bryanw1995
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RE: Are we headed for a college sports media rights bubble?
(02-24-2024 09:40 AM)Frank the Tank Wrote: (02-24-2024 03:32 AM)C2__ Wrote: And if so when or will it pop?
Fact is, birth rates have been trending downward and this is going come to a head for colleges as soon as about 5 years (give or take) from now because of the lack of domestic births during the Great Recession. These people in the college aged pool are being replaced by immigrants, who can be better students than traditional American students in many cases but don't always have the same skillset or mastery of English as a traditional student, let alone the same interests (including sports). Less or a flat lining population growth rate means, at the very least, colleges likely won't grow. So future subsidy will likely be less, even if it stays the same, because of inflation.
And a higher proportion of non-traditional American students will mean fewer major college sports fans, especially for football. Football participation is already struggling in some parts of the country due to safety concerns, meaning more parents are steering their children away from it and that means, by proportion of programs playing football (which is always growing) there are a smaller pool of players. So the foreign/new American interest will be minimal and the domestic interest could be much smaller in a generation or two. Basketball should be able to suffer less of a fate due to it's global/more universal appeal but it is decidedly less popular in the US ATM.
And if we will have a higher amount of non-traditional Americans, first generation Americans and immigrants as well as a declining traditional American population and declining interest in football, it means days of American football being so popular (by percentage at least) is numbered and if so, these big conferences can't keep expecting explosive growth in TV contracts.
In fact, based on the decline of cable and satellite TV in raw subscription numbers (let alone the percentage) and the ever increasing age and inevitable mortality of Boomers and Gen. Xers and their viewing habits compared to younger people, it's obvious that there's a bubble for the unsustainable rights fees growth for the even most in demand schools. Sure, they'll make money from some of the last holdouts who prefer cable like me and some streamers, who will buy subscriptions to follow at least their own team. But fewer people and fewer people are continuing to watch cable/satellite and while many are streaming more than ever, they won't stream everything for the most part and are unlikely to go chasing a random game, even some involving P4 teams. So there will be less money coming in for everyone, including the P4/2. We'll see what becomes of this joint venture by Fox, Disney and Discovery being challenged by Fubo and if it is a savior for the status quo.
The NFL will be fine, they seem to be able to weather the trends better, although we should expect their general increases to decline some based on the same factors I laid out. But college football? Perhaps only the top 20 or so programs will be able to sustain the constant growth we've seen for decades, even at increasingly reduced levels. But if the seemingly inevitable split is too small and not inclusive enough, it could backfire and kill as much interest as concentrating the best brands brings. I know I won't watch it if Houston is not invited. And did I even mention basketball and other sports much? I'll save it for another post or thread, as this post is long enough.
This TV money is a bigger problem for the P4 (and P2 whose attitude is the money will keep going up, so they leverage their wealth and status to shape the future of college athletics) and less so for the G5 and to an even lesser extent to FCS and below because they aren't so reliant on TV money. But if there are fewer traditional students and if this whole thing about student-athletes becoming employees becomes de jure/statute, then they are in trouble and most AD's will collapse unless the NCAA reduces the number of required sports necessary to compete in D-I and some sports simply return to club sports status. And even that may not be enough to save them, so everyone, even the G5 and below, will have some serious soul searching to do. Few will search for their games and perhaps there will be no more having a captive audience waiting for SportsCenter to come on, meaning even fewer potential viewers.
I think a bubble is bound to pop, if not an outright crash with even the most elite programs shuttering or becoming an eggshell of themselves.
Here’s the thing: is it actually a bubble when sports rights have grown unimpeded since 1980? We have had a version of this story virtually every couple of years: when the Yankees signed a huge rights deal with MSG and Fox way outbid everyone for the NFL in the 1990s, when RSNs and conference networks rose and ESPN was at its household peak in the 2000s, and even people were legitimately questioning whether the Big Ten was making a mistake in taking a short-term TV deal in the mid-2010s as opposed to locking themselves down for the next 15 years like the SEC and ACC. (Seriously - was a common strain that the ACC signed a smarter TV deal than the Big Ten because “Of course the sports rights bubble will pop by 2020!”) All of those “bubble pop” predictions have been proven wrong.
You could argue that sports rights are more like the stock market: there might be hot periods and cold periods, but the overall trajectory is growth over a long period of time.
Now, the important thing about the stock market is that the gains aren’t evenly distributed. We see that in the current rise in the stock market that is largely driven by the “Magnificent Seven” growth stocks at the top - if you look at the value stock and small cap stock categories, they have lagged.
So, the risk isn’t to the P2 at all. The Big Ten and SEC are straight up the most watched sports entities in American sports besides the NFL. They aren’t the ones at risk. It’s the middle class or even upper middle class - like we just saw with Pac-12 - that is most at risk. Mega-stars are still getting paid and that’s true in every facet of the entertainment industry - music (see Taylor Swift), movies (where the studios have a “blockbuster or bust” strategy) and TV (see the top Netflix producer deals).
Now, I fully grant that the tier below that top level is getting squeezed, and the bottom level is just getting paid commodity-level prices. So, it would be fair to say that the gains of the NFL and P2 for rights fees doesn’t mean that the tiers below them will get any gains, just as the gains for Taylor Swift and Shonda Rhimes do nothing for the musicians and entertainment producers below them. That is a real issue in the economy overall where the gains are increasingly concentrated at the top while the middle gets squeezed. That is less of a sports rights issue and more of an across-the-board global economic issue.
As for enrollment trends, while it’s true that the overall college-aged population is heading toward a cliff, anyone that has dealt with college admissions for the past 5 years knows that the same superstar dichotomy that I described above has hit academia. The brand name schools are getting more applications and having higher demand than EVER. This includes most major flagship schools, which directly overlap with the P4 membership. So, the P4 schools are NOT the ones facing enrollment issues. They’re the ones actually benefiting the most (along with elite schools like the Ivies) from a “flight to quality” in the college enrollment space. All of those Big Ten and SEC schools that might have been looked at as backup schools for top students in the past no longer have enrollment standards that are anywhere close to backup metrics anymore.
(If you want to understand the bloodbath on how hard it is to get into a brand name school right now - and I’m talking “brand names” like Wisconsin, Maryland and Texas A&M, much less the Ivies - take a look at the Applying to College Reddit page. Anyone that attended a P4 school on this forum should thank their lucky stars that they’re not applying to their schools today because most of us probably wouldn’t have stand a chance to get in now. Most of the P4 schools could lose half of the applications that they receive now and still be more selective than they were 10 years ago.)
I feel like I should just bookmark this post and link to it when people say "but, but, the bubble will pop soon and then we're all doooooooomeedd!!". Live sports are fundamentally more valuable today than ever before, and it's reasonable that they'll continue to appreciate as a whole in a market in which basically every other show on TV is just as easy to watch on your Tivo as it is live, and often better that way. Live sports is a destination event. Not just the Super Bowl, but the NBA finals/playoffs, MLB playoffs, major college football games between titans of the game, world cup soccer, Champions League, the NCAAT, etc etc etc. All of it is destination TV, everybody wants to watch it live and that makes it enormously more valuable than every other type of program as a means to drive revenue for any broadcaster, whether they're OTA, online, or on the moon.
The only way that sports revenues dwindle is when/if people stop caring about them. That could happen tomorrow, or next year, or next century, but what's more likely to happen is more like what has happened to malls. They quit growing and expanding, but just as many people, perhaps a bit more than ever, still go to them. But as a % of the overall market they're not as large. So, perhaps sports revenues start to level off in the long term, but their fundamental support is solid across sports and across regions the world over, and they're highly unlikely to just fall off a cliff one day. Could we see some leveling off due to ESPN no longer spending stupid amounts of money on content that nobody else wants, or nobody else wants very much? Sure, that could happen, and it probably will, but it won't impact the long term trend of increasing value in media rights.
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