Nathanson: Sports Losing its Stickiness

Live sports are expected to continue to drive ratings and viewership in the future, but according to influential media watcher Michael Nathanson, senior research analyst at MoffettNathanson, the category may be losing some of its luster.

In a note to clients Wednesday, Nathanson wrote that live sports continues to be the glue for the entire media ecosystem. “But that glue appears to be getting less sticky,” he added.

Despite record ratings for the NBA Finals and the World Series, ratings pressure abounds, Nathanson wrote. Sluggish viewership for the once-invulnerable National Football League and the Summer Olympics and the glut of poor matchups across all sports have fragmented the market and softened ratings. The emergence of skinny bundles – video packages that often don’t include top sports channels like ESPN and regional sports networks – have added to the pressure. Add to the mix the likelihood of even higher fees for sports rights as leagues test the waters with digital and mobile service providers to attract younger viewers, and the outlook is downright bleak.

RELATED:Sports Aren't 'DVR-Proof:' Survey

Nathanson doesn’t believe all is lost. He pointed to the strength and resilience of sports programming – in 2005, only 14 of the top 100 shows were sports related; by 2015, 93 of the top 100 shows were sports. He pointed to rising ratings for the NFL and other sports in the wake of the presidential election and the fact that sports advertising is still tops – national ad spending for sports has grown from $9.5 billion in 2000 to $15.1 billion in 2015. The closest segment was documentary programming, which rose from $4.7 billion in 2000 to $6.3 billion in 2015.

But the analyst doesn’t see much relief in the future regarding rising sports rights costs, especially as digital and mobile players are expected to get deeper into the mix in the next decade.

That’s when a lot of long term deals roll off -- including NBCUniversal’s deal with the National Hockey League (2020); ESPN’s Monday Night Football deal (2021); ESPN, Fox and Time Warner’s agreement with Major League Baseball (2021); Sunday Football for CBS, Fox and NBC (2022); and DirecTV’s NFL Sunday Ticket (2022).

At the Dec. 8 MoffettNathanson Sports Summit, which featured executives from the leagues, networks and major ad buyers, Amazon was seen as the digital player most likely to bid on sports rights. Most participants believed the digital players would start perhaps with Twitter’s expiring NFL streaming rights, later moving to Thursday Night Football, which ends for CBS and NBC next year.

But Nathanson added that there are barriers to digital players jumping headfirst into the sports fray. Besides the high costs, sports leagues like television’s broader reach and production expertise that helps make programming more compelling.

“In the short run, there might be some digital experimentation to test the readiness of these partners,” Nathanson wrote. “We believe their entry, no matter how small, will cause consternation for investors in 2017.”