(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry. Please subscribe.)
Last week, I managed to wind up with a physical copy of my college’s newspaper—I won’t lie: I love reading physical copies of newspapers and magazines—and I loved a very specific editorial choice: a reporter specifically described a quote as “in a quote included in the press release”.
Man, everyone should be doing this!
I’m constantly reading quotes in the trades that I know come from press releases. (The tell? Every article uses the same quotes!) Yet the quotes are often phrased as if the journalist was talking to the executive giving the quote. I’d argue this misleads the reader, and props to this young college beat writer for not repeating that style.
I will say that I’ve noticed more news outlets, and some trades, calling out when quotes come from press releases, but this still happens too rarely. Like the “story of the week” this week. Most outlets quoted a press release without doing an extra step of due diligence, and I’d argue it misled their readers. I’ll explain that, look into the future of sports media rights deals, the theatrical box office in 2024, the latest company to exit video gaming, what small streamer is getting shut down, and more.
(Note to readers: you might get two emails from me today, one from my newsletter and one from The Ankler. I’m a bi-weekly columnist for The Ankler as well, and they’re re-posting the first section from last week’s Streaming Ratings Report today.)
Most Important Story of the Week – The Sports Rights Outlook for 2024
I haven’t talked about sports media rights deals in a while, and compared to something like “theatrical box office”—which I cover in the next section (and write about all the time!)—they may be even more important to the health of the streamers and networks (declining though they may be).
The most recent set of new sports rights media deals seem to presage a slight rebound in value. Reading some recent headlines about new media rights deals, you might think it was more than slight. Take, for example, the big increase that ESPN will pay the NCAA for their playoffs and championship games (for everything except men’s basketball).
Here’s how I’d summarize it: ESPN will pay 10% more per year to buy NCAA sports rights.
10% is a great growth rate for any industry, especially to average that over 8 years. But I didn’t read that “10%” number in the news coverage; instead outlets reported that the rights had increased by “300%”, or tripled. “Tripling” sounds much bigger than “increased by 10% per annum”. (That’s why the press release went with it.)
But here’s the thing: they’re the exact same!
See, if something increases by 10% per year, on a long enough timeline, it “doubles” in value. How long? Well, use the “rule of 72”, which is a quick, handy way to calculate how long it takes for an investment to double at a given growth rate. For example: 72 divided by 9 is 8. So every eight years, something increasing by 9% each year will double in value.
Sports rights tend to be very long; some recent deals ran for for ten, or even twelve years. The NCAA sports rights deal before this one lasted fourteen years! That’s how you get a deal like this to “triple” in value.
A few years back, I looked at sports media rights growth specifically, and found that the average increase for sports rights was about 5% per year. I haven’t updated that analysis—it’s a project I just don’t have time for; if you’d like me to tackle more projects like that, I’d need to hire a research assistant, so consider buying a paid subscription so I can do that!—but most deals still tend to be in that range, if not actually a little lower.
We’ve seen a few recent deals and here’s how I’d judge their growth rates per year:
- NCAA Playoff Rights: $115 million per year, 10.1% annual growth, 8 years (ESPN)
- NASCAR: $1.1 per year, 3% annual growth, 7 years (Fox, NBC, TNT and Prime Video)
- National Women’s Soccer League: $60 million per year, 151% annual growth, 4 years (CBS, ESPN, Amazon Prime Video and Scripps Sports)
- College Football Playoffs: $1.3 billion per year, 6 years, unknown growth (ESPN)
(Be careful with that last one: it isn’t official which means it could change.)
In this context, I’m not sure we can draw too much about where sports rights are headed. While the NCAA did have a great growth rate for its rights, at $920 million over 8 years, it’s still pretty small in the grand scheme of things. (The men’s basketball tournament makes nearly that much each year.) The big change is that Women’s March Madness basketball saw huge ratings last spring for ESPN, and they hope that growth will continue.
The bigger deal, in my opinion, is NASCAR, which didn’t see nearly as big growth, and it’s for fewer years than the last deal (seven versus ten), hence why the press release touted it as a “40%” increase. By my calculations, to emphasize it…
…NASCAR saw 3% growth per year.
(By the way, the NASCAR deal is much larger ($1.1 billion per year versus $90 million) than Formula 1’s media rights deals, because its ratings are two and a half times larger, though Formula 1’s last deal saw huge growth, unlike NASCAR.)
Overall, this is good news for both the NCAA women’s basketball tournament and the National Women’s Soccer League, which saw big pay increases. But that growth isn’t as high as some headlines would lead you to believe. However, the numbers for NASCAR would worry me if I’m about to make a new sports media rights deal, so…
Should the NBA Be Worried?
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