August 25, 2016
Over the past decade, television broadcasters have bet that DVR-proof live sports will remain highly profitable, and shelled out tens of billions of dollars to acquire broadcast rights to the NFL, NBA, MLB, EPL, Olympics, World Cup, college football and basketball, and all other sports imaginable. Fox, CBS, and NBC all created sports-only cable channels, and the Longhorn Network, SEC Network, Big 10 Network, and Pac-12 Network were all launched.
To a large degree, paying rights fees is an exercise in extreme speculation. In a recent example, CBS and Turner decided to pay US$8.8 billion for March Madness rights that extend through 2032. By that time, the combined effects of cord cutting, a la carte, over-the-top, mobile, and other concepts we can barely conceive of (virtual reality?) will mean that the way television is broadcast, consumed, and paid for will be radically different. Agreeing to pay US$1.1 billion annually – a 40 percent increase on what the rights used to cost—18 years out is a tremendously speculative bet on the idea that Live sports will continue to generate vast amounts of revenue.
For most sports organisations, the sale of broadcasting and media rights is now the biggest source of revenue, generating the funds needed to finance major sporting events, refurbish stadiums, and contribute to the development of sport at grassroots level. The royalties that broadcasters earn from selling their exclusive footage to other media outlets enable them to invest in the costly organisational and technical infrastructure involved in broadcasting sports events to millions of fans all over the world. Check out Sports content: the evolution, cost and popularity on page 8.