Sports Media Rights to Soar to $23B in 2021, PwC Report Says

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Illustration by Tam Nguyen/Ad Age

Like the media industry that props it up, the North American sports marketplace is in the midst of a sort of seismic upheaval, as younger fans continue to abandon traditional distribution channels while digital monoliths look to disrupt the standing broadcast pecking order. But a new study suggests that the pervasive uncertainty should only help pour even more megabucks into the sports-industrial complex.

The sports market will grow at a compound annual rate of 3 percent through 2021 across four key segments: media rights, gate revenues, sponsorship and merchandising, the new 2017 PwC Sports Outlook predicts. Revenue in the sector will rise to a cool $78.5 billion in 2021 from an estimated $69.3 billion in 2017, according to PwC (formerly PricewaterhouseCoopers).

Of the aforementioned four buckets, media rights are expected to swell at the most accelerated rate, growing to $22.7 billion in 2021 from $19.1 billion this year. On average, media rights revenues are on pace to grow 4 percent each year, or as much as 19 percent between now and 2021.

Michael Keenan, sports practice leader at PwC, notes that next year is expected to be the first when media rights dollars top gate revenue. Per PwC's projections, broadcast and digital spend will add up to some $20.1 billion in 2018, edging stadium revenue by around $579 million.

"I am bullish on sports media rights," Keenan says, adding that the year-to-year increases in fees is likely to be exacerbated by "what appears to be a great deal of competition out there for a variety of soon-to-be-available rights packages."

In the near term, the monetization of rights will largely be concentrated on the approximately 25 regional sports network packages that will become available across Major League Baseball, the NBA and NHL. National media packages for the top-tier sports properties—a catch-all that includes the NFL, NBA, MLB, NHL, the College Football Playoff and NCAA Men's Division I Basketball Tournament—are secure through the final year of PwC's latest projections.

The most high-profile media rights deal that will be renegotiated within the next few months is the three-handed "Thursday Night Football" package, which is split on the broadcast side by CBS and NBC and includes simulcasts and seven standalone games on NFL Network. The current two-year, $450 million "TNF" bundle is set to expire in the waning hours of Christmas Day, after NBC broadcasts the Steelers-Texans game.

As it has done with Twitter and Amazon Prime, the NFL is expected to offer some sort of digital simulcast package to the likes of a Facebook or a Google/YouTube after the "TNF" broadcast rights are nailed down. It's unlikely that one of these emerging distribution partners will entirely unseat a legacy TV network when the current NFL rights package goes on the block in 2022—or at least that's what commissioner Roger Goodell seemed to suggest this summer at an industry conference.

"Primarily our product's on network television, which we believe in," Goodell said during the July "GameChangers" confab at the Paley Center for Media. "We believe that its best days are still ahead, and it still draws a huge audience. So we want to be on all platforms, and we believe that our best days, as well as all of sports, are still ahead."

The PwC report echoes Goodall's assertion. "Broadcast rights preservation … is likely to remain an industry priority through at least the next deal cycle to avoid potential further dilution of rights fees," it says. "Any consumer-led disruption of the linear broadcast market realized in the near term due to migration, either within pay-TV or from broadcast to digital, is unlikely to materially impair the media rights fee landscape."

PwC's Keenan says that while the firm's new report doesn't address what might transpire beyond the year 2021, he believes that the NFL may look to go back to writing shorter deals when the present TV contracts run out. (Since 1998, the TV rights packages have been divvied up in eight-year increments, while the two packages it hashed out between 1990 and 1997 were four-year deals.)

Keenan believes the NFL Players Association will study how its colleagues at the NBA approached their own media rights renewals back in 2014. "The collective bargaining agreement will expire in 2020, so when the players head back to the bargaining table, it's likely the NFL will have a good idea of where they're going with the rights," Keenan says. "The last collective bargaining agreement changed the percentages players received from the pool of rights revenues, so that now the highest share of the money they get from NFL operations comes from network television." That means the players' union is going to have a vested interest in how the NFL dishes out the rights to distribute the product that is the fruit of their collective labor.

Sports rights cost networks an arm and a leg and part of the other leg. The NFL will rake in $67 billion over the life of its current TV deal, while Disney/Turner's newish pro hoops pact will funnel $24 billion into the NBA's coffers between now and the end of the 2024-25 season. But they're pretty much the only thing keeping the lights on at the broadcast nets. In 2016, live sports accounted for 44 of TV's top 50 most-watched broadcasts, a ratio that is likely to be duplicated once this year's numbers are tallied.

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