[Example] A shift in the media business is changing what it is to be a sports fan

The first television broadcast of an Olympic games was in 1936, when around 160,000 people within transmitting range of the stadium in Berlin were able to tune in. The action was shot on three cameras, only one of which could capture live footage—and only when the sun was out. At the next summer games, in London in 1948, the BBC suggested that perhaps it should pay the organisers for the right to broadcast the event, and offered 1,000 guineas (about $40,000 at today’s prices). The Olympic committee sportingly said there was no need.

Today things are a little different. The 33rd summer Olympics, which begin in Paris on July 26th, will be crawled over by cameras transmitting thousands of hours of coverage to an audience of more than 3bn—nearly half the world’s population. The organisers will charge media companies some $3.3bn for the right to broadcast the action, contributing the biggest single part of the games’ income and making the event perhaps the most valuable fortnight of entertainment in history.

Mass media have changed the business of sport, and sport in turn has shaped the media. Worldwide, the owners of sporting intellectual property—everyone from the International Olympic Committee to video-gaming “e-sports” leagues—generated revenue of $159bn last year, estimates Two Circles, a sports-marketing consultancy (see chart 1). Some 39% of that came from selling broadcasting rights. The media, for their part, live off sport. America’s largest media companies spend more than a fifth of their content budgets on sports rights. Last year 93 of the 100 most-watched broadcasts in America were National Football League (NFL) matches.

Now mass media are evolving in a way that will again reshape the sports business. A third of viewers of the Paris games will watch not via broadcast but by online streaming. In some rich countries streaming will be the main way that young audiences tune in. The Olympics have long been an “incubator and innovation lab” for broadcasters, says Mark Lazarus, head of television and streaming at NBCUniversal, whose Paris coverage will include AI-generated commentary. Just as television allowed fans to watch from their living rooms as well as the touchlines, new digital formats are creating new audiences.

The shift of sport to digital channels will also complete a reshaping of the media industry. Sport is the last big content category propping up viewership of broadcast and cable television, which still provide a large chunk of the profits of big media companies. Nearly a decade ago John Malone, a media mogul, described sport as “the glue that holds the [cable] bundle together”. As sport moves to streaming, that glue is coming unstuck.

The tv business has been turned upside down in the past five years by the migration of viewers from broadcast and cable to streaming, pioneered by Netflix and hastily followed by most other big media firms, which have yanked their best shows from cable and put them online to attract subscribers. Today streaming accounts for about 40% of TV viewing in America. For the first time in decades a majority of households no longer subscribe to cable.

Consumers’ last reason to stay with cable has been sport. But that, too, is now shifting online. ESPN, the biggest sports cable network, which is owned by Disney, will next year launch a streaming platform with all the content previously reserved for cable. ESPN, in conjunction with Warner Bros Discovery and Fox, is also setting up a sports-streaming venture called Venu (pronounced “venue”). NBCUniversal, owned by the Comcast cable empire, is putting more sport on its streaming service, Peacock, even as it holds some events back to protect the cable bundle. “It’s a tightrope we walk,” says Mr Lazarus. But the direction is clear: by putting sport online, media companies are “pulling out these last Jenga blocks” of the cable business, says MoffettNathanson, a research firm.

Streaming upstarts would love to topple the Jenga tower. Amazon Prime Video, which began showing Thursday night NFL games in 2021, has a sporting menu in America that includes baseball, ice-hockey and soon, probably, games from the National Basketball Association (NBA). YouTube, owned by Google, has bought baseball and NFL rights. Apple in 2022 acquired exclusive rights to Major League Soccer (MLS), America’s top football league, for its Apple TV+ streaming service.

Perhaps most significantly Netflix, the biggest streaming service of the lot and once the most sceptical about buying sports rights, has changed its mind. Live sport is the fastest way to bring a large, simultaneous audience to its advertising business, which it launched in 2022. As a warm-up, in the next few months it will stage novelty events, such as a hotdog-eating contest run by an outfit called Major League Eating and a boxing match between Mike Tyson, a former heavyweight champion, and a YouTuber half his age. But soon it will get serious. On Christmas Day it will show an NFL game live for the first time, and next year will air a full season of WWE wrestling. Few believe these sports deals will be its last.

The entry of streaming services has contributed to a sharp rise in the cost of sports media rights. The NBA is rounding off negotiations for the next 11 years of rights in America, in a deal that looks likely to raise nearly three times as much money as before, by dividing its games between Disney, NBCUniversal and Amazon. As the cost of sports rights rises, content budgets are shifting away from other forms of entertainment. MoffettNathanson estimates that in 2019 the nine biggest American entertainment companies devoted 20% of their content spending to sport. This year the figure will be 24%. More football may mean less film: Netflix says that buying the rights to an NFL game costs as much as making a medium-budget movie.

For sports leagues, streaming promises something more alluring than ready money: greater reach, to the young in particular. The apparently healthy audience figures for sport on broadcast and cable tv disguise a steep decline in young viewers. In America under-18s are spending a quarter less time watching televised nfl games than they did eight years ago. Young people have abandoned broadcast and cable in general (the average viewer of MTV, a once-hip music channel, is now 51 years old), and as long as sport remains there it will struggle to reach them. Losing young fans is a growing concern: 40% of 35- to 64-year-olds worldwide say they are interested in the Olympics, for instance, but only 26% of 18-34s, according to Ampere Analysis, another research firm.

Streaming offers leagues a way to grow abroad, too. Compared with other forms of entertainment, sport is markedly unglobalised. The majority of Hollywood’s box-office revenue this century has been earned overseas, and music recorded in New York and Nashville tops charts around the world. American sports, in comparison, scarcely travel. Despite staging matches in Britain, Germany and other potential markets, the NFL earns 98% of its media-rights revenue in its home market. America’s other main sports translate little better; Indian cricket and European football are likewise watched mostly at home. The Premier League, the top flight of English football, is rare in making the majority of its money overseas (see chart 2).

Global streaming platforms could change that. Netflix’s airing of its Christmas NFL game to its 270m members in more than 190 countries will mark probably the widest-ever single transmission of a live major sports event. This was key to the league’s interest in the deal. “A huge part of that thinking was that the way Netflix distributes content, the way they surface content, is clearly global,” says Brian Rolapp of the NFL. “It’s the only game we know that we can play on one single partner that will be distributed globally, consistently. And that to us is very, very interesting.”

Netflix has formidable power to introduce audiences to new content and characters. It recently took over the home-screens of subscribers around the world to promote a comedy “roast” of Tom Brady, an NFL star. Its ability to shape local tastes was demonstrated in New Zealand in April, when it tested its WWE programme. Though wrestling has little following there, the match was reportedly the most-watched Netflix show in the country.

MLS, a younger league looking to broaden its footprint, has bet everything on streaming. Last season it swapped a mishmash of TV-rights deals for a single, global partnership with Apple. The deal has given the league distribution in more than 100 countries, a previous “pain point”, says Camilo Durana, head of media rights at MLS. Commentary comes in English, Spanish and, for Canadian games, French. Mr Durana says the Apple deal also makes for a more fan-friendly experience at home: rather than subscribing to different services, viewers can get every match in one place. And whereas matches were previously held at times that suited different distributors, now they are reliably at 7.30pm on Saturday in America’s Eastern time zone. Average viewing time is 56 minutes, more than twice what it was before.

Global distribution is allowing sports to find audiences in unexpected places. Formula 1 racing has roared into Americans’ viewing habits thanks in part to a Netflix documentary series, “Drive to Survive”, which debuted in 2019 and has run for six seasons. F1’s new American owner, Liberty Media, which bought the championship in 2017, wanted to reach viewers who were not already fans, so set out to tell stories happening off the track. “Our sport is drivers with gloves and a helmet, inside the car. You don’t know anything. So the way to be attractive is to show behind the scenes, in a sort of narrative way,” says Stefano Domenicali, F1’s chief executive.

The gamble has paid off. The show was a hit, and not just with the older men who typically watch F1. Three-quarters of its audience is under 55 and 40% are women, according to a poll by YouGov. Most importantly for F1, it was a hit in America, which has allowed the organisation to command a higher price there for rights to its races. Before the show ESPN had been paying F1 a reported $5m a year in America; since “Drive to Survive” the price is said to have risen more than ten-fold.

Predictably, others have rushed to copy the idea. Amazon, Apple and ESPN are making fly-on-the-wall shows about ice-hockey, football and women’s basketball. Netflix churned out more such shows of its own. After “Drive to Survive”, “We heard from almost every single league,” says Brandon Riegg, head of unscripted content at Netflix. Follow-ups include “Unchained” (cycling), “Quarterback” (American football) and, ahead of the Olympics, series on sprinting and gymnastics.

The features of a successful docu-drama, Netflix has learned, are not the same as those of a successful sport. Knockout tournaments, often favoured by fans, are narratively tricky: “Break Point”, Netflix’s tennis documentary, struggled to maintain viewers’ interest as its protagonists were eliminated. “Under Pressure”, which followed America’s women’s football team at the World Cup, suffered when its subjects were knocked out early. Events where all competitors finish—F1, the Tour de France, or 18 holes of golf—work better, says Mr Riegg: “There is a natural beginning, middle and end point.”

Sports as storytelling may grate with hardcore fans. But it points to the new way in which younger fans are consuming sport. Though they are less likely than older viewers to watch full games, they are more likely to engage with sport in nearly every other way. Young fans watch half an hour less live sport per week than older ones, but spend more time on fantasy sports, sporting podcasts, social media and more (see chart 3). “There’s a general prevailing narrative that Gen Z doesn’t care as much about sport as previous generations,” says Kahlen Macaulay, head of sports partnerships at Snapchat, a youth-centric social platform. “We actually think the opposite is true.”

One difference is a shift in allegiance from teams to individual athletes. Social media have given fans a direct link to stars of all kinds, including in sports (the most followed accounts on Facebook and Instagram belong to Cristiano Ronaldo, a footballer). Social accounts let athletes “showcase who they are with their helmet off”, as the NFL’s Mr Rolapp puts it. As a result, the old saying that the name on the front of the jersey—the team’s—matters more than the name on the back—the player’s—is being reversed. Ampere Analysis finds that 41% of 25- to 34-year-olds are more interested in individual athletes than teams, twice the share among 55- to 64-year-olds. Mr Macaulay dubs this “fluid fandom”: young sports enthusiasts have little team loyalty and follow their idols wherever they go.

This fan-pulling power has given star athletes enormous clout. Lionel Messi negotiated a deal with MLS and Apple which reportedly gives him a share of revenue from subscriptions to Apple’s football-streaming package. (In return he promotes it on his Instagram account, which is second only to that of Mr Ronaldo in followers.) The Los Angeles Lakers recently drafted Bronny James, an unremarkable basketballer whose father LeBron happens to be the Lakers’ most celebrated player. Some fans grumbled but Nike, the sponsor of both father and son, has built an ad campaign around the pair.

The switch of allegiance from teams to individuals also makes it easier for sports to capture new fans. Buzz around Caitlin Clark, a star basketballer, led to a spike in viewership of America’s women’s college basketball final in April, which for the first time had a higher audience than the men’s. ESPN’s new rights deal for college sports values women’s basketball at $65m a year, ten times its previous value. Star power does not always work: Saudi Arabia’s football league has yet to set the world on fire, despite signing Mr Ronaldo. But, given a choice between a player and a team, fans increasingly follow the former. Nielsen, a market-research firm, reported last year that the most popular baseball team in Japan was no longer the Yomiuri Giants but the Los Angeles Angels, following their signing of Ohtani Shohei, a Japanese star (who has since moved to the Dodgers).

Ties to teams have been further weakened by the new streaming deals. American TV and cable helped reinforce loyalty to local teams by making it easier for fans to watch games featuring their local teams than ones from farther afield, which typically involves signing up for an “out of area” package. That makes being a San Francisco Giants fan an expensive business for a New Yorker, say. Centralised deals, such as that of MLS with Apple, make it equally easy to watch any game, freeing fans from geographical ties.

The idea that fans will watch only their home team is also being eroded by the rising popularity of fantasy sports and betting, both of which require players to keep an eye on the whole league. Following a Supreme Court judgment in 2018, betting on sport has been legalised in 38 American states, setting off a betting bonanza. The American Gaming Association found that a quarter of American adults planned to bet on this year’s Super Bowl, wagering $23bn, 44% more than last year. The young are keenest: a quarter of millennials regularly bet on sport, versus 6% of baby boomers, according to Deloitte, a consultancy.

Media firms are piling into gambling to keep young fans interested. Disney, which used to think betting would tarnish its family-friendly brand, last year launched ESPN Bet, a gambling venture, in partnership with Penn Entertainment, a casino operator. The forthcoming ESPN streaming service will make it easy for users to place a bet. Sports leagues like gambling, too: the NFL reports that fans who bet watch longer than the rest. F1, which used to attract few flutters (in part because races’ outcomes are partly dictated by team orders) hopes that short-term, in-race bets may allow more room for gambling.

Media companies and sports organisations alike hope that growing interest in these complementary activities will eventually lead young fans back to the core product, which is where most of the money in sport is still made. “The battle we’re fighting is, there’s a lot of people following sports—not everyone’s watching sports,” says Mr Lazarus. Fantasy games and betting are booming, athletes are bigger stars than ever on social media and sport remains a ubiquitous topic of conversation. Nonetheless, he explains, “It’s harder to get people, especially younger people, to sit down and watch a full match.” If sport is to retain its colossal value, today’s young followers will at some point have to be converted into fans. ■