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Ad Revenue for the Big Game

A 30-second ad during Super Bowl 50 is selling for about $5 million. That’s an 11% increase over last year’s $4.5 million figure. With fewer events able to deliver huge audiences, advertisers are willing to pay up for the live, must-see events that do. It may be money well spent, as about 114 million people watched 2015’s big game, making it the most-watched broadcast in U.S. television history.

Sports and TV: A Moneymaking Dream Team

The NFL playoffs are the most profitable postseason sporting events in the country. “March Madness,” the NCAA Men’s Basketball Tournament, is a close second, with a 30-second ad during the championship game costing about $1.5 million. Beyond the postseason, sports programming in 2014-15 generated $8.47 billion in sales for ABC, CBS, NBC and Fox, accounting for 37% of their overall ad revenue for the period. That’s a 35% increase from five years ago, when sports contributed $6.27 billion to the networks’ ad sales.


What Stands Between Viewers and Cord Cutting? Sports

The popularity of Netflix, Hulu, YouTube and other services that stream content over the Internet has raised a number of questions about the viability of traditional TV. But, for now, a virtual monopoly on live sports is helping keep TV broadcasters in the game, largely because of the cost of acquiring the rights to games. ESPN, for example, recently paid $4.5 billion for the rights to broadcast games. That’s about as much revenue as Netflix generated in 2014.

“There are certain kinds of programming that are naturally watched live. Sports is the biggest example, by far. Companies spend billions for the rights to broadcast sports, and for Netflix, going out and buying rights is not realistic right now.”

Brad Barrett, Investment Analyst
 

Some traditional television broadcasters remain well positioned to benefit from ad spending, while companies that stream content over the Internet are prospering by redefining the way people watch TV. In an industry being transformed by innovation and new technology, research and active management are crucial for investors seeking to determine which companies will be disrupted, and those that have the potential to reap new profits.

Sources: Statista Inc. (Super Bowl ad spend for 2006 through 2014, TV ad revenue and Netflix annual revenue); Comcast Corporation (Super Bowl ad spend for 2015); and “The Moves That Forced ESPN’s Cuts,” SportsBusiness Journal, October 26, 2015 (ESPN sports rights fees). Data cited for network sports programming revenue are based on Kantar Media estimates as published in “Sports Now Accounts for 37% of Broadcast TV Ad Spending,” Advertising Age, September 10, 2015. ESPN sports rights fees include the following payments for these properties: $1.9 billion for NFL (National Football League), $575 million for NBA (National Basketball Association), $700 million for MLB (Major League Baseball), $608.3 million for College Football Playoff, $300 million for SEC (Southeastern Conference), $240 million for ACC (Atlantic Coast Conference), $80 million for Rose Bowl and $75 million for MLS (Major League Soccer). The deals for College Football Playoff, Rose Bowl and MLS were for the January 2015 games. Additional deals since 2013 and those that will take effect in 2016 were not included in the total of the ESPN sports rights fees shown; if included, the total amount would be higher.