Common Issues with Revenue Generated from Broadcasting Right

In the previous article, we have already seen that broadcasting rights and the revenue from the sale of these broadcasting rights have become a very important part of the overall revenue generated by sports leagues all over the world.

It would not be far-fetched to say that the economic fundamentals of sports leagues would be severely jeopardized if the revenue generated by selling broadcasting rights is not taken into account. However, that does not mean that there are no issues with broadcasting rights. Just like every other issue, it is important for the students to understand the pros and cons of broadcasting rights.

In this article, we will have a closer look at some of the common issues raised while criticizing the revenue generated from broadcasting rights.

1. Reduced Attendance: An important criticism of the broadcasting revenue is the fact that it is generated by encouraging viewers to watch the sporting event from their home or another indoor environment. This has a direct and negative impact on the number of fans who actually visit the stadium in order to watch the match.

   The increase in broadcasting revenue has a direct correlation with the fall in local attendance.

   Many sports franchises have been compelled to drastically reduce their ticket prices in order to encourage more people to visit the stadiums and watch the match. This can be detrimental to franchises because they generally receive a smaller share of the overall broadcast revenue but receive a larger share of the ticket sales.

   Also, the money derived from the sale of tickets is used to pay for the construction of stadiums. Hence, a fall in ticket revenue has a negative impact on the construction of new venues and on the upkeep of existing venues.

2. Overexposure: It is important to note that the success of any sport depends upon the loyalty of its fan base. Hence, even though there is no short-term impact if the fans of a particular sport become less enthusiastic, in the long run, it can virtually destroy the entire sporting league. There are many critics who claim that broadcasting is doing this exact same thing.

   Broadcasting allows fans to tune in to different sports events from around the world. As a result, they have access to games across the entire year and at all times of the day. The end result is that there is no novelty factor for most sports leagues.

   Viewers are aware that even if they do miss a particular sports event, they can watch another one in almost no time. As a result, fans have started becoming less loyal due to overexposure. Critics are of the opinion that the supply of sports events should be restricted so that viewers do not end up losing interest in the long run.

3. Government Vs Private Broadcasters: The switch from government-funded broadcasters to private broadcasters has happened in the recent past. This has been the cause of disharmony against broadcasters in many parts of the world.

   Many viewers from the past generation have alleged that private companies are trying to interfere with the government’s activities. According to them, it is the right of the common man to be able to view sporting events pertaining to their city or their nation. Hence, in such cases, governments allow the government entity to continue streaming the event for free. However, at the same time, private broadcasters which are more easily accessible are also in charge of broadcasting the event.

   The quality of the broadcast being done by private players is quite high. Private broadcasters differentiate themselves by providing better picture quality and commentary.

4. Attempts to Monopolize the Viewership: It is important to note that in many parts of the world, a single corporate group tries to buy the broadcasting rights of various sporting events of a particular game. This has been flagged as being problematic by several stakeholders since it allows the entity buying rights to have a monopoly-like control over sporting events. It is for this reason that many leagues have rules which explicitly prohibit such monopolistic sales.

   The idea is to ensure that the broadcaster should not be able to gain excessive leverage over other stakeholders in the sporting ecosystem.

5. Excessive Fragmentation: The opposite end of monopolization is excessive fragmentation. That has also become a problem when it comes to broadcasting sporting events. Many times different companies are sold the rights to broadcast the sporting event using different mediums.

   For example, one broadcaster might be given the right to broadcast the event on television while another may have the right to broadcast on pay-per-view OTT whereas a third one may have the right to broadcast the event via web streaming. This can lead to an inconsistent experience for sports enthusiasts. It is important for the broadcasting to not be too fragmented or too concentrated.

6. Revenue Sharing: Last but not least, broadcasting revenue provides a lion’s share of the inflows to the league. However, there are multiple systems that are used to apportion this revenue between the franchisor and the franchises.

   To date, the different systems of revenue sharing are a bone of contention amongst different stakeholders. In the next article, we will try to obtain a deeper understanding of the issue.

The fact of the matter is that there are many cons to generating revenue via broadcasting rights as well. However, it is obvious that the pros outweigh the cons. This is the reason that sports leagues across the world are using broadcasting revenue to generate income.