More Examples of Business Models Under Threat (cont.)
Media and Sports Industries
Introduction
The nature of sports and media industries is being fundamentally reshaped by
- younger audiences
- technology (including AI)
- shifting cultural expectations.
As Gen Z and younger Millennials become the primary fan base, both industries are moving away from traditional models based on broadcast rights with passive consumption, toward interactive, digital-first, community-driven ecosystems.
“…The shift of sport to digital channels will almost complete the reshaping of the media industry. Sport is the last big content category propping up viewership of broadcast cable television, which still provides a large chunk of the profits of the media companies……The TV business has been turned upside down the past five years by the migration of viewers from broadcast or cable to streaming. Netflix pioneered the shift and hastily most other big media firms followed, sending their best shows from cable and putting them on online to attract subscribers. Today, streaming accounts for about 40% of TV viewing in America and for the first time in decades, the majority of households no longer subscribe to cable…”
The Economist, 2024
More recently sport is shifting online, ie streaming and away from cable.
“…Disney which own ESPN, the biggest sports cable network, will launch a new platform…… Streaming all of the content previously reserved for cable. ESPN, with Warner Brothers Discovery and Fox, is also setting up a sports-streaming venture called Venu…… NBCUniversal, owned by the Comcast cable empire, is putting more sport on a streaming service, Peacock, even as it holds some events to protect its cable bundle…”
The Economist, 2024
Some new players in sports streaming include Amazon Prime Video, YouTube (owned by Google), Apple, Netflix, etc. Despite Netflix’s initial reluctance, it is now buying sports rights:
“…Live sport is the fastest way to bring a large, simultaneous audience to its advertising business…”
The Economist, 2024
Some of the live sports include American football, basketball, baseball, soccer, Olympic Games, car racing, wrestling, cricket, etc.
The increased competition of streaming for live sports has resulted in a significant rise in the cost of media rights. For example, the NBA is expecting
“…to raise 3 times as much money by dividing its games between Disney, NBCUniversal and Amazon…”
The Economist, 2024
Furthermore, despite the healthy audience figures sport on broadcast cable TV had, there has been a major shift in young people viewing
“…In America, under 18s spend a quarter less time watching televised NFL games than they did eight years ago……Losing young fans is a growing concern; 40% of the 35 to 64 year olds worldwide said they are interested in the Olympic Games……compared with 26% of the 18- 34s…”
Ampere Analysis as quoted by The Economist, 2024
Sport is going global, eg
“…Netflix’s airing of its Christmas NFL game to its 270 million members in more than 190 countries…. Its ability to shape local tastes was demonstrated in New Zealand in April when it tested its WWE program. Wrestling has little following there, but the match was reportedly the most watched Netflix show in the country…”
The Economist, 2024
Global distribution is finding audiences in unexpected places, eg
“… Formula One racing has roared into Americans’ viewing habits thanks in part to a Netflix documentary series ‘Drive to Survive’, which made its debut in 2019 and has run for six seasons…”
The Economist, 2024
Furthermore, dreaming services are making viewing more user-friendly: you can watch when it suits you from one service. This has doubled viewing time.
The media is using narratives, ie storytelling, to increase the popularity of the sport.
Stories about behind-the-scenes activities linked with sporting events have become very popular and have resulted in higher prices for media rights, eg Formula One documentary series, “Drive to Survive” was a hit
“…Not just with the older men who typically watch F1. Three quarters of its audience is under 55 and 40% are women…”
YouGov as quoted by the Economist, 2024
By deploying promotional narratives, F1 has been unable to increase its rights price by more than tenfold.
Other sports like ice hockey, American football basketball, etc, have developed narrative style programs:
- Unchained (cycling)
- Quarterback (American football), etc.
One lesson being learnt is that sports with knockout tournaments are not as popular as those that allow all competitors to finish.
Cycling and golf are favoured over tennis, football, etc, as all competitors finish.
Younger consumers (includes gambling) watch sport differently from the older generation.
“… They are less likely than older viewers to watch games, as it they are more likely to engage with sport in other ways. Young fans watch half an hour less live sport per week than older ones but spend more time on fantasy sports, sporting broadcasts, social media and more…… One difference is the shift in allegiance from teens to individual athletes. Social media has given fans a direct link to stars of all kinds, including sports…… 41% of 25-to 34 years old are more interested in individual athletes than teams, twice the share amongst 55- to 64-year-olds…”
Ampere Analysis as quoted by the Economist, 2024
This has been called fluid fandom as younger sports enthusiasts have little team loyalty and follow their idols wherever they go.
This gives the sports stars, such as soccer players like Cristiano Ronaldo, Lionel Messi, etc incredible bargaining power with massive follower numbers on their social media accounts (Facebook, Instagram, TikTok, etc.). As a result, they are receiving a share of the revenue from subscriptions for promoting online streaming packages.
“… The switch allegiance from teams to individuals also makes it easier for sports to capture new fans…”
The Economist, 2024
Furthermore, allegiance to teams has been weak, as evidenced in buying for new streaming deals based around access to any game, rather than geographically linked.
“…The idea that fans will watch only the home team is also being eroded by the rising popularity of fantasy sports and betting, both of which require players to keep an eye on the whole league. Following a Supreme Court judgement in 2018, betting on sport has been legalised in 38 American states…… The American gaming Association found that a quarter of American adults plan to bet on this year's Superbowl, waging $US 23 billion, 44% more than last year. The young are keenest: a quarter of millennials regularly bet on sport, versus 6% of baby boomers…”
Deloittes as quoted by the Economist, 2024
Some organisations like Disney felt that gambling would hurt their family-friendly brand; however, this has not been the case.
Research indicates that sports fans who bet watch longer.