Can Sports Help Radio Fight Disruption the Way They Help TV?

Spotify and Pandora Bearing Down on Radio Broadcasters

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Live sports have turned out to be traditional TV's best weapon against growing competition from the likes of Netflix and disruption by the DVR. Now as Spotify and Pandora chase listeners -- and Apple reportedly prepares a streaming music service of its own -- radio broadcasters are hoping they can use sports in much the same way.

Last weekend NBC and the radio syndicator Dial Global introduced NBC Sports Radio on 249 affiliates around the country, joining an increasingly crowded field that was once, surprisingly enough, considered unpromising. Emmis Communications was given little chance of success in 1987 when it introduced WFAN in New York, the first all-sports radio station, which promptly lost millions of dollars and nearly got shut down. After relocating on the dial and gaining a stronger signal, however, business started improving -- to the point that WFAN, now part of CBS Corp., raked in $41 million in revenue last year, according to BIA Kelsey. It ranked first among all sports stations nationwide and just ninth overall.

Today ESPN Radio and Fox Sports Radio have hundreds of affiliates. The Yahoo! Sports Radio Network has about 180. CBS Sports Radio, which only came along in January, has nearly 275 stations carrying its programming, including stations in nine of the ten largest radio metros. ESPN Radio helped its case in New York by switching to the FM dial last April; WFAN added an FM simulcast in October.

And the audience for sports radio has proven desirable for many advertisers. Nearly half of listeners, 49%, live in households with income above $75,000. Almost that proportion, 46%, have a college diploma. And males account for 84% of the listeners, the highest percentage of any format. The total audience now counts nearly 30 million listeners nationwide, according to Arbitron, the ninth highest of 23 formats. So it's understandable that genre's stations have risen in number to nearly 700 today from 413 in 2002.

The example that sports is setting on TV suggests that radio will keep moving in the same direction. In an era of audience fractionalization with entertainment and news programs, TV ratings for sports events have, by comparison, held up.

Similar to sports radio, they target affluent, well- educated viewers and have a strong male audience profile. Furthermore, sports are almost always watched live, meaning ads can't be "zapped." ESPN, the leader in TV sports, generates the highest cable and satellite fees in the industry at over $5 per month. The network is expected to collect $8 billion in revenue this year. ESPN has become the most valuable asset in Disney's media empire, with one estimate valuing the network at $66 billion. And its financial success and popularity has lately prompted new would-be competitors from NBC, CBS and Fox.

This isn't just a national media game. Right behind ESPN in affiliate fees are the dozens of regional sports networks scattered throughout the country. These networks provide live coverage of local sports franchises, and, according to SNL Kagan, average monthly affiliate fees more than $2.50. Comcast SportsNet Washington at $4.33 per month is the costliest. Last November, News Corp. paid about $3 billion for a 49% stake in New York's Yes Network, the top-earning regional sports network and the home of the Yankees. The cost to broadcast local games, of course, has also escalated. In Los Angeles, Time Warner Cable will carry Lakers basketball games for the next 20 years -- at a cost of $3 billion. Although it's still awaiting approval from Major League Baseball, Time Warner's 25-year agreement with the Los Angeles Dodgers is valued at $7 billion.

Although the broadcast rights and advertising dollars for radio are significantly lower than TV, large media companies face new competition for listeners, content and advertisers. And on radio as on TV, the rising cost for the rights to live games will mean plenty of emphasis on sports talk. But that may actually play better on radio, with its long tradition of multi-hour talk shows, than it does on TV. Sports radio generates about $150 million in annual revenue nationwide. With so many big media companies now entering the format, that figure will almost certainly grow.

Brad Adgate is senior VP-research for Horizon Media.
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