Two years into its $5.2-billion NHL deal, did Rogers make the right call?

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More than a year ago, Molson Coors Brewing Co. began looking at the Toronto Raptors as a potential silver bullet to reach a new generation of sports fans.

As Canada grows more diverse and baby boomers age, the brewer – which has been a National Hockey League sponsor on and off for decades – wanted to tap the growing popularity of basketball by shifting its Coors Light sponsorship to the hard court, leaving the NHL to Molson Canadian. Though basketball audiences are typically much smaller, sponsorships of the sport have the benefit of being far less costly in Canada, freeing up money to experiment with online marketing.

"Basketball was a great place for us to play," said Wes Wolch, head of content for media buying and planning firm MEC, who advised on the move. "You look at the diversity of the fan base and it was a great way for the brand to connect with a millennial group."

The change proved timely. This spring, the Raptors shed their reputation for choking in big games by reaching their first National Basketball Association Eastern Conference final, dispatching the Indiana Pacers and the Miami Heat in two riveting series – and drawing record TV audiences for basketball.

Meanwhile, playoff hockey ratings are down 44 per cent on average compared with last year, as every Canadian team missed the postseason for the first time since 1970. And the Toronto Blue Jays are trying to hang on to the halo of goodwill generated during last fall's surprise playoff run after a lacklustre start to their 2016 campaign.

These swings in fortune disproportionately affect Rogers Communications Inc., which owns NHL playoff and Blue Jays regular season broadcast rights through Sportsnet, shares Raptors rights with TSN and broadcasts soccer and wrestling. The unpredictability has caused the company's media division to miss its marks on hockey-related advertising, forcing widespread layoffs and cutbacks in production where fewer viewers were tuning in.

"There are going to be peaks and valleys based on team performance and bandwagon jumping," Scott Moore, president of Sportsnet and NHL properties for Rogers, said. "Sports is cyclical, and unfortunately for the reporting on our NHL deal, this year was a tough year for NHL teams, which translated into a tougher year for us."

But short-term successes and failures may mask an underlying trend: Where hockey has long been king of sports in Canada, younger and newer Canadians show equal or greater interest in sports such as basketball, just as new online video alternatives are fragmenting sports viewership.

Broadcasters face a new reality born of a demographic split. With a decade left on Rogers's 12-year hockey rights deal – the most expensive in Canadian history at $5.2-billion – the company and its rival, Bell Media, face the uncomfortable prospect that hockey viewership as they have known it might already have reached a generational peak.

"One of the problems that the conventional broadcasters, whether it's Bell or Rogers, are having is they need to understand that there needs to be a new normal," said Gord Cutler, a veteran producer of the Olympics and the NHL Network who was let go in April as senior vice-president of hockey for Rogers amid a cost-cutting effort. "They're still struggling with comparing ratings for hockey to five years ago."

NEW REALITY FOR TV SPORTS

Most industry observers agree that Sportsnet's hockey woes this season are a once-in-several-decades aberration that should be treated as a "blip" and "not a doomsday scenario," Norm O'Reilly, a professor and chair of Ohio University's department of sports administration, said. Hockey still rules the Canadian sports landscape, even if it's not as dominant as it used to be.

The Raptors' playoff run has continually boosted the high-water mark for playoff ratings, reaching a record average of 1.5 million viewers in the Game 7 wins over Indiana and Miami and an average of 1.8 million in the closely contested fourth game against the Cleveland Cavaliers on TSN.

Over all, basketball still pales next to hockey's popularity on TV. Sportsnet snagged 1.57 million viewers for the NHL draft lottery on April 30 and in January of 2015, an average of 7.1 million viewers tuned in to TSN and RDS, in English and French, to see Canada win gold on home soil at the World Junior Hockey Championships – a tournament for teenagers.

The Blue Jays, in the meantime, delivered the best ratings in Sportsnet's history when they bowed out to the Kansas City Royals last fall, with the final game averaging 5.12 million viewers. But after repeatedly drawing an average of more than one million viewers to games in early May this year, the latest series against the New York Yankees opened to an average viewership of only 692,000 as the team struggles to win.

"Hockey is still king in terms of numbers, but it's a crowded landscape," said Brian Cooper, president and chief executive officer of sports marketing consultancy S&E Sponsorship Group.

However, this playoff season is a rare example of hockey being dethroned, at least in the short term. First-round NHL playoff games on Sportsnet averaged only 549,000 viewers, down 55 per cent from the prior year, when five Canadian teams made the postseason. Second-round contests were down 52 per cent to an average of 715,000, before the third-round matchups rebounded somewhat, down 11 per cent year over year.

"Winning creates audiences. It's that simple," Mr. Moore said. "We have sort of a Balkanized hockey audience. It's very regional, it's very tribal, and people watch their own local teams way more."

TSN president Stewart Johnston, whose network holds the rights to some regional NHL broadcasts, including 26 Toronto Maple Leafs games, was not available for an interview.

A reversal in fortune for the Leafs or the Montreal Canadiens could spur a dramatic turnaround in hockey viewership. But experts believe that a generation of sports fans will spread their attention more widely in the long term.

"I actually think that there is a new world order because of the fragmentation of viewership between platforms, more sports and different sports," Mr. Cooper said. "The expectation and the numbers that we used to get are going to be affected and lowered."

A DEMOGRAPHIC DIVIDE

Unless they are careful, sports broadcasters could face a generational rift between more loyal, long-time viewers willing to make watching their favourite teams an appointment and a new wave of fans who are less devoted to any one team, sport or mode of viewing.

"That is the big risk: As we all age, and the boomers age, do those next generations have that same affinity?" Mr. O'Reilly said. "Maybe this is a bit of a wake-up call, when you have a bad [hockey] season like this, to think about, alright, how are we going to fit into all these changing demographics?"

Immigration is a factor. Forty-one per cent of new Canadian sports fans who arrived in the country less than 10 years ago call themselves avid fans of the Raptors, compared with 39 per cent who are big NHL fans, according to surveys by Charlton Strategic Research Inc. Premier League soccer ranks third, with 31 per cent of new Canadians calling themselves diehards, ahead of the National Football League or Major League Baseball.

Hockey is still most popular across all age groups of Canadians, but the Raptors equal or surpass the Maple Leafs' popularity among those aged 12 to 34, while the Leafs have more avid fans among those aged 35 to 70.

Those gaps in fan support narrow the longer a sports fan lives in Canada. "They do assimilate to things that are culturally important," such as hockey, Charlton president Gord Hendren said. "Having said that, basketball is still growing in terms of its cultural relevance and importance. And the more it continues to do that, I think that those [Raptors] fan numbers would become more sustainable over time."

Those younger sports fans are also a sweet spot for marketers, who often use their brands to promote accessibility to youth sports as an investment in the future.

"The kids that are playing now are the ones that you're hoping will grow up to eventually drink our beer, or come to our bank, or subscribe to Sportsnet," Mr. Wolch of the media buying agency, said.

Even as Canada's population grows, youth registration in hockey has been flat. A 2014 study by Solutions Research Group ranked hockey the second-most-expensive of 44 sports, costing $1,666 a year on average – even more than equestrian sports. About 531,000 youth still registered, but that total was far surpassed by soccer and swimming, while participation in basketball is making up ground at 354,000.

"Is that going to be reflected in future viewership? It has to," Mr. Cooper said.

He pointed out the success of action sports and the Ultimate Fighting Championship are grabbing younger viewers' attention and even cricket and rugby, better known among new Canadians, have both "modified their games to reach a younger audience with the Twenty20s and the Sevens – shorter-period games, and they're played on the digital platforms."

All of which raises one crucial question for the sports broadcasting industry: "If the cable dollars disappear, how are they being replaced?" Mr. O'Reilly said. "It's not that viewership is dying – it's that it's changing."

SNACKING TO STREAMING

An older generation of fans are already conditioned to watch sporting events for hours at a time. But a large slice of hockey's core viewership is aging and "they go to bed at 10 [p.m.]," Mr. Cutler said. "They don't even see the second half of the double-header" on Hockey Night in Canada.

The changes in viewers' habits aren't lost on broadcasters. "I think people are snacking more and have less of an attention span and tend to have multiple screens open at any particular time," Mr. Moore said.

Rogers holds many of the keys to tapping that audience with hockey, having acquired full digital rights as part of its deal with the NHL, allowing it to promote subscriptions to its GameCentre Live and Sportsnet Now streaming services – something Mr. Moore thinks broadcasters everywhere will push harder for in future rights deals.

Those younger fans, who are comfortable juggling several screens throughout the day, present the biggest challenge for broadcasters, which are experimenting with short-form content – from five-second clips of Canadiens star P.K. Subban on Facebook or Twitter, to five-minute mini-documentaries promoting compelling storylines – as gateways to spark fans' curiosity.

"That's to drive you to the payment," Mr. Cooper said. "I think the monetization comes in the long form of the games, as opposed to these sampling products."

Broadcasters must find ways of making online viewing contribute more revenue as digital audiences grow. A dollar in traditional TV revenue "shows up as 20 cents" on digital platforms, Mr. Cutler said.

If it can be made to pay, online streaming also offers the tantalizing possibility of delivering larger audiences than traditional TV ever could.

"I'd say it might take two or three or four years, but could you hit a new peak [hockey audience]? Absolutely," Mr. Hendren said. "Because your distribution systems now are massively bigger than they ever were before."

HOCKEYNOMICS

Whether a publicly traded media giant, such as Rogers, has the patience to await a rebound in hockey's fortunes remains to be seen.

In late April, CEO Guy Laurence flatly declared that the company will "absolutely, definitely, without a shadow of a doubt, make a profit" on its investment in hockey rights for the second season running. "Trust me, it makes money," he told reporters.

Rogers's control of Blue Jays broadcasts and half-stake in airing Raptors games, among other sports, helps it hedge against short-term upheaval.

"66 to 68 per cent of [Sportsnet's] revenue comes from subscriber fees. So as long as we're a must-have network because we have a diverse sports portfolio, that's good for our business," Mr. Moore said.

But with playoff ratings down and some advertisers shifting spending to Blue Jays games, making a profit on hockey has meant slashing costs in step with revenue shortfalls. The company said in January that it would cut 200 jobs across its media divisions. That included halting production of the Sportsnet Central AM morning show in March and on-air personalities James Cybulski, Jamie Thomas and Hugh Burrill were let go.

The financial crunch at Rogers Media was evident to staff from the start of the hockey playoffs. Rogers assigned only three broadcast crews to the eight first-round series instead of the four that covered the first round in 2015. The fourth crew was used for spot duty for select first-round games. Broadcast sources say production costs for a full crew are about $100,000 a game.

The cost-cutting picked up from the second round on, multiple sources said, as Rogers executives replaced technical crew members with local freelancers in each city, reaping savings on travel costs. "We looked at how we adjust for the audiences that we expect, and the amount of revenue and cost that you put against a property," Mr. Moore said.

He declined to discuss details of the company's financial targets, but he added: "I don't think this season it would surprise anybody that we didn't hit the revenue numbers that we would have liked."

One thing that is clear is that Rogers didn't shell out $5.2-billion over 12 years – an average of $433-million per season for NHL rights alone, before production costs – to make small margins by cutting back on spending. The contract costs less in its early years, with the company believed to owe the NHL in excess of $300-million this year, though it recoups about $120-million annually from TVA and RDS for French-language rights.

"Like any business, you want to show growth. … And that's what the shareholders, and what my bosses, care about," Mr. Moore said.

But it can be challenging for sports broadcasters to deliver each and every year. "It's not as predictable as a lot of businesses. It's sports," Mr. Moore said. "Stuff happens."

With reports from David Shoalts and Susan Krashinsky.

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Sports viewership numbers

Sports events that drew more than 1.5 million viewers since the start of the NHL playoffs on April 13:

• 2,200,000 – Sportsnet, CBC, May 26, Game 7, NHL Eastern Conference final, Tampa Bay vs. Pittsburgh
• 1,801,600 – TSN, May 23, Game 4, NBA Eastern Conference final, Toronto Raptors and Cleveland Cavaliers.
• 1,571,100 – CBC, April 30, NHL draft lottery.
• 1,566,800 – CBC, April 28, Game 1, NHL second-round playoffs, Washington Capitals and Pittsburgh Penguins.
• 1,519,900 – Sportsnet, May 1, Game 7, NBA first-round playoffs, Toronto and Indiana Pacers.
• 1,511,200 – TSN, May 15, Game 7, NBA second-round playoffs, Toronto and Miami Heat.
• 1,510,400 – CBC, May 10, Game 6, NHL second-round playoffs, Washington and Pittsburgh.

Highest-rated Toronto Blue Jays game since start of NHL playoffs on April 13:

• 1,103,500 – Sportsnet, May 2, Toronto vs. Texas Rangers.

Most recent Blue Jays game in which ratings are available:

• 692,000 – Sportsnet, May 24, Toronto vs. New York Yankees.

Comparing NBA ratings other than Toronto from 2015 to 2016:

• 174,000 – TSN, May 25, 2015, Game 4, NBA Western Conference final, Golden State Warriors and Houston Rockets.
• 448,000 – TSN, May 24, 2016, Game 4, NBA Western Conference final, Golden State and Oklahoma City Thunder.

Head-to-head sporting events, Sunday, May 22

• 1,366,100 – TSN, 1:30 p.m. start, World Hockey Championship gold-medal game, Canada and Finland.
•  634,400 – Sportsnet, 2 p.m. start, Toronto Blue Jays vs. Minnesota Twins.
• 157,000 – Sportsnet, 7 p.m. start, Memorial Cup preliminary round game, Red Deer vs. Rouyn-Noranda.
• 1,347,900 – CBC, 8 p.m. start, Game 5, NHL Eastern Conference final, Pittsburgh Penguins and Tampa Bay Lightning.