Liverpool v Norwich City - Barclays Premier League

I’ve been kicking this article from Business Insider around a bit, and while I think it’s slightly misleading (TV isn’t dying, rather it’s moving to the Internet on a much less saleable platform for marketers), it’s a good indication that the old model is in decline.

Decline, not death. TV may reflect the slow, awkward transition of the newspaper into whatever newspapers are now (on that end, listen to David Carr’s excellent Dalton Camp lecture if you have an hour).

Anyway, you don’t click here because you want to know about TV, you click here because you want to tangentially read about the football. But football has so enmeshed itself with the TV model that what happens to the one will surely affect the other. And there is reason to think that the pat answer of some in the football world to the threat of traditional TV/cable decline—that networks will pay the same amount for rights no matter the platform—is misguided. Perhaps dangerously so.

Let’s look at the BI piece. There’s one interesting subsection that I think indicates a potentially big problem for leagues like the Premier League. Here’s the author Jim Edwards:

Ad revenue increases are masking the macro decline of TV.

The collapse of TV is having a counter-intuitive effect on TV ad sales: prices are going up, even though the number of commercials is going down.

The reason? It’s still really, really difficult to gather a large, mass audience in any kind of media, mobile or otherwise. The Super Bowl — on TV — is the only media property than can reach more than 100 million people in a three-hour stretch. That scarcity of large audiences makes TV’s dwindling-but-still-big audience increasingly valuable.

There’s something else in this little snippet: advertisers still value live television, which is an indication they’re still a long way off from diving into mobile and desktop video ads. That’s because the reach just isn’t the same as live TV, and perhaps the user analytics aren’t quite good enough to sell a specific (and valuable) demographic to advertisers, so the idea that ad revenue will be even remotely close on broadband sports as it currently is on cable is, well, wrong.

Could user subscription fees make up the difference?

Well, remember that cable is prix fixe, and there is not an insignificant number of viewers for live sports events who, faced with the choice of watching the event “cause it’s on TV” and watching it “only after you enter your credit card information”, will take the former. And of course that smaller subsection means fewer eyeballs, and less ad revenue. It just can’t match the TV model. Here’s Amadou Diallo for Forbes on that subject:

And let’s not lose sight of the fact that for all its acknowledged long-term problems, the existing content distribution model is today a very lucrative one for both content companies and pay TV providers. With no current alternative that comes anywhere close to this revenue stream, “Media companies want the MSO (multi-system operator) system to stay intact,” says SNL Kagan Senior Analyst, Robin Flynn. Streaming video services like Netflix and Hulu Plus, when combined with hardware like a Roku box or Apple TV can offer an increasingly attractive range of viewing options. Yet while these are growing in popularity, a majority of users are employing them in addition to a pay TV service.

For now, yes. But as broadband improves and TV and broadband merge, the economics of keeping cable just aren’t going to add up anymore. And cable cannot survive on sports alone. At some point, with subscribers dwindling, the ROI on these giant, aggressive rights bids from BT Sport and Sky and NBC isn’t going to make it worth it.

Moreover, expecting a phone slash cable slash broadband company, or a digital slash tech company like google or Apple, to bid the same amount of money on live sports without nearly the same ad dollars, or the same subscriber base, or the same need to get cable into people’s homes? It ain’t going to happen.

None of this screams to me “perpetually increasing broadcast rights deals.” It screams “significant correction on its way.” I could be wrong, but I do know that TV is in decline, and live sports isn’t going to save it.

Comments (2)

  1. Very interesting read. What if the cable companies were to just straight move the TV product to an online service. Where instead of paying to have a cable package you pay to have an online package where all the channels are available through a central hub on a website. Would the ads then change that much in their cost?

  2. Does it matter that NBC’s model for the US has evolved from the previous models? All EPL games are simultaneously streamed via NBCSports.com. All you need is to have a cable subscription that includes the NBCSports channel and you have access to the live games on tablet, mobile or PC.

    If nothing else, this is certainly an upgrade on the Fox model where you got a couple of games on TV, you had to pay for an additional channel to get more and then had to also pay to get the streaming service for tablet, mobile and PC.

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