The Return of Sports: How Increased Viewership May Influence Future TV Deals
By: Colin Platz
In recent weeks, professional sports have seen progress in returning to their respective TV spots. The PGA tour hosted the Charles Schwab Challenge on June 11, the MLB resumed their season on July 23, and the NBA and the NHL resumed their seasons on July 30. Since returning, leagues have recorded massive ratings thanks to audiences worldwide starving for sports and entertainment.
The PGA tour, the first American sport to resume since the postponement, saw a 107% increase in viewership from 2019 to 2020 in the final round of the Charles Schwab Challenge. Such a significant increase in viewership is staggering given the typical audience of the PGA tour in 2019 was approximately 3.4 million viewers. To put those numbers into perspective, the PGA tour is ranked the seventh most popular sport in America with the NFL being first, MLB second, NBA third, and the NHL fourth. Major League Baseball enjoyed its largest audience ever for an opening day broadcast on ESPN during the Nationals/Yankees game. The NBA recently doubled TNT’s average viewership for an NBA regular-season telecast, and the NHL recently played its most-watched doubleheader in four years excluding playoff games. Given all of this, it seems the NFL has an opportunity to crush these numbers on September 10th when the season is scheduled to kick off.
While COVID-19 has made many aspects of American sports more complicated logistically, the bump in TV ratings, if sustained, could help ease some of the financial burdens each league has faced due to the virus. TV deals may offer recourse to leagues that are projected to lose revenue during their 2020 seasons. Deals are negotiated to allow networks to buy rights to broadcast games of a given league. Networks use sports to attract a larger audience to their channel or feed, then sell commercial spots to various companies and sponsors to create revenue for their network.
TV negotiations make up a large chunk of each league’s revenue, and as the audience for a given league increases, so does their leverage in negotiations with TV networks. For example, CBS, NBC, and Fox will have paid the NFL $39.6 billion by the time their deals expire in 2022. In 2019, revenue from TV deals made up more than 50% ($8.78 billion) of the NFL’s total revenue, which was approximately $16 billion. The more people watching a game, the more lucrative commercial spots are for networks. This is why hosting a massive sporting event like the Super Bowl is such a splash for networks. CBS, Fox, and NBC pay a collective $3 billion annually to host regular-season NFL games, and each gets their broadcast of 3 Super Bowls respectively. Three billion dollars is a stiff ask, but considering a 30-second commercial during Super Bowl 54 cost $5.6 million, networks receive a worthwhile return on their investment.
While the cost for a commercial may seem absurd, viewership during Super Bowl 54 was roughly 113 million people.To better understand this number, that’s roughly 33 times more viewers than the Charles Schwab drew in, as discussed earlier in this article. It’s no wonder companies are willing to drop millions of dollars for half a minute of this level of exposure. Aside from that, Fox reported $600 million in gross revenue from Super Bowl Sunday alone. If COVID-19 creates a sustained increase in viewership across sports, the money leagues make in future TV deals may off-set the cost of empty stadiums in 2020.
However, this may be easier said than done. In a recent article for Sportico, Mario Paulis highlights that overall TV usage is down 8% for the summer TV season which began in May. Paulis goes further and describes fans as overwhelmed with the multitude of sports events occurring from night-to-night. The article insists that younger viewers are at a crossroads when choosing between games with such a crowded TV schedule.
Attracting young fans is vital to viewership, longevity, and advertisement revenue. Currently, sports leagues are in a unique position to distinguish themselves from one another. The complications of COVID-19 are still apparent across the country and leagues are facing an uphill battle. Sports that can use social restrictions to their advantage may see benefits for years to come, while sports that fail to adapt may see a prolonged drop in revenue. Adaptations have ranged from bubbles, to rule changes, and even modified playoff structures. The leagues with the most entertaining products are sure to prevail. As we have seen thus far, the NBA, MLS, PGA, and NHL have been able to capitalize on their restarts with limited COVID-19 cases and complications. The MLB on the other hand has struggled to maintain its season schedule due to numerous players testing positive for the virus.
Initially, the MLB hoped to play a condensed 60 game regular season before the 2020 playoffs begin on September 27. The league also agreed on expanding the playoffs from 10 teams to 16 in-part to supplement a shorter regular season. Apparently, COVID-19 had a different plan. Since the season opener on July 23 to August 10, 29 different games, involving 11 different teams have been postponed due to positive tests across the league. The MLB hopes to complete the season and make up lost games through double-headers and decreasing off days. In terms of revenue, every game matters, and how the MLB handles itself moving forward will ultimately dictate the relative economic success or failure of the 2020 season.
Leagues that have utilized a bubble approach have experienced significantly less turbulence. Within their respective bubbles, the NBA and MLS have whittled their positive tests down to miniscule numbers. The NHL who has utilized a similar approach with intensive safety precautions, has also produced very few positive test results.
There is an argument to be made that creating a bubble similar to the NBA’s may not be feasible for certain leagues, unfortunately, there’s only one Disney World. With larger rosters, more personnel, and more equipment, moving college football or the NFL to a bubble may be extremely difficult.
Due to many unknown variables, projections for revenue loss across leagues vary, however, an increase in viewership may help ease some of the economic stress caused by COVID-19. Leagues are in a position to gain fans and viewers alike as they restart their respective seasons. However, it’s been made clear that some leagues are in a better position than others to capture the attention of fans, especially after an initial bump in ratings. It is foreseeable that sustained increase in viewership may supplement COVID-19 related losses with more lucrative TV deals in the future, but only time will tell.
Colin is a rising 1L at the University of New Hampshire School of Law.
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