The cost of distribution rights for every major televised sport in the United States is more than the ad revenue TV channels get from airing those sports, according to Magna's latest Media Sports Report.
Why it matters: We are quickly approaching a tipping point in which traditional TV providers will no longer be able to justify the cost of carrying sports.
Magna analysts say they "don't see the ever-increasing gap between ad revenues and rights fees as sustainable in the long term."
This economics are especially problematic for broadcast networks that carry live sports games, because they don't have access to subscription revenues to subsidize the high cost of programming, like cable networks do. Broadcasters rely on ratings, driven by viewership — which is getting increasingly older and aging out of the coveted 25-54 marketing demographic, as well as retransmission fees (more below).
As a result, more sports distribution rights have migrated to cable networks — think TNT and TBS carrying the NBA and MLB, respectively. But there are problems there, too. Cable channels are losing subscribers to digital streaming options at the fastest rate ever. It's worth noting that both cable and broadcast networks make a substantial amount of money from retransmission fees (charging cable and satellite providers to carry their content), but collectively it's still not enough to completely offset the rate of increases to programming costs.
