by mike in boston / @mikeinboston / email

Good morning sports media fans.

This is the final instalment of a series on sports media stories to watch in 2019. Thanks to everyone who weighed in on part one (on the future of Damien Cox) and part two (on podcasting and the future of conventional radio).

Part three focuses on the evolving economics of sports media in Toronto, and to a larger extent in Canada. In this post we will cover where the biggest changes are coming and which segments of the industry are most vulnerable. As always, comments and corrections welcome below.

The Network Wars

Over the past several years we have grown accustomed to duelling press releases by Sportsnet and TSN, with each claiming victory as the #1 something or other. However in each of the past three years Sportsnet has claimed for itself the prestigious title of “most watched specialty network”. The 2017 victory lap was described as follows:

“For the period of January 1 to December 31, 2017, all Sportsnet networks collectively delivered a 5.2 audience share and an average minute audience of 193,000, marking a 29% lead over its closest competitor”

A year later, TSN claimed the title for 2018:

“TSN remains Canada’s most-watched specialty network in 2018, as the average audience of the network’s five national feeds lead those of its closest competitor by +13%”

A naive reader could be forgiven for becoming confused about how TSN “remains” #1 if SN was #1 the previous year. Both press releases cite the same source: Numeris, the industry’s self-created measurement monster. Their process involves taking the ratings for every channel for every week of the year and then dividing that to generate an “average audience”.

When you factor in offsetting programming like highlights shows, desk shows, game reruns, and radio on TV, a lot of the week yields negligible ratings gains over the competition. The real advantage comes from live programming. The higher the number of big games on your network over the year, the better chance of winning the average audience trophy at the end of 52 weeks.

If you do the math on the two press releases you end up with the following averages (note: both networks employ Hollywood math, as explained here, so don’t take these numbers as absolutely factual):

SN: 2017 = 193,000 ; 2018 = 152,000

TSN: 2017 = 150,000 ; 2018 = 172,000

If you zoom out a little it looks like this:

SN: 2015 = 159,000 ; 2016 = 166,000 ; 2017 = 193,000 ; 2018 = 152,000

TSN: 2015 = 141,000 ; 2016 = 144,000 ; 2017 = 150,000 ; 2018 = 172,000

We can certainly debate what these numbers mean, but one thing is now clear: getting the NHL deal has not put Sportsnet in the clear #1 position.

When Scott Moore left Sportsnet in late 2018 he cited the network’s rank as proof that his job was done. If that was the goal, then TSN retaking the #1 spot in 2018 means the $5.2 billion dollar investment has been a failure. This might partly explain Moore’s hasty departure from Sportsnet and the lack of a ready replacement.

What is most striking is that Sportsnet’s time in the #1 chair coincides with the Blue Jays’ playoff run and the resurgence of general interest in the team. All 162 Jays games are on Sportsnet. As we all know, the 2018 Jays were hard to watch.

This suggests that the key to national ratings dominance is not hockey but baseball. It remains to be seen if the Raptors will ever emerge as a national draw. Right now the rest of Canada doesn’t care.

This fits with what we already know about the country’s interest in the NHL. Most people root for their own hockey team but won’t reliably watch another team during the regular season. Regular season games are split between SN and TSN in most markets. There is a significant subset of Canadians who will tune in to root for any Canadian team in the playoffs, but as the HNIC numbers show, these same folks won’t watch in droves if a Canadian team is not playing.

With the Leafs poised to go on a long playoff run in the next few years we will get a peek at how this affects Sportsnet’s national ratings. However the most stable way to win the ratings war for Sportsnet is to have a Jays team that is worth watching. Of note, the current Blue Jays administration has chosen to tank for the next while, eating contract dollars and avoiding free agent spending while waiting for the next generation of talent to emerge. From a business standpoint, this is going to be rough for Sportsnet.

Leaving aside the sports they split, there is an interesting contrast developing at the two networks. TSN has lots of properties that resonate both inside and outside of Toronto: the NFL, international soccer championships, the CFL playoffs, and the World Juniors. The huge ratings from these properties explain how they are able to remain competitive despite not having national hockey rights in a hockey mad country. Over at SN, they have the Jays, MLB playoffs, and the NHL playoffs and national broadcasts.

The main thing to watch in 2019 is how the swing back to TSN as #1 will affect Sportsnet. While we roll our eyes at these meaningless titles, advertisers do not. As we saw when Sportsnet had to hand out give-backs due to poor ratings on HNIC, this had knock-on effects throughout the whole network. Sportsnet Magazine was shuttered and a bunch of people lost their jobs.

With Scott Moore gone it will be very easy for a newcomer to heap blame for the decline on the previous regime, and then make big changes to get the ship back in the right direction. This kind of uncertainty is not good for people. I hope Sportsnet sees the ratings as part of the ebb and flow of fickle audiences but that’s easy for me to say. I don’t answer to shareholders.

The Digital Takeover

The Globe reported this week that cable subscriptions are down 20% over the last 5 years. Rogers and Bell are vulnerable to each cutting of the cord, since this hits them in two different wallets. First, as cable suppliers, and second as content providers who receive a hefty subscriber fee for each person who watches TSN or SN.

Both networks offer standalone (Over The Top) digital subscriptions in the $20-$30 range. Neither network is releasing numbers on how many people have signed up. By contrast Bell is proudly touting that 2.3 million Canadians have signed up for their Crave TV streaming service. This suggests that the TSN Direct numbers are not worth bragging about.

The main question that media watchers are asking is whether digital subscriptions will be sufficient to offset the revenue lost by cord-cutting. According to the Globe, the industry is trying to “manage the decline” at this time, but are not interested in slashing the price of cable. Rather, their proposed solution is to bundle cable and internet to weaken the incentive to cut the cord. If you’re going to pay $75 a month for internet and then add on streaming services you might as well just pay $150 for cable and internet together and get all the content you want, including all the sports.

The problem with this approach is that the content people want is found on streaming services like Netflix, Amazon, etc. As such people are going to be paying for streaming anyway, which will lead most consumers to question why they need cable. The obvious answer is to skate where the puck is going and to bundle internet service and streaming. So if you’re BCE then offer Crave + TSN Direct when you sign up for Bell flavoured internet. Rogers shut down their streaming app Shomi in 2016 and have been investing in Comcast’s X1 technology, which is essentially a cable-based “smart” TV product.

With newspapers we saw that a huge amount of money disappeared in the transition from print to digital. Traditional advertisers were skeptical of the future of the internet and Google and Facebook eventually swooped in and soaked up all the ad revenue. At the same time, readers saw decreasing value in the what papers were offering with so much information being available online.

TV is in a parallel position right now. Their traditional model was to produce programming people wanted to see and sell it both to consumers and to advertisers. Consumers are telling cable companies they are losing interest in the traditional model, and these companies are slowly rolling out digital alternatives. The really interesting question is what happens to advertisers. The most popular streaming services have been ad-free from the start. Would you still pay for Netflix if you had to sit through unstoppable ads? Would you be willing to pay more for an ad-free experience?

To bring this back to sports, so much of the revenue in sports media is driven around commercial television. Think of all the panel shows, the highlights packages, the desk shows, the pre and post game shows, and so on. All of that is funded by commercials. As people move to digital there is the possibility that lots of that revenue will disappear, as it did with the newspapers. We’ve already seen what disappointing ratings did to jobs at Sportsnet after Year 2 of the NHL deal. If it’s true that the industry is prepping for big subscriber losses, what will that do to TSN and SN?

The New Economy

As I wrote about last time, podcasting continues to change people’s consumption habits in exciting ways. The main concern is whether there is a viable business model there. Apparently there is:

What is fascinating about the Ringer model is that podcasts are integrated into the rest of their content. Here’s a good example. If you go to their NBA page today (after the deadline) you’ll find a blend of written, podcast, and video content. Rather than being an afterthought podcasts are on an equal footing to the rest of what they produce.

If you compare this approach with what the networks and papers are doing, the contrast is stark. Sportsnet is pivoting to podcasts to an extent but a deluge of disposable content dominates their website on a daily basis. TSN.ca is a design nightmare, with video and audio clips dominating most of the space. The papers have no podcast strategy despite the Ringer proving that this can be a viable revenue stream.

This puts The Athletic in an interesting position. It is a digital native publication that is now in its third year of offering an ad-free reading experience at a very reasonable price.

Wow! The $NYT added +482,000 net new subs to its news product in FY18 (+22 per cent). Total digital subs up to 3.3 million. I remain steadfastly bullish on the digital subscription thesis! 🚀📈https://t.co/IwdUVtlEQu — Adam Hansmann (@TheAuthletic) February 6, 2019

The big question is whether their business model is sustainable at $12 a month or the bargain price of $72 for the year. According to recent job postings on the site, they are heavily invested in podcasting. But can you make money on podcasts without bundling in ads? Will that break the agreement between the company and its subscribers of an ad-free experience? Or, will they try to spin podcasts off into a separate (premium?) subscription?

The Athletic is moving into the important stage of trying to retain subscribers who were lured in with steep discounts. It will be very interesting to see how their model evolves during the transition. My original subscription was $40CAD for Year 1 and my retention offer for Year 2 was $29CAD. There was no subsequent retention offer for Year 3.

As the company runs out of venture capital cash, they will need to convince subscribers that paying full price is worth it. A robust podcast suite with targeted ads seems like a good way to supplement their subscriber income. There is, of course, the enduring possibility that the low prices at The Athletic are a play to get as many readers as possible before getting absorbed by a content platform like Facebook or Twitter or Yahoo. That would be a pretty big change for subscribers.

This brings me back to the papers. Currently there is no way to pay just for the sports section. The Star and The Globe have beefed up their paywalls lately, with The Sun being the most generous with their free offerings. The Sun is also the cheapest digital subscription, as covered here.

Despite being free or cheap for sports readers, The Sun sports department killed it in 2018. They sent their reporters to all major events, home and away. By contrast, The Star and the Globe had many of their key people writing from the couch throughout the year.

We have debated the merits of spending on travel here quite a bit. If you look at the Sun’s Jays coverage in 2018 then you have a convincing argument that it was a good investment. The duo of Rob Longley and Steve Buffery have been doing a great job on the Jays, breaking several stories that others were not going to touch.

With Richard Griffin leaving The Star for a job with the Jays and Bob Elliott no longer writing about the team there is a huge gap in the marketplace. These were the two most respected voices on the Jays in Canada. It will be interesting to see if The Star follows The Sun’s strategy and re-assign someone with some name-recognition, like Feschuk, or if they simply walk away from that kind of coverage and hope that no one notices.

What they likely won’t do is make a splashy replacement hire. And this is the problem that all papers face when someone leaves or retires. With each departure they become less and less relevant, which in turn makes it harder and harder to motivate people to subscribe.

None of the papers are participating in the new economy in sports media. There are no specialized podcasts, and there is no standalone digital product for sports readers. Will 2019 be the year we see a major reduction in sports coverage by the legacy outlets? I hope not.

Over to you: how do you see the economics of sports media evolving in 2019? How have your own consumption habits changed?

thanks for reading and commenting,

until next time …

mike (not really in boston)

photo credit: Al Bello/Getty Images