Major entertainment companies have made some enormous bets on live sports as a guaranteed audience draw in coming years. Just how big? Around $50 billion for some of the biggest companies.
That number—nearly six times what Netflix has committed to pay for content in coming years—is broadly how much ESPN’s majority owner Walt Disney and 21st Century Fox, owner of ESPN rival Fox Sports 1 and the Fox broadcast network, have each promised to pay sports leagues like the National Football League and Major League Baseball to air games over a period that stretches for a decade or more, according to footnotes in their annual financial statements.
These long-term commitments have grown in size in recent years (see chart), as the cost of sports rights has gone up. It’s no secret that sports leagues have been able to charge higher prices for their rights; fragmentation of audiences among entertainment programming has made sports one of the few kinds of programming that continues to draw large live audiences. That’s of great value to advertisers and helps support TV networks demanding higher fees from pay-TV operators.
But what these huge numbers highlight is just how much of a long-term risk the media companies are taking on. For both Fox and Disney, about half of the obligations are due more than five years out—in some cases significantly more than 10 years from now.