PwC Sports Market Outlook: Media Rights Continue To Grow as Industry Looks to Big Rights Deals in 2020s In 2018, media-rights deals are projected to exceed gate receipts for the first time By Jason Dachman, Chief Editor Tuesday, December 19, 2017 - 12:19 pm
Print This Story
Story Highlights
Last week, PricewaterhouseCoopers released its latest sports-market outlook, At the Gate and Beyond, providing revenue projections over five years (2016-21) within four key segments in North America: media rights, gate revenues, sponsorship, and merchandising. The report projects the sports market to grow at a compound annual rate of 3.1% across the four segments, from $69.3 billion in 2017 to $78.5 billion in 2021. Among the most notable insights in the annual report was PwC's projection that, in 2018, sports media-rights deals will exceed gate receipts for the first time, with the majority of the growth over the next four years fueled by regional-sports-network deals.
Here is an overview of some of the key takeaways from the PwC report in relation to media rights:
Media Rights Are Fastest-Growing Segment: Media rights are currently the fastest growing segment of the four with a CAGR of 4.3% over the Outlook period and will surpass gate revenues next year to become the largest. The monetization of rights available in the nearer term (25 RSN deals across MLB, NBA, and NHL will run off within the next five years, as well as in at least the beginning of the next national-rights deal cycle) should remain strong, given increasing competition among traditional broadcasters and emerging distribution partners, as well as stronger paths to monetization across digital platforms in either rights form or direct-subscription/ad-based models.
RSNs Drive Media Rights Until National Deals Open Up in 2021; Digital Becomes Major Player: Key deals underlying the media-rights segment are locked in until 2021, when the next cycle of national-rights deals begins to overlap with the five-year projection period. The monetization of rights available in the nearer term as well as in at least the beginning of the next national-rights deal cycle should remain strong given increasing competition for rights among traditional broadcast intermediaries and emerging distribution partners. There are also stronger paths to monetization across digital platforms in either rights form or direct-subscription/ad-based models to the extent consumer engagement shifts from the linear broadcast.
Media-Rights Deals Drive Value of Pro Franchises, Fuel Stadium-Build Boom: Media-rights deals have driven value growth across the major leagues for five years and counting, similar to the way adoption of league-wide revenue-share programs and construction of new stadiums, arenas, and ballparks enhanced local-team values over the two decades before, a 20-year building boom involving more than $55 billion in facility construction across professional sports and intercollegiate athletics, according to PwC research.
Top-Tier Properties Likely To Remain on Linear Broadcast in the Near Term: According to PwC, broadcast-rights preservation is likely to remain an industry priority through at least the next deal cycle to prevent potential further dilution of rights fees. Any consumer-led disruption of the linear-broadcast market realized in the near term due to migration, either within pay TV or from broadcast to digital, is unlikely to materially impair the media-rights-fee landscape. This is particularly true for major properties with incumbent rightsholder carriage deals in place with major distributors through at least the early stages of the next deal cycle, as well as for subscriber migration away from or within the pay-TV bundle expected to occur over a protracted period.
Lower-Tier Properties Could See Rights-Fee Declines: Lower-tier properties entering the deal cycle, however, could begin to realize, at minimum, lower growth multiples, if not fee-level declines, thus widening the rights-fee gap between premium and other broadcast content - particularly to the extent the pace at which consumers shift engagement to digital content increases and/or traditional intermediary partners shift to business models that place lower priority/valuation on live sports content.
Shorter-Term Commitments by Rightsholders?: In general, next-cycle deals across the property spectrum could realize shorter-term commitments by rightsholders, particularly if existing rights-fee levels are preserved, with an increased share of market risk retained by properties, which would lead to increased volatility in future market size beyond the five-year Outlook period.
Direct-to-Consumer Offerings on the Horizon: Existing digital products currently positioned as complementary to the linear broadcast are projected to preserve monetization of broadcast content related to cord-cutters and cord-nevers. As a result, direct-to-consumer offerings and other digital content are anticipated to be stabilizing forces rather than material drivers of market size through at least the next rights deal cycle as digital products build an incremental audience, product-feature roadmaps are realized, and subscription/ad models are refined.
Immersive Experiences Will Be Key to Future Deals: Future growth within the media-rights segment beyond the next rights-deal cycle will hinge primarily on market engagement, with future generations of digital products that deliver premium, immersive experiences with either live or archived content enabled by a wide landscape of underlying technology, including personalized video, 3D video, augmented and virtual reality, and augmented video. With a potential global market size of more than $1 billion by 2025, immersive sports media will remain a nascent market relative to a number of areas, including gate, cable bills, merchandise, videogames, and direct-
