Sports deals threaten US TV model

8 October 2014

NEW YORK: The size and nature of the rights deals that are being struck between sports governing bodies and US media companies have the potential to significantly change the television landscape.

In recent days the National Basketball Association (NBA) has agreed a nine-year $24bn deal with Time Warner and Walt Disney, three times the size of the previous contract, while the National Football League (NFL) signed an eight-year £12bn deal with DirecTV, reportedly a 50% increase on the previous arrangement.

Consulting firm PwC reported that the total value of the rights to air live matches was set to jump almost 19% this year to hit $14.8bn, second only to ticket sales in terms of revenue.

A big part of the attraction for media companies is that most sports attracts big audiences and viewing is done live with people less able to avoid ads.

But someone eventually has to pay for these inflated rights deals, and some observers expected that the current pay-TV model – where subscribers pay for a bundle of channels, many of which they will never watch – would have to change.

In particular, there is a concern that the TV networks paying for the rights increase the fees they charge the cable and satellite TV providers that carry their channels and they in turn will increase their rates to consumers.

"People who are not sports fans shouldn't have to bear these costs," John Bergmayer, a senior staff attorney at Public Knowledge, a consumer-rights group, told the Wall Street Journal.

And Tom Larsen, group vp/legal and public affairs at cable operator Mediacom thought: "This is going to drive more consumers away from pay-TV".

Nor is it just increased pricing that will do that. The NBA agreement also provides for the creation of an OTT service in which some games will be available online for viewers who do not have cable television subscriptions.

"This is the first crack in the structure of the television business that has been in place for decades," Jim Nail, an analyst with Forrester Research, told the Financial Times.

"It sets the stage for more cord cutting because, up to this point, sports fans couldn't really get their fix without pay-TV," he added.

"And if more people cut the cord, other networks and primetime programming will have to be more aggressive with their streaming programming in order to maintain ratings."

Data sourced from Wall Street Journal, Financial Times; additional content by Warc staff