The revenue that is spent on sporting events is going to skyrocket as compared to the rest of the entertainment industry.
This is bad news for Hollywood.
As stated over numerous articles over the last year, there are many trends in play that are going to affect Hollywood studios. Generative AI is going to be the next disruption which will have a profound impact. While it will help the movie studios, it could also create a great deal more competition.
The fragmentation of entertainment is going to be even more devastating than the breakup of the monopoly on distribution these entities had.
There is a winner in all this and it is live sports. The contracts these leagues are going to receive are only going to accelerate. The recent negotiations for the NBA rights are going up even though the ratings are falling.
Why is this?
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Sports Will Reign Supreme
The disruption that is taking place is going to make sports the king. There are a number of reasons for this.
Unlike Hollywood which is suffering a hit, sports are seeing their numbers remain strong. This is also the same for the CPM. This means monetization is outpacing the rest of the industry.
One of the reasons why networks are going to continue throwing big money at the leagues is because it is closest thing to a sure bet they have.
The leagues are also going to benefit from the newer entrants into the business. Netflix and Amazon are starting to get rights to some games. These entities monetize in different ways, especially with them embracing the advertising models. This will provide additional revenue which can be directed towards the bidding of these contracts.
Hence, the players are changing but the cash flow is still the same.
A final twist is the fact that generative AI is going to drop the cost of entertainment productions. This means that, for entities such as Amazon, which also produce films and shows, they will free up resources that can also used for sports.
To give an idea of how much this is, the amount of money spent on entertainment content was 4x that of sports.
If the same productions can be created for significantly less money, the is billions available.
Protection From Fragmentation
Sports offers something unique in the sense that leagues cannot become fragmented. While there is the ability to form more leagues, they cannot replicate the original.
For example, the NFL could see other leagues created, as was done in the past. However, no matter what is done, it is not the NFL. This is true for all leagues. Naturally, some have more value than others.
This means the games are essentially exclusive to those networks that get the rights. It has a built-in barrier that cannot be breached.
The same is not true with other forms of entertainment. We already say YouTube disrupt television and films. In fact, with it comes to television, the dilution occurred with other channels pulling from the traditional networks.
It is a process that is not going to play out with sports.
The attention economy is about eyeballs. Anything that is protected against fragmentation stands a chance of retaining its value.
Thus, while some leagues might lose viewers, the money is still going to flow. Compared to some of the other entertainment products on the market, there is a lot less risk associated with live events.