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Like athletes who defy physical limits, economic gravity seems to elude the sports business.
Not a year goes by – minus the pandemic hiccup, perhaps – that record prices seem to get paid for various athletic assets such as teams, players, sponsorships and TV contracts.
But is the consumer’s appetite for sports entertainment limitless? Is a sports business bubble brewing?
Today, a team’s bottom line really isn’t how many fans attend the games. Rather, it’s the riches created by rapidly shifting TV audiences who can choose to watch on everything from traditional TVs to phones, tablets and desktop computers.
This sports TV smorgasbord, however, may be a case of too much good stuff.
Sporting eyeballs are spread across more events. As many as 40 million Americans are “cord-cutting” – moving from buying TV content in bulk from traditional cable services to a la carte choices through “streaming” services.
That means sports businesses aligned with cable TV are suffering. But streaming services covering far more games are typically unprofitable because they pay big for content – as much as $26 billion for U.S. games in 2023, according to Variety – up 75% from 2015.
Yet in the middle of this spending spree, warning signals emerge.
The viewership turmoil caused Walt Disney Co. to consider spinning off ESPN, its cash-guzzling sports programming giant. And a major provider of televised games over cable TV – Bally Sports – can’t pay its bills.
Bally’s road to this fiscal mess is complicated, but it’s a mix of cable TV’s declining audiences and too much debt. It leaves big questions percolating about the future broadcasts of 47 pro teams, including baseball’s Los Angeles Angels and San Diego Padres, basketball’s Los Angeles Clippers, and hockey’s Anaheim Ducks and Los Angeles Kings.
It’s a harsh reminder that the business of athletics is by no means risk-free. Just like the competitions that are…
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