The landscape of television is changing, did you see it? I’m sure you are part of it. But were you aware? It has changed and the world of sports has been the biggest manipulator as well as the biggest prize. And who comes out with the rights to the best sporting events in the future will be the decider on the winners and the losers.

The Current Landscape of Television

Television is controlled by three media companies. Disney Inc., News Corp and Comcast. Disney is the most well-known of the three companies and it owns ABC and all their affiliates, ESPN and all their networks (ESPN 2, ESPNU, ESPNews, etc.). Disney also runs Disney Studios, Lucasfilm Ltd., and Marvel Entertainment LLC. It is estimated that Disney is worth $165 billion.

Comcast Corp is worth an estimated $193 billion. It is the largest of the media moguls and it controls NBC, NBC Sports, Bravo, E!, USA Network, CNBC, MSNBC, The Golf Channel, Universal Sports and the Weather Channel. It also owns Universal Studios in Hollywood and multiple Cable Networks.

The smallest of the three is News Corp which owns FOX, Fox Sports, Fox News and 20^th Century Fox in Hollywood. News Corp is worth a respectable $7.3 billion.

Since the rise of cable in the 1970s it has been these 3 companies that have dominated the field. They have fought amongst themselves for the biggest prize in television: sports contracts.

Sports and Television

The biggest prize in the television sports contracts war is the NFL. Each of the three networks have battled hard for NFL viewership which consistently rakes in large numbers in the Neilson ratings. Sunday Night Football is always the highest watched show of the week during the season and Thursday Night and Monday Night usually crack the top 10 for the week. In 2011, the networks signed a 9-year extension with the NFL. The deal that will go through 2022 cost the networks $3 billion a year. It gives the Super Bowl (the most watched television program of the year) an even split among FOX, NBC and CBS. ESPN paid $1.9 billion for exclusive access to Monday Night Football. How in the world can these numbers be worth it?

As previously stated, the NFL is viewership manna and advertisers dreams. Just last week, Sunday Night Football was the top watched program of the week and its pregame show was number 5. Thursday Night Football regularly wins its night as well as Monday Night Football. The Super Bowl is the biggest golden egg. In 2017, the Patriots and Falcons had 111.9 million viewers. By far the largest viewership of any program on television (the presidential inauguration only received 16.6 million viewers across all coverage of the event). When football is on, people turn on to watch. What people watch, advertisers will pay big for. Though it might by the fattest chicken in the roost, it’s not the only one.

The NBA just signed a deal with ESPN and TNT worth $2.66 billion dollars a year. This deal gives excusive NBA Finals and Playoff rights to ABC and ESPN. TNT will continue to cover in season games and the All-Star game. The increase in the television revenue here has already caused major dole outs of contracts to players. The current deal goes until 2025. Last season the NBA averaged 1.19 million total viewers. In the first two games of the NBA Finals this year there was an average 19.6 million viewers. 2016 saw averaged 18.6 million viewers for the NBA Finals.

Major League baseball signed their last television deal in 2012. It was worth a combined $12.4 billion and will expire in 2021. The MLB deal gives television rights to FOX Sports Media Group as well as TBS. Baseball had been the 3^rd wheel of sports in years past but has more recently begun to gain ground on football and basketball. A recent poll came out showing MLB to be the most favorably viewed sport in America. America’s Pastime has gained viewership like crazy over the last year. The 2016 World Series Game 7 garnered 40.8 million viewers. This was the most viewership in 25 years for the sport, and as you can see from above, surpassed the NBA Finals viewership.

The viewers and money in sports have proven to be the key to television success, but could they also be the mechanism that tears the system down?

The New Players

As stated before, cable television and its owners have controlled who and what you watch for decades. But with the rise of streaming options and the continual “cord cutting”, if the new players to the game go after and win the sports television contracts we could see a completely different playing field. But is there anyone able to compete with such valuable companies who throw around a billion dollars the way my 1-year old throws corn?

Amazon might be that player. Amazon is estimated to be worth $427 billion, substantially more than the other media corporations. With Amazon Prime streaming they have entered the world of entertainment. They have begun creating their own content from Amazon Prime members which is estimated to be about 54 million. They have even dabbled in the NFL already. They currently share rights with CBS and NBC. They will stream 11 games this year including the Christmas Day Special. Two weeks ago the numbers came in for Amazon viewership and though it was only estimated to have 1.6 million viewers less than 2.5 percent of the total viewership, it’s where the viewers were coming from that might win them the contract. Amazon Prime streamed the game in 187 different countries, 30 percent of their viewers of TNF was watched in a language other than English. Amazon could be a way for the NFL and all US sports to expand their brands worldwide.

The other big player in the world of streaming is Netflix. Netflix is worth $61.6 billion dollars. Netflix began in 1997 allowing subscribers to pick DVD’s through the internet. But it was in 2007 that they changed the industry through their streaming options. Here they allow subscribers the option to stream TV shows and movies directly to the subscriber’s device. It was unlimited on the amount of shows a subscriber could watch and the word “binge” become common vernacular when describing American’s television habits. By 2010, Netflix had over 40 million subscribers. They again caused tectonic shifts in the industry in 2012 with the launch of House of Cards. They created, produced and distributed an award-winning television show all on their own. Since House of Cards, Netflix regularly produce their own content and their competitors, Hulu and Amazon Prime have done the same.

In response to the rise of Netflix and Amazon Prime, the traditional media companies have attempted to keep pace. Hulu, the last of the 3 major streaming options, is owned in partnership by Walt Disney, 21^st Century Fox, Comcast and Time Warner. The streaming world has caused severe hemorrhaging from the traditional powerhouses because of a term known in the industry as “cord-cutting”.

 

“Cord Cutting” and the Shrinking of Cable

This year, the 5 largest US pay-for-tv providers have reported major losses. In the second quarter Comcast lost a total of 34,000 customers. In 2016 it reported only a loss of 4,000. AT&T reported a loss of 351,000 customers in the second quarter. The total subscription losses over the quarter for all of the major players was 527,000.

ESPN, the self-proclaimed “World Wide Leader in Sports” very publicly had to lay off over 100 employees this summer in an effort to cut costs. The reason for the need to cut costs? Dwindling viewership and the rise in “ever more insanely expensive rights fees to pro-leagues and college consortiums.” To get an understanding of the dwindling viewership, last year ESPN was in 87.3 million homes. Two years ago, it was 94.4 million and in 2010 it was in 99 million homes. It’s already been discussed the rise in costs to hold rights to broadcast the sports, so as viewership in traditional mediums decreases but demand for live sports holds steady, it could be the streaming giants of Amazon and Netflix, or even Facebook and Google, who may choose to seize the moment and change television forever.

Conclusion

“Imagine a scenario when Amazon is joined by Google, Facebook and Apple at the table in direct opposition to the networks that have historically battled for the prize [of sports contracts],” Mike Boxham, a senior VP at the Research firm of Magid said. Imagine indeed, the whole television industry would be turned on its head. More and more people opt out of cable for the cheaper streaming options that allows them to watch when and where they want. Until today, it has been the sports industry that has kept the traditional mediums alive. People only have the options of cable to watch all their live sports. But this could change. Could Amazon or Netflix join the table when the MLB television deal ends in 2021 and receive those rights? If so, would anyone choose to still pay for cable in if their streaming service could also stream them live sports, or even allow them to watch the sporting events on their own time? Would sports leagues like MLB, NBA and NFL prefer to sign with Amazon or Netflix who have proven they have a worldwide audience, something the traditional networks cannot provide?

There are many questions yet to be answered. But there is one that is not, television is changing and sports is at the center of it.