Introduction: The Great Content Glut
Media rights represent an important revenue source for global premium sports leagues, including the “Big Four” in North America (NFL, NBA, MLB, NHL). Media rights deals are typically contracted over multiple years, with annual escalators, and represent a durable driver for franchise valuations. As a firm dedicated to investing in the Big Four and other premium sports, we have spent considerable time and resources on the data and models necessary to understand and forecast media rights values.
We believe three key shifts in the U.S. media marketplace are driving growth in premium sports media rights:
First, the market is digesting the reality of content proliferation, competition and commoditization. Put simply, there is too much video content chasing the same number of eyeballs across the same 24-hour day. Second, a new cohort of streaming-first, diversified tech platforms have emerged as real competitors for sports rights. These businesses are more than just media companies and can amortize rights costs across a broader set of commercial goals. Third, AI is an accelerant: it will make it even easier to create undifferentiated, copiable content at scale, which will worsen the “content glut” and raise the value of anything truly differentiated, authentic and uncopiable.
As a result, traditional media companies face a dilemma. How do media companies protect our subscriber base and advertising business in the face of increasing commoditization and formidable new competitors?
How We Got Here
Media companies, both legacy media companies and Big Tech, generate direct revenues from content via subscriptions and advertising – Subscriber Value (SV) and Advertiser Value (AV). Sports media rights packages represent some amount of future SV and AV that leagues and teams sell to media companies in exchange for fixed, contracted revenue – providing certainty and visibility to franchises in exchange for reliable, often exclusive access to must-have content for networks and streamers. That basic set up is in large part not changing, but the number and kind of partners interested in buying rights packages is.
Just over a decade ago, the media business was highly concentrated and consolidated. There was, in fact, only one television product that most households bought: the cable / linear TV bundle. There were only five, scaled, active bidders on sports rights, and even worse for leagues, losing a rights package was less consequential: no one unsubscribed from the bundle because ESPN/ABC lost NASCAR rights in 2014; they just changed the channel. Margins at media networks were ~40%+ – extremely high by any industry standard.
EXHIBIT 1: Video Landscape In the U.S. Is Highly Fragmented
