The Exploding Cost of Streaming Live Sports

In the past 25 years the cost of broadcast rights for English Premier League soccer has surged thirtyfold as deep-pocketed media companies have grown to depend on live sports to win subscribers and keep them from defecting to online rivals. Next year an even richer bunch—those same internet giants that are wooing TV viewers—will likely show up at rights auctions, pushing prices even higher. “Live sports attracts a passionate fan base,” Greg Hart, video chief at Inc., said in August after signing a deal to offer Association of Tennis Professionals matches on Prime Video.

The biggest prize will be the Premier League auction this winter. Since the league’s inception in 1992, pay-TV broadcasters have bid up prices dramatically, with Sky Plc and BT Group agreeing to lay out a combined £1.7 billion ($2.2 billion) a year at the last auction, in 2015, up from £1.1 billion in 2012. The top leagues in Spain and France will also be up for grabs, and the U.S. National Football League will sell streaming rights for its games. Tech giants “are going to become serious players” in sports, says John Enser, an attorney at CMS Cameron McKenna Nabarro Olswang who has helped negotiate rights deals.

In 2016, Twitter Inc. paid $10 million to livestream 10 Thursday night NFL games on a nonexclusive basis. This year, Amazon elbowed Twitter out of the way, offering $50 million for the same package. In May, Facebook Inc. signed a deal for one live Major League Baseball game per week, in tandem with traditional broadcasters, though it didn’t disclose the cost. And in September, Facebook offered $600 million for digital rights to cricket matches in India, but it was trumped by Star India Private Ltd.’s $2.5 billion bid for digital and conventional broadcast rights. Facebook is considering a bid for Premier League matches, says Dan Reed, the company’s head of global sports partnerships, who notes that there are 300,000 groups on the social network devoted to the Real Madrid soccer squad. “We can drive great benefit to broadcasters, leagues, rights holders, and teams because they can access this huge fan base,” Reed said at a media industry conference in April. “You can market to those people in a variety of ways.”

Tennessee Titans defensive end Jurrell Casey (99) sacks Miami Dolphins quarterback Jay Cutler (6) during the second half of an NFL game on Oct. 8 in Miami Gardens, Fla.
Photographer: Wilfredo Lee/AP Photo

Traditional media companies are watching the new arrivals warily. Sky says the latest 70 percent increase in the cost of Premier League matches—it has the rights to 126 games a year—caused a 6.2 percent drop in operating profit. In the U.S., ESPN Inc. has seen rights for the NFL rise to $1.9 billion annually from $600 million two decades ago, spurring it to cut staff and launch a digital push as its subscriber numbers decline. Fox, CBS, and NBC each pay about $1 billion annually to show NFL games, about double what they paid two decades ago, researcher IHS Markit says.

Although the U.S. networks have multiyear pacts for major sports, the tech players have been signing shorter-term digital agreements—something the NFL is encouraging, in hopes they might bid against the incumbents when current deals begin to expire in 2021. While the networks have some breathing room—MLB rights are locked up until 2022, and the National Basketball Association’s contracts end in 2025—the rise of digital players threatens the all-you-can-eat packages of sporting events that provide fat profits for the likes of Sky, Comcast, and AT&T. “If you’re a pay-TV platform, you are very worried about the ability of a whole host of people to bid,” says Mostyn Goodwin, a partner at OC&C Strategy Consultants in London. “Sport is key to retaining subscribers.”

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