The Future of Big Sport Is in the Hands of Big Tech

The fierce battles on sports fields have been echoed by the broadcasting rights battle off it, with billions of dollars and entire business models resting on the success (or failure) of sports. Now big tech is involved, who wins??

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The cable/satellite TV wars really began in earnest with ESPN ’s Sunday Night Football launch in 1987. Yes, Major League Baseball (MLB) came first into the subscription pool, the NBA has dabbled and, before you complain, this was far from the whole story but NFL turning to pay TV was a big deal. It set the stage for a generation of media battling out for supremacy using sport as a Trojan Horse for new subscribers.?

In 1990, the combined contracts for NFL were $3.6 billion across four years, so $900 million a year, equivalent to about $2.1 billion a year now. The current rate? $13.3 billion in the U.S., and that’s not counting the licenses granted worldwide.?

The National Football League (NFL) is bigger now and worth *a lot* more money. It makes sense. Of the top 30 most watched television broadcasts of all time, according to analysts Nielsen, 22 are Super Bowls and no other event in the top 30 happened this Millennium. Not even COVID lockdown speeches got a look-in (which is surprising given the number of other countries this event featured in top lists of.)?

It is a similar model around the world: Britain’s Sky Sports for example — founded by Fox’s Rupert Murdoch— bought the rights to the then newly-formed soccer Premier League for ￡304 million ($380 million on current exchange rates), equivalent to ￡800 million today. Most recently, the global rights to England’s Premier League were sold for ￡10 billion ($13B) in the last round of bids.?

Sport has been used as a way to get people onto new platforms and pay for new services. We’re now just seeing the next generation of streaming platforms working out if people still want live broadcast television. For now, the two types of events that people still watch live are sports and huge global news events.?

And MAMAA—the ever-changing acronym for big tech’s Meta, Google’s Alphabet, Microsoft, Apple, and Amazon— are involved with what happens next.

In the age of everything on demand, what price can live events command? When everyone wants things quicker, faster, and shorter, what role do sports still play? And does the fight over broadcast rights mean that there’s more life in the old broadcast networks yet??

Apple Senior Vice President of Services Eddy Cue was asked about how much he thought about sports coverage by Sports Illustrated in 2019.?

“Not a lot, honestly,” Cue said. “That’s not to say we would never do sports because who the heck knows? Never is a long time, but I don’t think that’s a problem right now.”

Since then, 苹果 has agreed to pay $85M a year for seven years of baseball coverage, which was expanded to include 60 countries in an extension earlier this year. And in June 2022, Major League Soccer (MLS) went all-in with Apple globally, with the tech giant promising a minimum of $2.5 billion over a decade. And that’s where the shakeup is happening — sports went global.?

While England’s Premier League rights belong to 40 companies across nearly 100 countries, if you want to watch MLS, it has to be with Apple. And this is a pattern that’s about to blow up the existing models of sports licensing.?

Netflix ’s business model relies on, as much as possible, owning the global rights to programs and/or commissioning them itself. This means Netflix’s brand is stood next to Stranger Things, Orange Is the New Black, Ozark, Squid Game, Bridgerton, and countless other original shows. It is only Netflix, wherever you are in the world, where you can watch it.?

Streaming platforms are trying to do the same with sports.

If you want to watch Japanese soccer anywhere in the world, you need to subscribe to streaming giant DAZN. The same is true for several boxing and mixed martial arts (MMA) fights. If one channel becomes the home for an entire sport, that is where its fans will gather.?

It makes sense. 亚马逊 has agreed to an 11-year package with the NFL for exclusive rights to the NFL’s Thursday Night Football. But in the U.K., you can’t watch it on Amazon Prime, instead, you can watch it on Murdoch’s Sky. It’s also available on DAZN in the U.K. It’s confusing for audiences, mainly when more advanced users can use a VPN (virtual private network) to trick streaming platforms into thinking they’re in a country they’re not.?

It’s a game of cat and mouse between streamers and streaming platforms, but, at least for now, the more advanced streamers always seem one step ahead. Analysts consulted for this piece believe that the only profitable way through big bets on sports are if global rights are assured.?

“Particularly in the modern age we’re living in… I want to create aggravation, rivalry, entertainment, talking points.” - sports promoter Eddie Hearn

Sky, Amazon, Apple, and all the other organizations in this piece have been approached for comment.?

It’s a complicated picture as the number of Americans subscribed to paid television services is falling. The 60 million in 2016 has fallen to around 57 million, according to Variety, and is part of a broader downward trend.

This has led to some drastic action. Walt Disney Co. is open to selling at least part of its majority stake (80%) in ESPN and ownership of ABC. "The challenges are greater than I had anticipated," Disney CEO Bob Iger said. "The disruption of the traditional TV business is most notable. If anything, the disruption of that business has happened to a greater extent than even I was aware."?

Sport is only a small part of this disruption and one of the last things people will tune in live for. Viewing figures for the NFL remain remarkably robust, (16.6 million in 2009, 16.7 million in 2022, according to Sportico.) The viewership picture for baseball is similar, with numbers down from 2016 highs, according to MLB Run, but stable and growing slowly again. Though smaller viewing figures, the NHL is similarly stable, the Sports Business Journal says.?

The picture for the NBA is more complicated, with viewing figures at near-30-year lows. Walt Disney and Warner Bros. Discover Inc are negotiating their contracts with the NBA, which expire in 2025. Their exclusive bidding window ends in Spring 2024 and everyone from Netflix and Apple to Fox and Amazon has been mentioned in a potential bidding war.?

It is here where the clearest picture of what the next generation of sports broadcasting will look like will emerge.?

The low NBA viewing figures are because, Sports Media Watch says, without Michael Jordan, after the sad passing of Kobe Bryant, and now LeBron James’ “Heatle” era is over, we’re waiting for the next era-defining superstar to emerge.??

And it is on the superstars that big tech is betting.

In soccer, at least in business terms, individual stars have superseded team support. Lionel Messi, perhaps the greatest soccer player of all time, is now playing at Inter Miami in part because of an undisclosed deal with Apple. It offered Messi a share of the revenue from new subscribers to Apple TV, it has been widely reported, along with shirt sponsor Adidas also offering a percentage of shirt sales. The thought was that with Messi in the U.S., global Apple subscribers would rocket.?

"It's clearly in the early days, but we are beating our expectations in terms of subscribers,” Apple CEO Tim Cook said in an earnings call last week. “The fact that Messi went to Inter Miami helped us out there a bit and so we're very excited about it."

This deal, at least in Western sports, is unheard of. There is all manner of regulations, player groups, collective bargaining agreements, and legacy broadcasting deals, making it all but impossible.?

So what price can you put on a superstar??

Soccer megastar Ronaldo is being paid $215 million annually to play in Saudi Arabia. But his social media presence is reportedly worth nearly $500 million to Nike alone.

“Narrative is key to promoting any sport and making sure people are invested,” boxing promoter Eddie Hearn told the BBC. “Particularly in the modern age we’re living in… I want to create aggravation, rivalry, entertainment, talking points.”?

Hearn was discussing the “sanitized” state of modern sport, with elite performance requiring more sacrifice than ever before, with media training leading to “polite” answers and risks, he says, making sports “boring.”

In researching this article, I asked a couple of people not interested in basketball who of the top 50 players in the NBA they’d heard of. Beyond LeBron? Only one person had heard of any other name (the 76ers’ James Harden.) The NFL has Kansas City Chiefs quarterback Patrick Mahomes as the biggest star but those era-defining names are thin on the ground. And this could spell trouble as bids keep increasing.?

Analysts have called this bidding war between streaming and legacy broadcasters a “bubble” that could end up with lower audiences for every major sport involved. What happens if/when this bubble pops??

Netflix has already cut $300 million in spending this year, Amazon CEO Andy Jassy is reportedly looking at cutting back Amazon Studios' spending, and both Disney+ and Hulu are removing shows to cut costs. The “Netflix of sport” DAZN’s most recent annual numbers reported an operating loss of $1.3 billion and an overall loss of $2.3 billion. Revenue grew by ~80% over that time.

It’s a big bet that, so far, looks a long way from paying off.?

The questions we still don’t have answers to after researching this article: (all musings/questions/opinions welcome to [email protected] if you think you know the answers)?

1. Are more specialist sports the answer? Field hockey, badminton, table tennis and cycling have huge global participation but there isn’t the same bidding war on broadcasting rights. Would enough people pay the subscription to make it a profitable venture??
2. Could one of MAMAA manage the global rights to the Premier League? It’s seen as the goose who lays golden eggs but buying soccer rights to it would double the annual budget of any streamer. Is it realistic? Would officials even go for it??
3. What happens to the NBA? If the Dallas Mavericks’ Luka Donci? is to fulfill his potential as the “next Michael Jordan,” what needs to happen for him to cross into popular consciousness? Who gets rights in 2025 will be huge.??