Cable television

Skyrocketing sports media rights costs pose a problem for cable TV

As Americans grapple with inflation, media companies are seeing steep increases in the cost of a prized commodity: sports rights.

For years, companies like Walt Disney Co.’s ESPN, Comcast Corp.’s NBC, Fox Corp. and Paramount Global’s CBS have increasingly spent on game rights. From 1980 to 2023, the five largest U.S. professional sports leagues will have earned more than $210 billion from domestic media rights alone, according to a Bloomberg News analysis (with the National Football League accounting for 65%). giants like Amazon.com Inc. and Apple Inc. have also moved into sports broadcasting, driving up the prices paid by traditional media companies.

Several television networks will pay the NFL roughly double their current fees to broadcast games under new long-term deals. Apple will pay Major League Soccer nearly triple the value of the league’s previous media deal. Warner Bros. Discovery Inc., owner of TBS and TNT, will pay Major League Baseball 65% more under a new deal that took effect this year.

The surge in sports media rights

Annual domestic rights cost for the largest US professional sports leagues, nominal values


Highest of the year

total duty cost

before 2000

How many diffusers

and streaming services

will pay in 2023

Highest of the year

total duty cost

before 2000

How many diffusers

and streaming services

will pay in 2023

Highest of the year

total duty cost

before 2000

How many diffusers

and streaming services

will pay in 2023

The highest

the annual cost

total rights

before 2000

How much

diffusers and

streaming services

will pay in 2023

Note: In multi-year agreements, broadcasters typically pay less at the start of the contract and later; for such transactions, the figures included in the graph are annual averages. The figure for 2023 takes into account all known transactions as of October 18.

Source: Data compiled by Bloomberg News from media reports

It’s not just men’s sports that cost broadcasters more. The NCAA women’s basketball tournament is expected to be worth more than $100 million a year if sold separately to media companies, according to a report commissioned last year by the National Collegiate Athletic Association. ESPN currently pays an average of $34 million per year for the women’s tournament and more than 20 other NCAA championships under a deal that expires in 2024.

Broadcasters have no choice but to pay. Live sports are one of the few reasons people still pay for cable TV. In fact, sports regularly make up the vast majority of the top 100 most-watched shows on television each year, according to Sports Business Journal to research. Giving up those rights would likely hasten the decline of viewers.

Sport is the king of TV content

Top 100 most-watched annual shows, 2018-2021, by million viewers


The Big Bang Theory

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The Big Bang Theory

episodes

The Big Bang Theory

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The Big Bang Theory

episodes

The Big Bang

The theory episodes

Note: Data for US networks in English only. “Football” and “Other Sports” include professional and college games. “Olympic Games” includes summer and winter.

Source: Sports Business Journal

Meanwhile, the number of cable TV subscribers is shrinking, jeopardizing a vital source of revenue that media giants need to afford sports rights.

“Sports rights may not be tenable for all current holders as linear [TV] declines,” Wells Fargo analyst Steven Cahall wrote in a note this month.

At the end of 2018, pay-TV subscribers stood at 87 million. By the end of this year, they are expected to drop to 63 million, according to Bloomberg Intelligence. Media companies derive much of their revenue from royalties based on the number of people who subscribe to cable and satellite television.

Pay TV in freefall

Cable and satellite TV subscriptions from major providers, year-end

Note: Chart represents subscriber counts for Altice, AT&T, Cable One, Comcast, Cox Communications, Dish Network, Charter Communications, and Verizon. Includes estimates.

Source: Bloomberg Intelligence

The National Basketball Association, which begins its regular season Oct. 18, will be the next big test of whether media companies can continue to afford popular sports. Disney and Warner Bros. Discovery is expected to begin negotiations with the league soon and will likely pay a hefty premium to renew those rights, which expire in 2025. Amazon has also expressed interest in acquiring the NBA rights.

So far, companies say the rising cost of sports is worth it to keep people subscribing to cable TV. But they are keeping a close eye on Apple and Amazon who have the financial wherewithal to outbid everyone on the next big deal.

“For the most part, it’s the incumbents who have acquired the meaningful needle-moving rights domestically,” ESPN President Jimmy Pitaro said in an interview. “The question is, is this continuing or are the big tech companies getting even more aggressive in this space?”