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Report: Sports Rights Inflation Unsustainable Long-Term
JPMorgan issued a report last week arguing sports rights inflation is unsustainable long-term. When combining sports media rights payments and revenue for network television, regional sports networks and streaming for all the major North American sports, it totals $26 billion in rights fee spending for this year. Some sports rights, such as the NBA, could still see sizable renewal step-ups in the coming years. For the major programmers and sports rights distributors that JPMorgan covers, the report estimates $18.2 billion of national sports P&L operating expenses this year, growing about 5 percent per year over the next five years (based on existing contracts and renewal assumptions). By way of comparison, JPMorgan forecasts roughly 2 percent revenue growth of linear plus direct-to-consumer, based on 6 percent annual bundled disconnects and roughly equivalent annual affiliate fee increases.JPMorgan writes: "We believe the ratings and viewership of sports today, essentially must-haves in an otherwise challenged linear ecosystem, will continue to justify sports rights inflation, but that inflation exacerbates what are already existential challenges for the video distribution business as a whole. Today, it is unclear how DTC/digital platforms will be able to replicate the legacy model's level of profitability, as today's model of low prices and easy on/off on a monthly basis with high churn looks unsustainable in general but especially for sports."
JPMorgan issued a report last week arguing sports rights inflation is unsustainable long-term. When combining sports media rights payments and revenue for network television, regional sports networks and streaming for all the major North American sports, it totals $26 billion in rights fee spending for this year.
Some sports rights, such as the NBA, could still see sizable renewal step-ups in the coming years.
For the major programmers and sports rights distributors that JPMorgan covers, the report estimates $18.2 billion of national sports P&L operating expenses this year, growing about 5 percent per year over the next five years (based on existing contracts and renewal assumptions). By way of comparison, JPMorgan forecasts roughly 2 percent revenue growth of linear plus direct-to-consumer, based on 6 percent annual bundled disconnects and roughly equivalent annual affiliate fee increases.
JPMorgan writes: "We believe the ratings and viewership of sports today, essentially must-haves in an otherwise challenged linear ecosystem, will continue to justify sports rights inflation, but that inflation exacerbates what are already existential challenges for the video distribution business as a whole. Today, it is unclear how DTC/digital platforms will be able to replicate the legacy model's level of profitability, as today's model of low prices and easy on/off on a monthly basis with high churn looks unsustainable in general but especially for sports."
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