Do broadcasters overpay? Do we face a bubble in the sports rights markets? Very unlikely. But spiraling TV rights can turbocharge sponsorship assets.
There has been some nervousness in the sports and broadcast markets recently about the escalating costs of television rights in sports.
Cries of “Is it a bubble?” and “not sustainable” have been heard.
Let’s be frank. Broadcasters are rarely accused for overpaying for their rights. On occasions it does happen, but these are the exception, not the rule. The business of television is a numbers game and these guys can crunch the numbers better than anyone.
And when they do overpay, they generally know it and the strategic benefit of the sports right itself concerned to the broadcaster often compensates for any overpay.
The Olympics are a case in point where networks often do not recoup their investment through advertising in the broadcast of the Games themselves, but the prestige of the Olympics forms a marketing pillar for the network over a four year period.
So why the rights do fees work?
There are a lot of moving parts; here are some key points to consider.
Fragmentation – There is so much content today, although total viewer numbers are generally steady, these viewers are spread across more programing. Live sport is a traditional television destination for a viewer that is hard to beat.
Demographics – Males, particularly younger adult males, are a hard to reach demographic and sport delivers these consistently in strong numbers.
Airtime – Sports produces an abundance of engaging content, from live play, preview shows, and recap shows to highlights packages – all from the one match, and available across all screens.
Importantly sport is Social Fuel that drives passion and engagement like no other content, and this plays out in social media. As brands continue to look to get closer to pop culture, sport only grows as a viable and lucrative platform brands can build multi-faceted campaigns around and broadcasters today offer the multi-screen platforms that support these strategies.
Broadcasters are now more than likely paying a fair and reasonable market price for the assets they are acquiring in the current market. The irony is that this shift in broadcast rights fees will likely see an upward trend in the investment required for more traditional marketing assets. There has not been the escalation in value of these assets at same rate as that of broadcast rights.
A gulf has developed between the cost of such traditional assets like shirt sponsorships and in venue sponsorships and that of the exploding value of broadcast rights. Expect to see rights holders looking to close this price gap as they come to understand the value of these assets and the demand that exists in the market place as advertising costs go up to support the broadcast rights increases.