Throughout our careers, premium sports properties have resembled growth stocks: rights fees headed skyward at double-digit rates. Sports perfectly exploited pay TV’s dual-revenue-stream-powered boom. National broadcast network deals grew, supported by station retransmission consent fees; powerhouse cable networks developed, propelled by affiliate revenue. Meanwhile, local pro team agreements drove near-ubiquitous distribution of RSNs. Sports advertising’s rising tide lifted all boats.
Attractiveness of the package. What’s the market’s perception? Formula One had to offer ESPN sweetheart terms in 2018 just to get desired exposure. By 2020, it got a small rights fee. Then with an assist from Netflix’s “Drive to Survive,” competition yielded $85 million annually from ESPN. F1 improved its story — and its market value. But what have you done for me lately? In 2023, F1 ratings were down 8%.
Time since last reset? New agreement reporting tends to compare average annual package prices (AAV), deal-over-deal. However, it is the step up from the final year of the previous deal to the first year of the new which usually counts. After that, it’s typically yearly cost-of-living increases. Thus, NASCAR, which ended 12-year Fox/NBC agreements, appeared to gain a bigger increase than the Premier League, whose last NBC deal ran only three seasons.
Has the package been under-market? Sometimes a sport and its media rights package get out of sync. Conditions at negotiating time matter. NASCAR saw huge rights fee upticks in previous deals, but then its viewership lagged (in part because it placed more races on lower-rated pay TV networks versus broadcast to generate more money). ESPN’s 12-year NCAA “other” championships deal was notably underpriced, and the explosive growth of the NCAA women’s basketball championship drove the recently announced, $920 million, 8-year-agreement.
Demographics (younger/older; income levels; geography).
Demand. The NCAA “other” championships offer both tremendous volume and quality. But, realistically, how many bidders could handle its 2,200-hour tonnage, requirements for broad distribution, and event production? Answer: Only ESPN. Thus, when the NCAA determined to keep the championships package together (and not bid the women’s basketball championship separately) it became inevitable that ESPN would clinch the deal. Multiple networks are invested in college football, but ESPN has the incumbent’s advantage with the College Football Playoff — only it can pay more rights into the remaining two seasons of the current deal. ESPN appreciates how the CFP helps drive better ad sales throughout the five-month season, a competitive halo. On the other hand, the financial performance (and debt load) of media companies matters too. Paramount (CBS) and Warner Bros. Discovery (Turner) might aspire to be aggressive buyers, but their balance sheets constrain them.
Trend (where have audiences and sponsor interest gone from the last negotiation?). The standalone CFP has had an uneven ratings performance, in part because its participants have tended to come from the Southeast, Southwest and the 166 miles separating Ohio State and Michigan. However, the 2023 and 2024 semifinals were thrilling and Michigan’s championship run drew 27 million and 25 million viewers respectively. College football is the No. 2 sport in the U.S.
Nature of package.
Tentpole property. The NCAA women’s basketball championship only covers three weeks, but it has emerged as ESPN’s leading event between January’s CFP and April’s Masters. The CFP already dominates its current windows and is set to expand by eight more.
Ed Desser is president of consultancy Desser Sports Media Inc. (www.desser.tv). John Kosner is president of consultancy Kosner Media (www.kosnermedia.com). Together they developed league TV strategy and ran the NBA’s media operations in the ’80s and ’90s.
