The Bull Market in Live Sports Rights

There's a bull market in live sports rights. This isn't new, it's been a trend for awhile but recent deal figures are astounding.

The Big 10 signed a 7-year, $7 billion deal with CBS, FOX, and NBC this morning. It's the first collegiate conference deal that exceeds $1 billion in average annual value. It won't be the last either -- you can see a list of Power 5 media rights deals below via Sportico.

The question begs to be asked, "can live sports rights grow to the sky and still be profitably monetized by the buyer?"

There was a great interview between Bill Simmons and former Disney CEO Bob Iger a few years back on this topic. Simmons asked Iger, "Has anyone paid for sports rights and regretted it?"

Iger, who oversaw negotiations and live rights purchases over his career at Disney and ABC, mentioned the only time he remembered having buyers remorse was the 1988 Winter Olympics in Calgary. He mentioned:

"We lost a lot of money on it. And it stung."

The more remarkable part is what Iger didn't say. Over more than 30 years and hundreds of negotiations for live sports rights, he could only think of a single time it didn't work out financially. In fact, it seemed his biggest regret was not buying more. He regretted not locking up Sunday Night and Monday Night NFL rights when he had the chance in 2005.

"Looking back on it, if we could go back and do it differently, I would. Live sports are very valuable. We will be at the table again in the future, I can tell you that."

There's nothing more sticky than live sports. In fact, it may be the only thing holding the cable bundle together.

Per the Sports Business Journal, NFL games made up 75 of the 100 most watched TV programs in 2021. Out of the top 100, beyond the 75 that were NFL games, 11 were events from the Tokyo Olympics, 7 were college football games, and 2 were college basketball games.

95 of the 100 most watched programs last year were live sports. The only scripted program that made the Top 100 was The Equalizer which CBS aired immediately after the Super Bowl.

The value of live rights extends beyond football and basketball. In the past week, Endeavor (sports agency and owner of UFC) and WWE made strong cases for the value of their live rights. (Yes, the barber thinks you need a haircut!)

Nick Khan, former agent at Creative Artist Agency, now COO at WWE gave a summary of the current dynamics for live rights on this weeks earnings call:

"We've been detailing for two years how hungry the marketplace is for live premium content. We are confident as ever as we approach US rights renewals for RAW and Smackdown."

He went on to elaborate the marketplace has become more crowded with buyers than ever before, specifically Big Tech. Recent news from Silicon Valley and beyond around live rights include:

• Apple: they acquired MLS rights with a 10-year, $2.5 billion deal starting in 2023. They also did a deal with the MLB this year to stream select games for $85 million over 7 years.

• Netflix: they put in a bid for Formula 1 which ultimately went to ESPN for $85 million year. The previous F1 live rights deal was $5 million a year; they fetched a 16x multiple.

  • Khan speculated (err ... he definitely knows) Netflix's hunger for live rights will increase as they roll out their ad-supported tier.

  • In his words, "the strongest CPMs are those sold against live rights."

• Google: currently bidding for sports rights in the US and internationally. They recently put in a bid for Sunday NFL Ticket in addition to cricket rights in India.

In short, Big Tech is coming. NBC, FOX, and ESPN won't be the only three bidders at the table going forward.

For Endeavor, the UFC was a key talking point. In their view, they have a sleeping giant on their hands, particularly the prospect of selling the live rights again in 2024 when they come up for renewal.

UFC rights currently reside with ESPN; they signed a 5-year, $150 million annual deal in 2019. When it's time to negotiate in 2024, the expectation is for those rights to increase in a big way. To quote Endeavor CEO and Hollywood super agent Ari Emmanuel, "we feel very confident."

The future owners of live sports rights feels extremely uncertain.

However, the direction of the prices is abundantly clear - they're going up.