The Live, Televised Sports Bubble Cometh

Is the economic viability of live, televised sports on the verge of a nasty correction?

Despite viewership sliding downward for other TV programming, live sports remain a ratings and advertising powerhouse.

Networks have opened their wallets wide to pay for sports broadcasting rights in recent years. Consider the National Football League. DirecTV signed a $1.5 billion-per-year deal in 2014 to have exclusive rights to show out-of-market games. (That deal is now the focus of an anti-trust lawsuit.) CBS is paying $300 million just to broadcast eight Thursday night games in the 2015 season. ESPN spends $1.9 billion a year for “Monday Night Football.”

So why cut such huge checks in an era of TV fragmentation? Simply put: millions of people are still willing to arrange their personal schedules around a game.

Viewership of Major League Baseball on Fox Sports was up more than 25% over last year for the first month of the 2015 season, and local MLB telecasts continue to dominate primetime in several markets. The NFL now attracts an average of 17.6 million viewers per game telecast, and some Sunday/holiday games top 30 million viewers. For comparison, TV’s top-rated series right now, “The Big Bang Theory,” draws about 15 million for a new episode.

At the same time, much of the cost of these mega-deals is getting passed onto customers. This leads to the question: How high can the price of cable go before viewers cut the cord?

The migration of sports fans away from the cable bundle is already underway. ESPN has lost 7.2 million subscribers in the past four years, 3 million just since last year.

“At some point consumers will say ‘Enough is enough,’ ” said Dan Rayburn, a media analyst at Frost & Sullivan.

That temptation for fans is growing. The proliferation of user-generated streaming apps like Periscope and Meerkat, as well as illegal streaming sites, also makes it easy to find any game online for free for those willing to sacrifice some video quality.

More importantly, the MLB, MLS, and NHL all offer streaming packages and continue to expand their online offerings. The NBA has begun to offer fans the option of purchasing single games as well. Could leagues become their own media companies and sell directly to the consumer, eventually leaving networks and cable/satellite providers behind?

If the price of sports programming continues to rise, that may soon become a reality.

“The biggest threat to the cable industry is not cord cutting or streaming, it’s themselves,” says Rayburn. “If they continue to raise rates like clockwork, they’re the biggest threat to their business.”