As athletes gear up for a full year of sport (and viewers for a heavy summer of drinking), broadcasters are preparing to air some of the biggest events in the sporting calendar, including the Olympics, UEFA Euro 2024, and the T20 Cricket World Cup. But where such a packed sporting schedule would once have been a golden ticket for TV companies, the playing field looks different this year; audiences are fragmented across different video services, and advertisers are not spending on TV like they used to.
According to figures from WARC, ad spend on linear TV in the UK is forecast to remain in decline throughout the summer of 2024, despite the high-profile sporting tournaments ahead. And that downward trend is expected to play out across Europe, including in Germany where the Euros are being hosted this year.
Competing for ad spend
That said, the diminishing importance of live sport to TV should not be overstated; the record-breaking viewing figures for this year’s Super Bowl highlight the pull of big-ticket sporting events. And in the US, brands are expected to spend an additional $2 billion around the Paris Olympics, according to Daniel Knapp, Chief Economist at IAB Europe. Meanwhile in Europe, Euro 2024 is forecast to drive €250 million in incremental spend across the continent.
However, this boost will not be enough to offset the decline in linear TV spending, according to WARC. While live sports remain a draw for audiences, the halo effect around those events appears to be shrinking. WARC observed that until about 2014, World Cup and Euro tournaments increased ad investment in the months surrounding the event, not just during the events themselves. In the UK, ad spend in World Cup years was on average four percent higher in Q2 than other quarters – Q2 generally representing the early stages of the competition in which there were still England matches.
But the research suggested more recent tournaments have not seen an equivalent boost. “Since the World Cup in Brazil in 2014, we’re not seeing that effect anymore,” says Alex Brownsell, Head of content at WARC Media. “And there was basically zero benefit that we noticed in Q4 2022 when the Qatar World Cup happened.” In fact in the UK, TV spot spend in Q4 2022 was down 14.5 percent YoY, in spite of the FIFA World Cup.
And while that quarter was especially impacted by the cost-of-living crisis, linear spending has been in decline since social media companies and streaming services entered the sporting arena. And younger viewers are following the action online. According to Ampere Analysis, 93 percent of 18-24s engage with sports on social media at least weekly, while GWI data suggests that almost 25 percent of 16-24s watched live Super Bowl coverage via streaming services. But rather than bringing more ad dollars into the video ecoystem, those new entrants are all competing for ad spend from a fixed pool of money.
“Advertisers have a largely fixed budget for professionally produced video content,” notes WARC’s Brownsell. “And that will either go to linear TV, or as eyeballs shift to on-demand streaming, they will spend it with BVOD, SVOD, etc. They’re not spending any extra money. So if you’re Netflix and you’ve just bought the rights to the WWE, if you’re Amazon and you’ve just picked up cricket in Australia, and you’re trying to sell advertising against it, you’re not competing against YouTube. You’re certainly not competing against Google search or Instagram or TikTok. You’re competing against the traditional TV companies, and you’re trying to take their revenue away.”
A dangerous game
This leaves broadcasters in something of a vicious cycle; if their revenues continue to fall, so does their ability to shell out for sports rights. And without the mass reach of live TV, advertisers will spend less around sport. Ampere Analysis forecasts that total spend on sports rights by incumbent broadcasters is set to decline by almost 10 percent between 2024 and 2028.
The market is already showing signs of strain – even Disney has played with the possibility of selling ESPN as it struggles to retain cable subscribers, before entering a streaming joint venture with Fox and Warner Bros. Discovery. The company’s streaming offering ESPN+ also lost subscribers last year, suggesting viewers can no longer afford the multiple streaming subscriptions required to follow their favourite sports. In the UK for example, the split of TV rights means the cost of watching every Premier League game in the current season is around £1000 per year.
In its latest rights deal, the Premier League managed to reduce the number of subscriptions fans will need by removing Amazon from the equation – while growing its TV revenue by 4 percent on the previous auction. But while Sky and TNT Sports (formerly BT Sport) were willing to foot the bill this time round, WARC’s Alex Brownsell argues that sports leagues and franchises could struggle to keep attracting higher sums for their TV rights.
“At some point the numbers aren’t going to add up,” he says. “I think we will reach an inflection point where the amount of revenue that the TV companies get from subscriptions will no longer justify the required outlay for live rights; Sky in the UK cannot pay infinitely more and more for Premier League rights.”
And while international streaming companies have dipped into their deep pockets for select sporting rights, relying on Big Tech could prove a dangerous game for rights holders. The regional nature of sports rights means they may not always be worth the outlay for global tech firms in the way they are for the incumbent broadcasters, and tech giants are likely to remain strategic in their investments.
“If you’re Amazon, you’re making loads of money already, so spending billions on key sports rights for that particular market? You can be really ruthless about it,” says Brownsell. “If the costs don’t make sense, they won’t bother doing it.”
Warming up
Streaming companies are therefore more inclined to spend on ancillary sports content such as documentaries, which score highly among younger viewers who are reportedly more interested in athletes’ stories than in following teams or competitions. And these shows can in turn boost the popularity of sports franchises; according to Nielsen, Netflix’s ‘Drive to Survive’ series has driven a 10 percent increase in US fans of Formula 1.
As a result, rights holders are looking to tap into the appetite for short-form and streaming content. In 2022, the International Olympic Committee (IOC) partnered with Netflix to make ‘The Redeem Team’, a film about the 2008 US Olympic men’s basketball team. And the IOC is in talks with streaming companies ahead of the Paris Games, insisting that any Olympics-based streaming content is warming up audiences for the live events, ultimately driving them towards local broadcasters.
“I think we’re going to have a shaky 10-15 years where rights owners might need to get creative,” comments Brownsell. “That might mean smaller packages and bundles, to try and get some revenue from the tech companies who aren’t at the moment interested in buying the whole lot, and trying to milk what they can from a struggling broadcast market.”
