In a slow-growth global economy, one industry is doubling its prices.
Major league sports, from hockey to basketball, are achieving increases in their latest TV contracts that put more utilitarian businesses to shame – even as Internet streaming services offer new ways for sports leagues to tap the wallets of their fans.
The best may still lie ahead for major league sports, as games increasingly mix real and virtual content to expand the grip of their spectacles on global audiences. But that future is likely to put broadcasters in a vulnerable position, as the pressure mounts on them to shell out ever larger amounts of money to show a limited amount of prime sporting events.
Case in point: Earlier this week, Walt Disney Co.'s ESPN and Time Warner Inc.'s Turner Broadcasting agreed to pay the National Basketball Association more than $2.5-billion (U.S.) a year over nine years beginning in 2016 to televise its games, a 186-per-cent increase over the league's previous haul.
Don't cry for the other sports, though. The National Hockey League's recent TV deals in Canada and the U.S. feature a 167-per-cent increase, while Major League Baseball negotiated a 105-per-cent increment, according to ESPN.com's calculations.
The National Football League is the laggard, with a mere 28-per-cent bump – but that's partly because pro football is already the big winner, taking in $6.45-billion (U.S.) a year from its national network deals, more than double what the NBA will pocket, according to ESPN.com. In addition, the league agreed last week to extend its Sunday Ticket streaming deal with DirecTV for $1.5-billion a year, up 50 per cent from the existing arrangement.
The reasons for the giant increases aren't tough to discern: Unlike most programming, sports are watched live, which means viewers can't skip past ads, a valuable feature for broadcasters that depend on ad revenue for a big part of their revenues. Just as important, sports programming offers cable TV subscribers a powerful reason to stay loyal rather than defecting to Netflix and other streaming alternatives.
But the question is whether cable subscribers will pay the increases that will probably result from the new deals, as the added costs for programming work their way through the system and result in higher cable bills.
One of the most interesting features of the NBA's new deal is the announcement that the league is teaming up with ESPN to create an Internet sports channel that will be available without a cable subscription. While everyone involved swears the new channel isn't intended to directly compete with cable, it's obvious that it eventually could – especially if it's widened to include other sports, which seems likely, according to Reuters.
A Netflix for sports could build on the streaming services already offered by many leagues. However, while existing streaming deals typically respect local blackouts or require viewers to be a cable subscriber, the threat of moving more and more games to a pure Internet service could put even more pressure on broadcasters and cable companies to pay up for rights.
One big advantage of streaming services from the perspective of sports leagues is that they offer an easy way to cater to international fans. Sports leagues have already discovered that video games are an easy way to hook foreigners on sports they may not see that often, and streaming services could eventually mix the real and the virtual in ways that are even more addictive.
An enhanced NFL streaming service, for instance, could allow fans to compare their own play calls to a coach's strategy on the field or participate in real-time fantasy football through the course of a Sunday afternoon. It's an enticing dream for sports leagues, but potentially a headache for broadcasters and cable companies who are playing catch-up in a world of spiralling costs for sports broadcasting rights.
Ian McGugan