Put yourself in the mind of someone in charge of advertising something nationally. The product doesn’t really matter. It could be light beer, a blockbuster movie, fast food, insurance, electronics, banking, credit cards, mortgages, soda, cosmetics, or even a presidential candidate. In years past, if you sought to reach the most people at one specific moment in time, your dollars could be widely distributed across sports and entertainment. Not anymore. In 2019 that money almost has to go to live sports, most notably amongst them the NFL. And at the highest scale, it almost certainly needs to be one of the broadcast networks: NBC, FOX, ABC, or CBS.
You’re undoubtedly well aware that massive amounts of entertainment television consumption has moved to ad-free platforms like Netflix, Hulu, and Amazon Prime as well as towards subscription networks like HBO and Showtime. In another bucket, cable penetration dipped below 85% of American homes — don’t worry, this isn’t a story about the death of cable, which has displayed its own resilience of late; but the cord-cutters are a factor here — while broadcast networks remain in nearly 120 million households. The result is a party like it’s 1969.
In comparison to commercial-supported scripted entertainment programming, which has fallen off a cliff, live sports have commanding dominance of the TV advertising market by holding serve. As one network source put it, “According to Nielsen Media Research, in 1998, one commercial in 20 premium sports events would have delivered 467 million impressions. And in 2018, one commercial in those same events would deliver 438 million impressions.” The sports supply has overwhelmingly endured while there are comparatively scant opportunities to sponsor dramas and sitcoms.
Tom McGovern, the President of Optimum Sports — which does media buying, planning, and sponsorships for blue-chip brands like Apple, State Farm, and PepsiCo — explains the implications from an advertising perspective: “As the world has fragmented and with the emergence of performance media and data, there’s been some tactical change towards targeting and buying a specific audience. But, what’s a key in every marketing program and media image modeling is reach. So, over that time, as the decline of entertainment has happened, the need for reach is still there. There are not a lot of opportunities to obtain reach. Sports remains that — particularly the NFL.”
“We’ve also reached an inflection point of the cost and efficiency,” McGovern continues. “Sports has always been very expensive to reach a mass audience over time. But as the supply of inventory in entertainment — particularly primetime — has just decreased so much, the cost has increased dramatically in a supply and demand world just given the declining supply.”
In other words, don’t buy into any hype, which has been happening for at least over 30 years, that live rights fees for the sports that deliver the biggest live audiences are going to fall off a cliff anytime soon.
Even if you reflexively realize that sports on broadcast television have been remarkably resilient in comparison to entertainment programming, some of the statistics will astonish you. For example: In the 2013-14 broadcast season (which roughly encompasses Labor Day through Memorial Day), 57% of the programs that averaged over 15 million viewers were live sporting events; sitcoms and scripted drama combined for 31%. In the 2017-18 season, live sporting events comprised 85% of the telecasts that hit this benchmark while sitcoms and scripted drama combined for just 8%.
If you take the full year of 2018:
- 89 of the top 100 most watched programs on TV were live sporting events.
- The NFL accounted for 64 of those 89 sporting events, the Olympics had 13, college football had six, the NBA had four, and college basketball and MLB had one apiece.
- NFL games comprised the seven most viewed TV programs of 2018.
- In the top 20 programs of the year, only two were not live sports — The Academy Awards, and an episode of This is Us that aired right after the Super Bowl on NBC.
- Of the aforementioned 89 sporting events, 83 aired on broadcast TV. Five of the six programs exclusive to cable were college football playoff games on ESPN; ESPN also had the Rams-Chiefs Monday Night Football thriller. Additionally, there were three Thursday Night Football games simulcast on FOX and NFL Network and an NFL playoff game simulcast on ABC and ESPN.
Here’s what all that looks like visually:
Last winter, NBC had the Super Bowl and Olympics in the same vicinity. Mark Lazarus, who is Chairman, NBC Universal Broadcast, Cable, Sports and News, describes that this was, “an unprecedented opportunity to reach viewers, in terms of both total audience scale and key demographics. The Super Bowl and Pyeongchang Olympics were watched in 8 of every 10 U.S. homes.”
NBC enjoyed such success with this aggregation that they are moving back a year in their next Super Bowl rotation, trading CBS the 2021 telecast for 2022’s to pair the Big Game and Olympics again. “We’re excited about the similar opportunities we will offer to sponsors and advertisers in 2022,” says Lazarus.
THE BIG SHIELD
One thing that bears repeating is it’s just remarkable how much of a stranglehold the NFL has on the upper echelons of the marketplace. You’ve undoubtedly heard a lot of buzz about Game of Thrones. Where do you think the finale would’ve ranked in live viewership in comparison to the most-watched NFL games this past season? Seventy-first, according to a tweet from Michael Mulvihill, FOX Sports EVP, research, league operations and strategy. All but one of those 70 NFL games aired on broadcast TV.
“The value of live content, and specifically the NFL, to uniquely aggregate audiences is becoming more and more special,” says NFL Media COO Hans Schroeder. “We always in the NFL over long periods of time have been focused on getting the widest reach and distribution of our content. We’re the one league that requires all our games to be over the air in some way, shape, or form. But generally the vast, vast majority of our games are very widely distributed and that’s something that we think has really driven our success over time.”
The NFL’s dominance is especially pronounced when it comes to competition versus primetime on other broadcast programming. As the chart to the right provided by the league shows, the gap between the NFL vs. its broadcast competition only widened between 2017 and 2018 as NFL ratings increased 6%.
There are broader implications, too. “Entertainment television has always delivered a higher percentage of females. To reach females through sports has always been very expensive in comparison,” says Tom McGovern, the Optimum Sports President. “But when you do some of those side-by-side comparisons to entertainment programming, we’re beginning to hit the inflection point of where the real-time effective cost of reaching females in sports is not as cost-prohibitive. If you rank programming like the NFL against other entertainment even as it just relates to females, it’s still going to rise to the top.”
While the NFL dominates, the rest of the spectrum is also performing very well in the marketplace.
- The Olympics have won the night for NBC versus the other broadcast networks 74 straight nights; they’ve beaten the other three combined for 35 straight nights.
- The NBA Finals on ABC has won the evening on television 69 straight nights. It’ll almost certainly be 70 after Raptors-Warriors Game 6 Thursday. It’s not uncommon for the Stanley Cup Finals on NBC to win the night either.
- Perusing the comprehensive college football ratings on Sports Media Watch, 25 of the 27 regular season and conference championship games that averaged over 5 million viewers last season aired on broadcast networks (ESPN had the other two, and also maintains dominance on bowl season).
- Even as total viewership numbers of the World Series has declined, FOX executive Michael Mulvihill explained to me last December that it draws equal viewership in proportion to the top-rated scripted television as it did 40 years ago.
It also warrants mentioning that this is not just a one-way street, but a symbiotic relationship. Sports generate profoundly large audiences for them, but the broadcast networks have relentlessly retained their distribution. They’re nimbly everywhere and you can watch them on Pay TV, over the air, or even on your web browser via a Stanford University research program. #Goodluck to the skinny OTT bundles that try to make it without the affiliates that combine essential live sports with local news and weather (local news has also been very resilient, but that’s a story for another time).
“Broadcast distribution has endured because there’s no substitute for the ability to reach everybody live,” says former FOX Sports executive Patrick Crakes, who is now an industry consultant. “In an era where audiences are fragmenting at an accelerated rate in the moment live content requires a free path to every potential viewer in order to maximize its enormous value potential — and only broadcast does that.”
Another way to put it: Scott Ehrlich, an executive for Stadium, a bourgeoning sports broadcast network that has picked up tranches of Division-1 college sports programming, opined to Ben Strauss of the Washington Post about why households with over-the-air television jumped from 12 million in 2014 to 16 million in 2018: “It’s the fastest growing segment of TV … People like free.”
(While broadcast affiliates will remain free via over-the-air antennae, a story for another time is that it’s a solid bet that live sports will propel the retransmission fees that the core four networks charge Pay TV distributors to rise; John Ourand reported in Sports Business Daily that this factored into FOX’s strategy when they acquired Thursday Night Football rights last year.)
MORE TO COME
With the dynamics we’ve discussed, expect live sports to creep even more onto broadcast television. FOX, which sold essentially all of its assets that did not pertain to live news or live sports to Disney, is picking up WWE Smackdown this Fall; during football season they’ll have NFL bookending the weekend on Thursdays and Sundays on their broadcast network. In between, they’ll have WWE on Fridays and Pac-10, Big-12, and Big 10 football on Saturdays. The World Series will be sprinkled in there too. When the XFL launches in 2020, more than half of its viewing windows will be on broadcast TV on FOX or ABC, with the remainder split amongst ESPN, ESPN2, FS1, and FS2.
ESPN/ABC SUPER BOWL?
The NFL Draft, which had previously been an exclusive cable property on ESPN and later also NFL Network, debuted on broadcast TV in 2018 on FOX before moving to ABC this past year.
A few months ago, my colleague Bobby Burack theorized that ESPN and ABC could conceivably get in the Super Bowl rotation by carving out a new incremental package of international, Saturday, and holiday games in the regular season and putting them on ABC. While we keep hearing about how FAANG — Facebook, Amazon, Apple, Netflix, and Google — will inevitably jump into the fray with live rights, in my personal opinion it’s far more likely that this upcoming round of NFL negotiations in particular will see a meaningful, exclusive package land on the fourth broadcast network in ABC than with a tech company streamer.
First of all, the companies that are making the most waves with exclusive streaming are not FAANG, but the television incumbents or startup ventures. ESPN+ has the UFC, college sports, and soccer. NBC has an English Premier League streaming package. B/R Live, owned by Turner Sports and now under the AT&T umbrella, has soccer and now pay-per-views for the upstart AEW pro wrestling promotion. DAZN, the streaming outlet helmed by former ESPN president John Skipper, has made far more ambitious investments in boxing and proprietary MLB content than FAANG, who have collectively nibbled along the edges of exclusivity in premium sports. Facebook, for example, tried out an exclusive 25-game MLB package in 2018 before cutting it back to just six this season.
“Television still has very significant advantages when it comes to live content,” says Mulvihill. “Our delivery system is reliable whether the content is viewed by a million or a hundred million. It’s also quicker than streaming, which will put broadcast content in a better position to capitalize on in-game wagering in the future. And for our advertising partners, our audience data is ethical, opt-in measurement of actual human beings, not surveillance and bot traffic.”
To his point: However difficult it may be to nail down exact viewership totals, television is measured on a level playing field by a third party in Nielsen. The networks are federally regulated, which appears to be coming to big tech internet content but isn’t quite there yet. If you’re buying an ad on an NFL Sunday — or anyone else in sports — compared to placing it in the wild algorithmic online jungle right now, you have zero concerns about it playing anywhere in the vicinity of raw videos of a mass shooting (which Facebook has to play whack-a-mole with to remove) or something like anti-vax commentary (YouTube finally decided to demonetize these videos this past February).
We also haven’t seen yet if any streamers truly have the bandwidth to handle anywhere near the audience that linear television regularly distributes on broadcast or cable. Up to this point, the most ambitious exclusive streaming has pertained to monetizing comparatively niche fanbases.
BROADCAST AND STREAMING AS COMPLEMENTS, NOT SUPPLEMENTS
Nonetheless, it’s important to note that with these A-List events we’ve been discussing here, streaming is additive to the ecosystem and will continue to grow. The NFL, for example, has deals with Verizon (across the mobile network for games that are on TV in one’s local market) and Amazon (for Thursday Night Football) that are incremental to their television rights. On a TNF game between the Saints and Cowboys last season, there were 21 million viewers on television and a 1.1 million viewer average minute audience for streaming.
Yes, about 20 times as many people watched that game on TV as via streaming, but the streaming audience alone would’ve ranked among the top 15 programs in cable primetime this past Thursday. These numbers will grow in and of themselves, and quite conceivably raise the aggregate tide with them. Most people would rather watch a big game on television, but who amongst us hasn’t streamed football during a wedding? There are games we can catch throughout all types of prior engagements now that previously would’ve gone unseen.
The bottom line is that ad-supported live sports are comparatively thriving across all platforms right now, but especially broadcast television, as advertisers have less and less other options to secure considerable audience reach at a specific moment in time. Scripted entertainment is not walking back through that door.
“People will find big events whether they are on broadcast or cable,” says NBC executive Mark Lazarus. “With more quality content available on more platforms than ever before, there is a great emphasis on live events—particularly sports—to deliver large audiences. With the Super Bowl, Olympics, Kentucky Derby, or the college football championship, it’s often a communal experience with viewing parties. When you consider that 98-99% of sports viewing is on a live plus same day basis, it’s clear that people want sports live, regardless of whether they’re watching on broadcast, cable or via live stream.”
“The trend in decreasing cable homes makes it more of a challenge to reach as many households as broadcast. Cable penetration going below 85% in June 2016 was certainly impactful,” he acknowledges. “Broadcast, which is in 119.9 million U.S. homes, remains the industry’s most powerful distribution system.”