ESPN is down $500 million in revenue and down another $250 million at ESPN 2, News, Classic, etc. ESPN is the canary in the coal mine.
Broadcasters must unite and refuse to agree to deals that allow sports organizations to double dip: “It’s us or bust.” If broadcasters allow sports organizations to repurpose broadcasts they produce to other online and mobile platforms, the voice they hear may be Andrew Dice Clay’s, saying, “What are you, stupid?”
Andy Bloom is president of Andy Bloom Communications, specializing in talent coaching and development. Previously Bloom was operations manager for Talk Radio 1210 WPHT, and Sports Radio 94 WIP/Philadelphia, communications director for Rep. Michael R. Turner (R-OH), and VP of programming for Emmis International and Greater Media Inc. For more information his website is www.andybloom.com. Contact him at [email protected].
Andy, great article. Obviously the decision making of legacy broadcast groups and individual local stations is fear based and people don’t want to be labeled as the one that lost the XYZ Sports League / team to the competitor across the street. They use the myth that they will make their money back from the “ratings lift” this content provides to the rest of the station(s). That’s mostly a lie, because for example, everyone knows airing 162 MLB games for a mid market team that isn’t contending, is almost aways going to drive audience away in droves! This reminds me of the Nielsen conundrum. Everyone knows we pay for a ratings service that is flawed on a good day, and uses methodology that can’t produce good market measurements. Like with the sports deals, someone has too lead, and be the first to say “no”!