Sports rights are becoming a key tool for system operators to retain and attract new subscribers. But with costs rising and viewership falling, are sports such a good investment?
Operators pay extraordinary amounts for sports rights
System operators are putting a lot of faith in the ability of sports to retain and attract new subscribers. For example:
- Verizon paid $2 billion in 2018 for a 5-year license to distribute live NFL games to mobile devices
- BT paid almost £1 billion ($1.4 billion) in 2015 for the rights to deliver 42 Premier League soccer matches per season for three years
- NBCU (owned by Comcast) paid $7.7 billion in 2014 for the rights to deliver the Olympics through 2032.
These are enormous amounts of money, by any estimation. Moreover, sports rights are likely to continue to escalate in cost with new digital providers like Amazon entering the bidding. For example, BT could be facing a 45% increase in license fees for the Premier League. And operators are looking to maximize their value. Consider how Comcast is leveraging the Olympics.
NBCU maximizes Olympics coverage online
NBCU is firmly committed to leveraging online to help expand its coverage of the Olympics. At the last Summer Olympics in Brazil, the company provided live coverage of every event online. It will be doing the same, and more, for the upcoming Winter Olympics in Seoul, South Korea.
Every event at the Winter Olympics will be streamed live online through NBC web properties and apps, but a viewer will need to authenticate with their pay TV login credentials to watch. New for this year, viewers will also be able to watch the opening and closing ceremonies online, though the streaming coverage will not include the TV ad breaks. However, most people may opt to watch the opening ceremony time-delayed on TV since it occurs at 6 AM Eastern on February 19th.
The Olympics are better on Xfinity
As with the 2016 Summer Olympics, Comcast is leveraging its special access to the Olympics to make Xfinity X1 the best place to watch the games. The X1 experience integrates all NBC coverage, including the live streams, into an Olympics Dashboard. The Dashboard will be accessible through the X1 set-top box and the Xfinity Stream app. The X1 voice control system has been updated to understand 1,500 commands tailored to the games.
Comcast will also make some of the coverage available in UltraHD with HDR and Dolby Atmos sound. However, to watch the high-quality video customers will need 4K HDR set-top boxes which Comcast started shipping last November.
Comcast X1 needs a lift from the Olympics
There is no doubt that Comcast hopes the Olympics will help it boost video subscriber sign-ups. In 2016, the cable company seemed to have turned around its flagging video fortunes. Comcast had a net gain in video subscribers for the first time in ten years. However, it is not clear if the Olympics were a big factor. In the second quarter of 2016, when most Olympics fans would have signed up, Comcast turned in its worst subscriber acquisition figures of the year, losing 4,000 customers. This Q2 2016 performance was an improvement over 2015, but the improvement was in line with other quarters in the year.
However, its fortunes seem to have faded in 2017. Comcast lost 125,000 video subscribers in Q3 2017, versus a gain of 32,000 in the same quarter in 2016. First and second quarter results were also considerably below 2016 levels. It seems headed for a loss in video subscribers for 2017, though we will know more on Wednesday when Comcast reports its fourth-quarter results.
Premium sports losing luster with viewers?
Falling viewership may begin to give operators like Comcast a reason to wonder if they made a wise investment in premium sports. For example, 2016 saw a 15% decrease in viewers of the London 2012 games. The London games averaged 31.1 million viewers over the 17-day event, while 2016 saw 26 million.
NFL has seen a similar dip in viewers. For the 2016-2017 season, average game ratings fell 8% and in the 2017-2018 season a further 10% decline. The Premier League in the UK has fared somewhat better. Sky channels carrying Premier League games saw a 17% drop in viewership in the 2016-2017 season, with BT seeing a much smaller 2% drop. In the US, NBC saw its Premier League game coverage in the US suffer a 17% drop as well. So far, however, the 2017-2018 has seen a partial recovery. Sky viewing is up 9% and BT up 8%.
Falling sports viewership and escalating license fees do not seem to be deterring operators. As Verizon’s Tim Armstrong said earlier this month at CES:
“I would argue a five-year deal for NFL is money really well spent to drive Verizon and its core strategy.”
This sentiment seems to be shared by all the other operators. Though with these market dynamics those sentiments could change fast.
Why it matters
Operators are relying on premium sports to help recruit and retain subscribers.
Sports right are expenses and rising fast, while sports viewership is falling.
With these market dynamics, operator faith in sports to deliver customers could change fast.