Early in the history of televised sports, live broadcasts were seen by many as detracting from the all-crucial gate attendance. Now, selling those broadcasts may become even more important than selling tickets. Paul Bond of The Hollywood Reporter writes that a new study suggests television rights revenues will surpass gate revenues as the top subsector of sports revenue across North American sports by 2018:
Thanks in large part to the popularity of the NFL on television, in 2018 media rights will for the first time supplant gate revenue as the most lucrative subsector of the North American sports industry, according to a study released Monday.
In 2014, gate revenue accounted for $17.71 billion in revenue in North America while media rights was at $14.6 billion, good enough for third place among the four subsectors, behind sponsorship and ahead of merchandising, according to PricewaterhouseCoopers.
Media rights, though, is growing faster than all other subsectors so will be the biggest driver of revenue by 2018 when it brings in $19.95 billion, PwC said Monday. By then, gate revenue will be $19.72 billion, sponsorship will be $17.64 billion and merchandise will be $14.25 billion.
While it’s the NFL’s massive national broadcasting deals (estimated at $40 billion from 2014-2022) that are primarily behind this, other leagues are contributing too. National deals are big and getting bigger, and local MLB, NBA and NHL rights are drawing remarkable prices to buttress various regional sports networks’ lineups. The study estimates that 35 per cent of those regional rights expire in the next five years, so if the bids for them keep increasing, that could certainly play a role in the further rise of TV revenue as well.
There are a couple of challenges ahead for leagues on this front, though. For one, will the prices for sports rights keep rising? Live sports’ popularity as in-demand, DVR-proof events certainly will help there, as will the strong ratings we continue to see for many sports events and the growing numbers and budgets of various sports cable networks that need strong live programming to keep their viewers and subscriber fees, driving bidding wars over the most desirable content. However, we have seen some evidence of cord-cutting having an impact, at least on ESPN, and there are more cable-free options than ever to watch sports. If the subscriber base for these channels doesn’t stay strong, we may not see rights continue to rise indefinitely.
The other challenge leagues will have to face is finding ways to still get people out to games. TV technology makes staying home with your own snacks and drinks extremely appealing, so creating a strong in-stadium and gameday experience will be crucial for leagues looking to keep their gate revenues alive. While TV ratings are expected to pass gate revenues, the gate (and the accompanying merchandise and concession sales) is still going to be important for at least the near future. Contrary to what anti-TV owners once thought, leagues can profit both from TV and from the gate, and these numbers show that TV is becoming a more and more important part of the equation. At least at this point, though, it can’t be the only thing driving leagues. It may become the most crucial part of the engine, but the rest of those revenue sources will remain important too, even if TV becomes the biggest one.