The United States is unquestionably the world’s largest and most influential broadcasting market. With a population of more than 335 million, a highly developed television ecosystem, and a diverse sporting landscape – albeit one dominated by the National Football League (NFL) – the US has been at the forefront of sports media innovation for a century.
This legacy in sport broadcasting is enhanced by America’s influence on global popular culture and its leadership in technology. In short, what happens in the US impacts media markets around the world, whether it’s changing consumption habits, innovative business models, or the adoption of new technologies.
But even in a rapidly changing industry, the pace of change in the US broadcasting market over the past ten years has been unprecedented.
Advances in internet connectivity, the ubiquity of the smartphone, and the emergence of digital channels have created fierce competition for rights and subscribers, fundamentally altered consumption habits, and challenged long-established economics. Gen Z, social media, and streaming have upset the status quo.
Simply put, understanding the US market has never been as important. With that in mind, SportsPro has examined the state of play stateside and identify the key things to watch out for now and in the coming years.
And if you want more market intelligence and insight, be sure to check out the USA market spotlight on the brand new SportsPro+ media hub.
Consumers are ditching traditional pay-TV for a wide range of streaming services (Image credit: Google)
Cord cutting is transforming the media rights market
Of all the trends in US broadcasting, there is one megatrend that impacts everything else – the shift from linear to digital broadcasting. It’s a migration impacting virtually every market in the world, but the situation in America is far more advanced than anywhere else
The economics of sports broadcasting in the US have long been underpinned by ‘the bundle’. In the US, cable television viewers cannot pick and choose which services they want to pay for – they either have to subscribe to all of the bundle, or none of it. Cable companies then pay a channel operator a royalty fee for every customer, the value of which is related to their perceived importance in attracting and retaining that subscriber.
Sport has traditionally been seen as one of the main drivers of cable subscriptions, meaning higher carriage fees, and sports channels receive revenue from consumers who might never tune in.
However, the widespread availability of high-speed internet in the US means many households will no longer tolerate the expense, limitations and inflexibility of cable television and are ‘cutting the cord’. They are switching to streaming services that offer more flexible, affordable contracts with greater freedom. In 2013, there were more than 100 million pay-TV households in the US, but this figure is now 65.1 million and is projected to decrease even further.
This shift is undermining the economics of the bundle, affecting broadcast reach and revenue. But just as it was with cable, sport is a powerful customer acquisition and retention tool for streaming services. The difference is that whereas in a linear world, broadcasters had to convince cable companies of their worth to the bundle to generate predictable revenue, streamers have to actively acquire customers and make additional investments in technology and marketing.
The types of properties that achieve these goals aren’t necessarily the same, while streaming investors are now more interested in profitability than growth. As a result, major broadcasters are doubling down on the most important rights and cutting costs elsewhere.
NBC has previously told SportsPro it won’t flood Peacock with sport just for the sake of it, while ESPN is being more selective and prioritising its financial resources for key properties like the National Basketball Association (NBA).
Middle-tier properties that coasted along during the cable era and took predictable revenues for granted are now vulnerable.
“The metrics that every media company are using right now to decide where they need to invest have tightened and the kind of ROI they’re looking for has changed. It means you can’t be complacent.”
Hillary Mandel, Executive Vice President and Head of Americas, IMG
“There’s a conundrum,” Hillary Mandel, IMG executive vice president and head of Americas, tells SportsPro at the Sportel sports business conference in Monaco. “There are more platforms than ever and on paper that should mean more opportunities. But the economics in this marketplace are such that the middle and the lower [tier properties] are getting squeezed.
“The metrics that every media company are using right now to decide where they need to invest have tightened and the kind of ROI they’re looking for has changed. It means you can’t be complacent.
“The easy path, or some might say the right path, is revenue certainty. The path of least resistance is certainly a good one. You find a partner, they give you a load of money in advance and then you can invest that revenue back into your property and grow and not have to worry whether your partner is [profitable].”
Diamond Sports Group, which operates the Bally Sports RSNs, is in bankruptcy protection (Image credit: Getty Images)
Chaos in the RSN space and the uncertain future of local rights
There is arguably no greater example of these forces in action than on regional sports networks (RSNs). Local sport has long been viewed as one of the major selling points of the bundle, allowing the cable companies to justify their steep fees. Accordingly, RSNs have benefitted greatly from this system and enter long-term deals with major league teams to maintain their position and squeeze out would-be competitors.
Ultimately, RSNs assume the value of royalties will exceed rights payments and other costs, while teams receive the certainty of a lucrative long-term revenue stream. For several decades, this symbiotic relationship has benefitted all parties and increased franchise values – especially in Major League Baseball (MLB).
However, the more common cord-cutting becomes, the less revenue RSNs receive. Most RSNs don’t have DTC options for cord-cutters to subscribe to and even those that do now have to actively acquire and retain customers who were previously forced to pay up.
Warner Bros Discovery (WBD), which operated three AT&T SportsNet RSNs, has exited the market, while Diamond Sports Group (DSG), which owns the Bally Sports network of RSNS, has entered bankruptcy protection and returned or forfeited some of its rights.
DSG has secured or is close to deals with many of its key partners that will allow it to continue to the end of the season, but most within the industry accept that the RSN model which has proved so lucrative for so long is unsustainable, and most understand that any alternative won’t be as profitable in the short to medium term.
For many teams adjusting to a post-RSN world, such as the NBA’s Utah Jazz and Phoenix Suns, the answer is a combination of free-to-air (FTA) coverage that widens exposure and DTC platforms that promise more diverse monetisation options through activities like ticketing and merchandise, and the ability to customise the experience and deepen engagement. The long-term bet is that the revenue generated by a larger fanbase will offset the loss of direct income.
“The phenomenon of cord cutting means that all of a sudden a model that was built on cable subscription dollars goes away and revenue certainty is out of the door,” says Mandel. “Everyone acknowledges what a great ride that was, getting money from customers who weren’t actually watching, but the flip side is that [rights holders] were losing fans.
“There were some sports markets where [teams] were barely reaching 30 per cent of the possible audience. So you are starving your fans except for what they can get nationally.
“That’s why FTA coverage is coming back. The guaranteed dollars are going to be significantly less and the financial hit is very real, but you are now looking at 100 per cent coverage in your market, you have the ability to innovate and take control.
“Look at what’s happening in Utah and Phoenix. AT&T SportsNet Rocky Mountain was literally down to about 20 per cent reach and fans said they hadn’t been able to watch Utah Jazz games for ten years and now I’m watching the team again. The money isn’t the same but at least you’ve created a runway for fandom and success. It’s innovative but its coming at a cost.
“Sports fans in the US are local. They don’t love MLB when they’re five years old, they like the New York Yankees or Pittsburgh Pirates. That local fandom has created this duality, where you have to feed your local fans and you also want to be national and reach 110 million television homes. There’s a lot to be said about that.”
ESPN’s biggest events are still exclusive to cable. But that will change in the coming years (Image credit: Getty Images)
The future of a DTC ESPN and the fate of the bundle
The general consensus is that live sport is the only thing keeping the bundle together. But with the fate of RSNs so uncertain, and with the likes of NBC, CBS and WBD putting their sports coverage on their DTC platforms, it’s only really ESPN and Fox that keep certain events cable exclusive.
Currently, ESPN’s linear networks and the ESPN+ streaming service operate in isolation, which means flagship events like the NFL, the NBA and college football are exclusive to cable. However, there are plans to combine the two, possibly as early as 2025, eroding that exclusivity and potentially encouraging even more cable subscribers to cut the cord.
The issue for ESPN is the same as it is with the RSNs – cable is still more lucrative than streaming for the Disney-owned broadcaster. To maintain or grow revenues in a full DTC model, ESPN knows it needs scale and assistance with the additional sales and marketing costs. That’s why it’s seeking ‘strategic partners’ from the tech and telecoms sectors to help with the rollout. It’s also said to be courting the major leagues themselves to help with content.
There will be plenty of interest in what form the full DTC version of ESPN will look like, who those strategic partners will be, and what the impact on the pay-TV market will be. But there might still be life in cable yet. The recent deal with Charter includes provisions for ESPN+ and Fox has said it has no intention of making its most important events non-exclusive to cable in the near future.
The battle for the NBA’s domestic rights will have major repercussions
Another event set to have huge repercussions for the entire industry is the upcoming sale of the NBA’s domestic rights. The current cycle ends after the 2024/25 season, and the league is reportedly looking to treble its current US$24 billion arrangement signed in 2014.
Incumbents ESPN and WBD are keen to renew, and NBC has thrown its hat into the ring. However, the NBA is widely expected to carve out a streaming package in a bid to achieve its revenue target and reach its younger, tech-savvy fanbase. Amazon has made no secret of its interest, while Apple and Netflix have been linked with a move, and ESPN, WBD, and NBC all have streaming platforms they want to populate.
With all the rights to other major properties sewn up for several years, the NBA is the last opportunity for an ambitious broadcaster to push the needle for some time.
Women’s sport is now a major part of the US sports broadcasting landscape
The ongoing growth of women’s sport is one of the defining narratives of the modern sports industry, and previously undervalued or underappreciated properties are now of significant interest to broadcasters looking to capitalise on this interest and acquire new sources of content.
“It’s been oversaid, but it’s a fact that women’s sports are growing,” says Mandel. “Sponsors are coming to the table and that’s the gamechanger. Where dollars are, comes change.”
Two deals that Mandel has been involved with reflect this growing appetite. The first is the National Collegiate Athletic Association (NCAA) contract for all events excluding American football and men’s basketball. It’s a package that comprises 34 championships, including women’s basketball and women’s volleyball. Last season, the final of the women’s March Madness tournament increased viewership by 103 per cent to achieve a record 9.9 million viewers, while 92,003 fans attended a volleyball matchup between Nebraska and Omaha – a record for women’s sport.
ESPN’s US$500 million, 12-year contract expires at the end of 2023/24 and it is widely expected to face more competition – and a heftier bill – if it wants to renew.
The second is the domestic rights to the National Women’s Soccer League (NWSL). IMG secured four-year deals with Amazon, CBS, ESPN and Scripps worth US$240 million, giving the league wide exposure and cross-promotion across multiple linear and digital channels and achieving a 40-fold increase over its current arrangement with CBS.
“We have secured four game-changing, marquee partnerships that will help send the women’s game to new heights of viewership and fandom, growing domestic revenues for the league,” says Mandel. “The NWSL’s new line-up of media partners are stepping up with significant rights fees, production investment, top-tier platforms and impactful promotion. In lockstep with the NWSL, they are going to transform the ways in which fans can discover and engage with the games, assuring deserved exposure for these world class athletes on the broadest stage.”
Few are as qualified to talk about the state of US sports media as Mandel, whose role at IMG sees her working with some of the biggest rights holders and broadcasters in the country, giving her first-hand experience of the market forces at play.
“Sports properties have three main objectives,” she says. “They want to maximise revenues as that’s their lifeline. But at the same time, it is fans that will ultimately grow the business so they need reach. Then they need to have relevancy. I.e., is this platform going to propel them or are they going to drive the platform? It’s about working with broadcasters to analyse the trade-offs.”
And if there’s one opportunity that rights holders should be looking to seize in the digital era?
“I don’t think [all sports] have mastered the art of their ancillary digital,” she says. “They’ve been mostly focused on live content and there’s more that can be done. The influencer world is a massive new toy and who better than the sports industry to play with that? We’ve let athletes build their own brands and the leagues have built their own brands. That has to come together and there’s a growth factor.”
This feature forms part of SportsPro’s Broadcast Week, a five-day run of exclusive content featuring some of the leading innovators in the business of sports broadcasting. Click here to access more exclusive content and sign up to the SportsPro Daily newsletter here to receive daily insights direct to your inbox.
