Back in the day, a farmer had to decide how much of his wheat harvest to sell, and how much to set aside as seed for next year’s crop. Similar decisions between maximizing long-term revenue and short-term revenue loom large across several leagues.

One of the most challenging aspects of running a successful business is striking a balance between maximizing short-term revenue and long-term revenue. For example, Amazon’s liberal return policy decreases their short-term revenue, but it attracts more shoppers in order to drive higher long-term revenue. There are some trends that indicate that balance may soon come into question for many sports teams

The Streaming Dilemma

American viewers are increasingly shifting to non-linear viewing options, and streamers are looking to sports as a vehicle to attract subscribers to their platforms. The result is a decrease in casual viewing of sporting events as more programming shifts to unconnected paid subscription platforms. Teams and streaming companies are taking advantage of dedicated fans' willingness to cough up additional fees to watch their games. But one result is smaller audiences. Thursday Night Football on Amazon Prime has grown its audience in its first three years of an 11-year NFL deal, but its average TNF audience has yet to reach what it was in its last year on broadcast. In the NBA, a research study by Playfly Sports showed that audiences watched an average of 80 minutes of a streamed game vs 50 minutes of viewing for an average national linear broadcast game. While that sounds good, it signals that the streaming audience is made up of more avid core fans and fewer casual viewers. Teams that are moving more of their games to streaming are essentially trading higher revenue for lower reach. 

A more dramatic example of the trade-off is the MLS. The exclusive streaming deal that started in 2023 with Apple TV is bringing $2.5b into MLS over the 10-year contract. That guaranteed revenue stream is a good foundation for owners. But for a league that is trying to grow, the deal limits their exposure to new potential fans. Neither Apple nor MLS shares their ratings data, but some sources estimate it commands about the same viewership as Pickleball.  Likely, this small audience of people willing to buy an Apple subscription is among its most dedicated hardcore fans. The NFL is the most viewed sport in the US, so it may not be concerned about growing its fan base. But the MLS is still a developing sport in the US, and the Apple paywall makes it harder to engage the broad audience of potential fans they need to convert to grow. 

Take Me Out (A Loan) to the Ball Game

We previously wrote about the rise of the premium seat, but the seat is not the only price that’s been rising to head out to the game. Here’s the estimated cost for a family of four to attend a game, including tickets, concessions, and parking, assuming they buy the cheapest ticket available:

Source: Adam Thompson, Bookies.com

Since 2022, sporting event ticket prices have risen about 35% according to the U.S. Bureau of Labor Statistics. Over that same period, inflation was just over 9%. As a result, teams are increasingly catering to an older, wealthier demographic. Intentionally or unintentionally, several pro sports are narrowing the audience for their in-person game experiences. Attending a game is one of the pivotal moments in converting a person into a fan. But as with streaming, the likelihood of engaging with an unconverted fan is decreased by the higher cost. 

Recognizing and Addressing The Risk

It would seem the Big Four don’t have to worry about the long-term effects of narrowing their televised and in-person audiences. It’s almost unthinkable that people would stop being fans of those major established sports. But it’s worth remembering that in the mid-20th century, boxing was arguably the most popular sport in America. There were several factors in its demise, including the lack of unified management and competition from MMA, but one factor was their shift to pay-per-view, which limited the exposure of the sport outside of its avid fans. The last heavyweight title fight shown on primetime TV was in 1985. Muhammad Ali was once the most recognized athlete in the world. Most people today could not name the current heavyweight champion. Sports that seem to have a lock on our cultural consciousness should look at the example of boxing with some concern. 

The best way to balance the short-term with the long-term is to have a balanced scorecard of financial KPIs that keep an eye on both the immediate and long-term health of the franchise. Good, short-term KPIs include total attendance, total media viewership, and average fan spending per game. Good long-term measures include estimates of a team’s total fan base and a fan’s life-time value (LTV) broken out over multiple fan demographic segments. These are not simple measures to construct and typically require a lot of assumptions. But if they’re calculated consistently, they can reveal trends that speak to both the short-term and long-term trajectory of a team, a league, and a sport.