“The cost of goods is going up and sales are going down,” one longtime industry executive observed. “That’s not a good trend.”
What do they mean by that? ESPN has repeatedly over the past few years shelled out hundreds of millions of dollars extra per year for the NFL, MLB, NBA, college football playoff, and more. From that same article:
“It’s been a total mismanagement of rights fees, starting with the NFL renewal,” said one former employee. “We overpaid significantly when it did not need to be that way, and it set the template to overpay for MLB and the NBA.”
At the same time, cable subscribers are decreasing as a part of the slow trend of cord cutting:
ESPN’s subscriber losses, which have seen it lose nearly 8.5 million homes in the last 4 1/2 years, according to Nielsen estimates, or down about 8 percent, are at a rate that is declining faster than the rest of the industry.
Where do sports leagues make their revenue from primarily? You got it, TV deals. The NBA salary cap will skyrocket next year when the new TV deal kicks in. Sure, tickets and merchandise and licensing generate revenue, but the real money is in the TV deals. In essence, the glut of profits in sports is looking less and less sustainable.
And what happens when the system no longer supports the TV deals? Your guess is as good as mine. Sports leagues probably don’t fold, but I bet they look completely different.
I’m not saying that this will necessarily happen. There are a lot of counter-moves that could prevent/minimize this (leagues charging consumers directly, for one). But it wouldn’t shock me if 15 years from now this happens and we look back on this period and think “duh, it should have been so obvious.”