Video streaming platforms are attracting viewers who watch scripted shows and movies, leaving live sports as the last bastion of traditional television.
The solid ratings for the NBA Finals on ABC and the growing NHL Stanley Cup audience on ESPN are further evidence of the resilience of these events in the face of a fractured television landscape. In 2021, live sports made up 75 of the top 100 most watched programs.
But how long can legacy companies stay in the game?
This question took on new urgency last week when Apple made an important announcement to the media business with its agreement to become Major League Soccer’s primary carrier. The Cupertino, California-based tech giant is guaranteeing the league about $200 million a year over a 10-year deal — far more than any television network was willing to pay for the rights.
This follows Amazon’s $1 billion a year deal for exclusive rights to NFL Thursday Night Football after the company shared it with broadcast television networks for several years. Amazon paid many times more than these chains were willing to shell out after losing hundreds of millions of dollars on a package in years past.
For media conglomerates still dependent on the kind of audience sports deliver, the notion that tech companies with big pockets are after their most trusted content is giving them pause. While it doesn’t pose an immediate threat to their business – the next deal with the NFL, which is still predominantly broadcast and cable, is 11 years from now – the actions of Apple and Amazon could be a glimpse of the future.
MLS is not among the most popular American sports venues. But many industry insiders believe that Apple will use it as a showcase to showcase its ability to represent, develop, and grow the league. He could demonstrate his viability as a media partner for other sports organizations.
The current NBA deal expires after the 2024-2025 season, and the league is said to be aiming to triple its current $2.6 billion annual revenue, with Pac-12 college football games available in 2024.
Apple and Amazon are also expected to compete for the rights to the NFL Sunday Ticket subscription package, which gives fans access to games not on the market, a product that helped grow DirecTV’s business.
“It gives them the opportunity to acquire other rights,” said Lee Burke, president of consulting firm LHB Sports, Entertainment & Media. “You need to climb the corporate ladder. You must be ready to accept it. You can’t just go after the NFL and take the whole package.”
A spokesperson for the sports network, who spoke on condition of anonymity, agreed that the MLS deal, along with Apple’s recent acquisition of Major League Baseball’s Friday game package, is part of a long-term strategy.
“If they are successful, they will use that as a paradigm for other sports to try to get other leagues to hand them car keys,” the executive said.
Tech firms have their reasons for paying more for sports real estate than legacy media companies see fit. Apple wants to attract more users for its software and hardware products. For its part, Amazon is using Football on Thursdays, one of the most popular programs on TV, as a portal to more Prime memberships, giving users free shipping on retail purchases and access to other video offerings.
Berke said their goals follow the pattern of live sports, helping to advance new technologies throughout history. “If you want to sell hardware and software, the most effective strategy for 100 years is to acquire sports property,” he said.
When radio came along in the 1920s, the broadcast of Major League Baseball games was used to expand the medium and drive kit sales, although some team owners were concerned that the broadcasts would reduce stadium attendance. The networks and stations were owned by radio companies such as RCA and Westinghouse.
The rise of the National Football League in the 1960s and 70s provided the basis for network television sports divisions. When Fox acquired the rights to the NFL in the mid-1990s, it placed the fledgling network on an equal footing with ABC, CBS, and NBC.
In its early years, cable television was primarily intended to deliver broadcast signals to areas that could not receive adequate television reception. Live sporting events were the first major source of original programming.
“That’s really what made the cable industry grow,” says Kay Koplowitz, founder of USA Network. “You had to offer something that you couldn’t get from the local TV station at the time. That was the motivation for people to subscribe to cable.”
Koplowitz built her business, originally called the Madison Square Garden chain, in the 1970s and 80s, signing contracts to host Major League Baseball, the NBA and the National Hockey League, the Masters golf tournaments, and the US Open at the time, much more limited on broadcast networks. ESPN soon followed, becoming the dominant sports provider for cable audiences and charging the highest subscription fees.
Streaming companies have mastered the formula. While original programs and movies have brought public attention to streaming services like Netflix, live sports are a much more predictable way to build an audience for a subscription product thanks to a built-in fan base that spans multiple generations.
“Once you get a license, you know what you have,” Koplovitz said. “It’s different from the Hollywood business in that you pay a lot of money and you never know what you’ve got.”
Football is a sport that is suitable for streaming because its audience is younger and more accustomed to video streaming on a device. Paramount Global’s Paramount+ streaming services are broadcasting the Champions League, which has helped attract new subscribers and retain users who have already signed up.
These viewers are growing up without the habit of traditional TV viewing. But there are more than 70 million homes with satellite and cable TV, and the leagues aren’t about to give up audiences. Several sports broadcaster executives have said that the chance to host a major sports event entirely on the streaming platform will be at least five years from now.
In the meantime, sports leagues and organizations will have to balance streaming and traditional TV to maintain a critical mass. When games move from TV exclusively to streaming, the audience drops by 30% or more.
“If you ditch all other platforms in favor of streaming, you may reap short-term financial gains, but you will miss out on a lot of fans who are missing out on broadcast and pay TV,” Berke said. “Your strategy for the future is you want to be on every screen.”
But leagues and teams know where the future is headed. As pay TV services continue to dwindle, regional sports networks are beginning to offer their games as direct-to-consumer streaming subscriptions available without cable.
NESN, which provides service to the Boston Red Sox and Boston Bruins in the New England region, became the first RSN to make broadcast available for $29.99 per month.
ESPN, whose pay-TV subscriptions have plummeted over the past decade due to cord cutting, is also gearing up for a post-cable future. Bob Chapek, chief executive of parent company Walt Disney Co., said on a recent teleconference that the time will come when sports services will be available for cable-free streaming. The only question is how soon.