Sport rights set for devaluation as the industry reaches its Napster moment
Alongside all the other ways Covid has disrupted our economy and lives, it might be set to have a dramatic impact on the value of sport rights.
Some 83 per cent of executives, representing 4bn sports fans globally, believe that media rights have reached a high-water mark, a recent Seven League study found.
These executives have been at the coal face of inflating rights deals in sport for the last 20 years. If their view is borne out, this may be sport’s Napster moment.
Like the music business already has, the sport industry may have to fundamentally address how it is structured and where it derives its revenues.
Media rights have brought riches to many leagues, federations and teams, much like physical album sales supported the music industry.
That is, until the proliferation of streaming meant that stopped being the case and music went through some painful adaptations.
We recently saw a £526m deal between Suning Holdings and the Premier League to distribute games in China collapse.
Closer to home, the league has faced a consumer backlash against its decision to air games direct-to-consumer for £14.95.
Lower down the food chain we’ve seen smaller sports properties struggling to find a broadcast home for their events.
Others have had to take a big haircut in terms of the rights fees they can expect to receive from broadcasters.
This all has a trickle-down effect on the health of individual sports and grassroots participation.
Prognosis is gloomy but sport can adapt
For the big players in sport, media rights are what sustains huge wage bills — and an entire ecosystem of people working in the sport industry.
These properties will look to hold their current values in the short term, and may succeed.
A tranche of second and third tier properties whose media rights deals revenues are being eroded lies below them, however.
These revenues have proved vital for the continued sustainability of some sports, and often fund grassroots participation programmes.
It’s essential that sport, as an industry, acts quickly to diversify its revenues.
Despite the apparently gloomy prognosis, I remain bullish about sport’s ability to adapt.
Music fans didn’t stop listening to or loving music when the industry got disrupted; it’s just that the revenue model changed.
Sport will continue to be popular with fans. It just needs to change how it sells itself.
It will need to adapt from an over-reliance on broadcast fees to become a fully-rounded digital media business.
That means incorporating ecommerce, streaming, ticketing, sponsorship, membership, loyalty and wagering.
How each of these business models operate is fundamentally changing. We at Seven League call it the 3rd Age of Sport and you can read more about it here.
Charlie Beall is a consulting partner at digital sports agency Seven League.