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Sky’s the Limit on Sports Rights: Analysts

11/14/2011 12:01 AM Eastern

New York — Must-have television sports rights,
especially on the national level, are going to keep on
rising, whatever the cost to TV distributors’ profit margins,
financial analysts said last week.

Even as economic doldrums have compromised
consumers’ ability to pay their bills, including monthly
video fees, the price for the games and sports some love
to watch continues to spiral upward.

Thus far, media competition for key sports rights is
keeping prices high, despite pressure on TV providers to
keep the rates they charge to consumers in check.

“National television is still the healthiest part of the advertising
economy, and sports is even more healthy,” David
Bank, managing director, Global Media and Internet
Research at RBC Capital Markets, said during a panel session
at Sports Business Journal-Sports Business Daily’s Sports
Media & Technology 2011 conference last Wednesday (Nov. 9).
“You don’t get fired for buying that.”

Craig Moffett, senior vice president and senior analyst, U.S,
Telecommunications, Cable and Satellite Broadcasting, at
Sanford Bernstein, said the situation defi es basic economics.
“The only analogy is the health-care system, where there is no
clear signal between consumers and providers about pricing.
Competition causes prices to rise,” he said. “We’re waiting for
the straw that will break the camel’s back.”

Still, consumers ultimately provide much of the underpinning
for these rights deals with their monthly payments to distributors.
And Moffett said 40% of the U.S. population is in a
negative disposable-income situation, month to month, before
sports or entertainment programming enters into the picture.

The gold standard is still the National Football League. And
Miller Tabak media analyst David Joyce noted it has a higher
benchmark from which to work: ESPN’s new contract that
represents a more than 70% jump over its current pact. From
2014 through 2021, the worldwide leader will spend some $15.2
billion, $1.9 billion annually, versus $1.1 billion on its current
deal that expires after the 2013 campaign.

Joyce called NFL fare “a necessary evil” for programmers,
with rights escalating as a result.

Bank said there’s no doubt sports-rights costs will continue
to surge for some time to come, because enough margin
still remains: “The leagues have room to gouge the networks.
And the programmers have room to gouge the MSOs. I don’t
see any relief.”

Bank pointed to broadcasters gaining retransmissionconsent
and reverse-affiliation revenue as new streams
that will help pay for sports rights.

November

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