The Unraveling of Live Sports TV

Unpacking the contributing factors and how brands can respond

Photo by Austin Neill on Unsplash

The 2018 Winter Olympics will draw to a close this Sunday after captivating sports fans worldwide for the past two weeks. While there is no doubt that the Olympic Games remains one of the biggest global sports events, early reports suggest that the ratings are down compared to the last Winter Olympics. NBC’s broadcast of the opening ceremony attracted 28.3 million viewers according to Nielsen, marking a sharp 11% decline from the 2014 Sochi opening ceremony. The primetime broadcasts that followed did not improve, with ratings hitting a new low on Saturday. According to data compiled by Magna Global, the national household ratings for NBC’s primetime Olympics programs this year saw a double-digit decline across the board from that of the Sochi coverage in 2014, with the broadcast on Monday, Feb. 19 down by 31% from the comparable night from four years ago.

And it is not just the Olympics — almost all major sports are experiencing decline in their TV viewerships. The ratings for NFL suffered a 9.7% tumble during 2017 regular season, marking a troubling 17% drop per game since 2015. The NHL games also saw a 20% decline for their national broadcast on NBC last year. MLB and NBA ratings both stagnated on average, largely salvaged by the strong ratings of tentpole events like the 2017 World Series and NBA Finals. Even soccer, one of the fastest growing sports in the States, struggled with growing its audience in 2017.

Sports content has long been hailed as the last bastion against the erosion of live TV ratings. Out of the 100 highest-rated TV programs of 2017, 62 of them are sports events. As a result, TV ad revenue is also heavily concentrated on live sports programming, accounting for nearly 40% of broadcast TV advertising revenue in 2015. It is the lynchpin that is holding together the entire U.S. pay TV ecosystem, and the continuing decline of sports ratings should be of grave concern to media owners and brand advertisers.

So, what is causing this unraveling of sports TV?

There are multiple factors contributing to this decline. Each sport has their own set of issues that they need to address in order to maintain their popularity, such as the growing concern over traumatic injuries in football or the fact that the U.S. soccer team failed to qualify for the 2018 World Cup. But the overall cultural trend, as the ratings showed, is shifting away from sports viewing writ large. As the U.S. population continues to shift towards multiculturalism, audience interests will continue to diversify and likely result in an even more fragmented market.

More importantly, the younger generations today simply don’t care for sports TV as much as the older generations, thanks in part to the swath of entertainment content services available online today. Participation in youth sports has seen a steady decline over the past decade across all major sports. And as the participation rate drops, so do the TV ratings among younger viewers. A recent McKinsey study showed that more Gen Xers than millennials follow sports closely (45% versus 38%). According to a Magna Global study of Nielsen TV ratings of 24 sports, all but one (women’s tennis) have seen the median age of their TV viewers increase during the past decade. Assuming that section of young people won’t suddenly start caring about sports as they grow older, the future of sports TV viewership is unlikely to rebound.

Then there’s the rise of esports, which has captured a considerable amount of audience attention, especially among younger generations, that would likely have gone to sports TV in years past. As one of the fastest growing media sectors in the past decade, esports is seeing a huge boom in viewership that shows no sign of stopping. The number of frequent esports viewers and enthusiasts worldwide will reach 165 million in 2018, a year-on-year growth of 15.2%. The total esports audience, including the enthusiasts and casual fans, will reach 380 million this year and is projected to reach about 557 million by 2021, according to the latest data from Newzoo. For comparison, this year’s Super Bowl garnered about 103 million viewers, as its rating slips to a nine-year low. Furthermore, Newzoo estimates that 22% of U.S. male millennials watch esports, which puts it on par with baseball and hockey in terms of viewership among that coveted demographic.

In addition, the cord-cutting movement has been gaining momentum, with one-third of millennials saying goodbye to a traditional cable TV subscription, and are therefore less likely to have a cable subscription to begin with. And despite consumer expectations of on-demand viewing availability trickling into sports, many sports networks have been slow to come up with their own streaming solutions. While ESPN has had an online streaming option called WatchESPN for cable subscribers since 2010, a standalone subscription service for ESPN, named ESPN Plus, is still waiting for its grand launch later this spring. Disappointedly, it won’t even include live sporting events from the big four leagues or Sportscenter at launch, making it a harder sell to diehard sports fans.

Chart by Axios based on data from eMarketer

Even among the audiences that do still care about traditional sports, there is a cultural shift towards consuming highlight clips and summaries over watching the live TV broadcast. And the truth is, a lot of sports content can be easily condensed into highlight clips of goals, near-misses, VIP plays, and other key moments, all packaged nicely without the interruption of commercial breaks. Watching highlights grants you enough cultural capital to talk about the game without having to sit through a whole game. For example, there is RedZone, a premium subscription cable channel owned and operated by NFL that offers ad-free, “whip-around” coverage of live highlights across multiple games on Sundays, essentially providing viewers with a collage of the day’s most exciting NFL moments. In addition, YouTube saw an 80% lift in time spent watching sports highlight videos on its site during the last year.

Moreover, the younger generations are also increasingly consuming sports highlights via social platforms. Sports publication Bleacher Report operates “House of Highlights,” an Instagram account that delivers ad-free highlight clips of popular sports to its over 8.2 million followers, sometimes even during the games. Similarly, ESPN and NBC Sports have started working with Snapchat to disseminate highlight clips via Discover. In fact, 35 million people watched highlights from the Rio Olympics on Snapchat two years ago. Similarly, there are apps like Scorestream and Overtime that are geared towards sharing user-generated clips from sports events, especially local high-school and collegiate games. Some may argue that the immediacy of live coverage still matters when it comes to sports, but that is evidently less significant for casual fans that are largely content with watching the highlights.

Source: McKinley

To recap, the shift towards highlight consumption among sports viewers, partly driven by an explosion of entertainment content and the rapid rise of esports, and a larger cultural shift towards digital media consumption, are driving a continuing decline in sports TV viewership. While some TV networks may be trying new things, such as NBC’s disappointing VR coverage of the Winter Olympics, viewers now have little incentive to go back to those traditional channels.

If your brands still count on sports TV to reach your targeted audience at scale, it is time to start looking elsewhere. Here are some good approaches to keep in mind:

Follow your audience and go where they go, as the old saying instructs. With the accelerating cord-cutting movements, sports fans are increasingly turning to either the OTT skinny bundles like Sling TV and Playstation Vue or on-demand subscription services operated by the major leagues themselves to catch their favorite teams. Later this year, we will see the aforementioned ESPN and Turner launch their respective sports streaming services, giving brands new channels to reach the cord-cutters and viewers on the go. In this regard, the streaming service launched by WWE, which now has over 1.5 million subscribers paying $10 each month, points to a future of niche sports going directly to consumers via streaming services. For brands, the diversification of sports content distribution will also open up new channels to reach the fans.

Additionally, brands should also consider tapping into the highlight culture among sports fans and explore ways to insert their brands into those highlight clips. Sponsoring those clips is one obvious way to do so, but there are more organic ways too. For example, for apps like Snapchat and Scorestream, brands may consider creating geo-fenced brands filters for sports events for the spectators to use in the clips they capture. Hudl, a sport content editing tool, has worked with Gatorade to create branded signs and pointers that users can apply to mark key individual players in their highlight clips.

Esports represent another strong growth area that brands should tap into to reach the sports fans demo. At the moment, Amazon owns the biggest esports streaming platform Twitch, which offers a plethora of brand opportunities including sponsorships, branded cheers and emoticons, and pre-rolls. For more on this, please check out our podcast episode on esports featuring Nathan Lindberg and Taylor Stehlgens from Twitch.

Beyond Twitch, YouTube also has a gaming-centric live streaming service that brands may be able to leverage. While YouTube Gaming might be lagging in market share compared to Twitch, Google is reportedly developing a video game streaming service codenamed ‘Yeti’ that will be available on a Google-made gaming console, which might give YouTube Gaming a much-needed boost with built-in live broadcast support. Not to be outdone, Facebook is reportedly catching up by piloting a new gaming program that allows fans to tip streamers. With all the major tech platform owners (except Apple) exploring the esports space, brands will presumably have increasing access to that fast-growing audience to supplement the decreasing reach on sports TV. Of course, there are cable networks like TNT and ESPN that are also adding esports programs to their lineup, which brands can leverage to reach that audience as well.

Better brand integrations and in-game placement is another viable way that brands should work with sports owners and broadcasters to implement in order to make the sports TV viewing experience more appealing. Compared to traditional commercial breaks, they allow brands to keep their presence in an unskippable, highly visible way even when consumers are watching highlight clips. And in this regard, the soccer games in Europe provide a good example. As M.G. Siegler wrote at 500ish word,

“Those matches have no television breaks for advertising except at halftime. Instead, they advertise throughout the game in the form of the players’ jerseys and in the stadium itself. The NBA just started with advertising patches on their jerseys this year. The other “major” US sports will not be far behind.”

When all is said and done, however, brands have to get comfortable with the idea that the days of sports events being TV rating juggernauts may be nearing its end, and the kind of mass audience reach like the one that the NFL games deliver are rapidly dwindling. As the media landscape continues to fragment and viewers spread out, sports content will also be unbundled and disseminated through various platforms. The status quo of sports TV may be unraveling, but brands can always find new ways to reach the fans.