Can the Worldwide Leader in Sports Survive a Brave New World?

Let’s flashback to 2002. A young Lebron James is preparing to go straight from high school to the pros. Tom Brady just won his first ring with the New England Patriots. The Boston Red Sox are on year 84 of their World Series drought. The Chicago Cubs are on year 94 of their own. And sports fans are starting to wonder why they’re paying for a whole cable bundle when all they really watch is ESPN.

More than 20 years later — after the dawn of streaming, the rise of cable cord-cutting, four Lebron James championships, six more rings for Brady, and two broken World Series curses — the Worldwide Leader in Sports has a message for cable-skeptic sports fans: We hear you loud and clear.

Earlier this month, ESPN finally launched its long-discussed standalone streaming service, making everything on the cable channel (as well as its suite of sister channels) available to sports fans free from big cable bundles for the first time ever, at $29.99 per month.

It’s a critical step into the future for the Disney-owned company, one that could secure the brand’s place in a new media landscape now dominated by Netflix, YouTube and TikTok.

It may also be too late. 

In the years between the dawn of the internet age and last week’s ESPN streamer launch, legions of sports fans (especially millennials who would never deign to pay for cable) have found a new, cheaper way of watching sports: piracy.

Heck, even now-billionaire Lebron James — the quintessential millennial superstar athlete — has been caught using questionable streams to watch NBA games. Which all begs the question: Can the World Wide Leader in sports survive in a Brave New World?

Pigskin Piracy

While it’s difficult to put an exact number on how many viewers tune into illegal streams (they aren’t exactly tracked by Nielsen ratings, after all), there’s enough data to suggest that it’s occurring at a significant scale. Or rather, “industrial scale,” according to a report published in May by media research firm Enders Analysis, which laid the blame for the issue at the hands of big tech companies who fail to keep illegal streaming sites from populating search results and social media feeds.

Meanwhile, a survey of 3,200 NFL fans from anti-piracy firm VFT found that 35% of football fans turn to illegal streams to watch games. The firm also estimates around 17 million fans used illicit streams to watch the 2024 Super Bowl (about 124 million fans tuned in using legal methods, according to Nielsen). 

The head of Britain’s intellectual property crime unit recently told the Financial Times that the number of viewers of illegal streams in the country has “gone through the roof.” Luigi De Siervo, CEO of Italy’s Serie A football (or soccer) league even blamed illegal streaming recently for declining TV revenue.

He’s hardly pointing at a scapegoat. A 2021 study from media research firm Ampere Analysis and anti-piracy firm Synamedia found that sports broadcasters were losing out on as much as $28 billion annually due to illegal streams (compared with around $13 billion for the film and TV industry). This year, Ampere Analysis found that as many as 69% of sports fans in the US and Europe turned to illegal streams.

Moneyball

While we would never condone illegal behavior here at The Daily Upside, we certainly sympathize with sports fans feeling pinched by the rising costs of following their favorite players, teams and leagues. And the rise of illegal streaming is hardly surprising: After all, “free” will always be more appealing than “fee.” And sports are increasingly full of fees.

While pro games began to pivot from primarily free over-the-airwaves broadcasts to cable-exclusive broadcasts decades ago (Sunday Night Football jumped from network TV to ESPN in 1987), the new pivot to streaming has been especially costly.

Consider the NBA. Starting this season, thanks to a new media rights deal that nearly tripled the association’s annual media revenue, hoops fans seeking to watch every nationally televised game will have to pay for ESPN, another $10.99 a month for a Peacock subscription and $14.99 for an Amazon Prime subscription. That’s in addition to figuring out how to watch the local broadcasts of their hometown teams, which can vary from market to market and still require a cable bundle in many cities. Some teams have launched a la carte streaming options, while others have embraced over-the-air broadcasts.

That’s a lot of dough. NFL fans, meanwhile, are tracking the league from Thursday nights on Amazon Prime Video to Monday nights on ESPN, then popping over to streamers Peacock and Netflix for the odd high-profile holiday and playoff game.

In fact, a recent column in The New York Times posited that the cost of being a “hardcore sports fan” has risen 262% in the past 20 years, well outpacing wage growth of around 87%.

In addition to the rising costs, Christopher Etheridge, assistant professor of journalism and mass communications at the University of Kansas, told The Daily Upside that the new landscape has a high potential for “consumer confusion,” which could deter fans from following sports to new streaming destinations.

Getting Double-Teamed

There’s one big reason the sports viewing experience has become so much more expensive: Broadcasting sports has become exponentially pricier at a time when the business of big media is a lot less lucrative than it used to be.

A report from Ampere Analysis released last week found that media spending on sports rights in the US surged 122% over the past decade, outpacing industry revenue growth of 24% during the same period. Overall spending has reached a record high of $30.5 billion this year, according to the report.

Why? 

“In one word: fragmentation,” Chris Marangi, Co-CIO of value at Gabelli Funds, told The Daily Upside. “The destruction of the traditional big TV bundle and the move of eyeballs into streaming services meant that it’s more difficult than ever to aggregate a large audience, and those large aggregated audiences are what’s most often the most valuable to advertisers.”

In other words, sports provide streaming-focused media companies an avenue to loyal subscribers and lucrative ad revenue. 

There’s a scarcity element, too: Failing to secure sports rights can send potential streaming subscribers straight to a competitor. It’s why David Ellison’s first move as the leader of the new-look Paramount was to secure broadcast rights to the UFC. And why Paramount paid a premium, too; its payment of $7.7 billion over seven years is roughly double the fighting circuit’s current contract with ESPN, valued at about $550 million annually.

But experts also told The Daily Upside that acquiring the expensive rights to live sports is increasingly being viewed less as a sure-thing investment and more as a somewhat risky bet, especially as most non-football sports experience notable viewership declines in the US, notwithstanding the audience for illicit streams.

In fact, signs that sports media rights are a bubble ripe for popping are already starting to appear. In February, ESPN cited “fiscal discipline” when it announced it would opt out of the final three years of a seven-year deal it had signed with Major League Baseball in 2021, which saw the broadcaster paying $550 million per season. Earlier this month, CNBC reported that ESPN may soon be back in business with MLB, albeit at a smaller price tag; Yahoo Sports, meanwhile, recently reported that Apple may be exiting its $85 million-per-year deal for Friday Night Baseball, which began in 2022 and was set to run through the 2028 season.

ESPN’s MLB opt-out may be the canary in the coal mine. One person involved in the NBA’s recent rights negotiations with its new media partners who chose to speak anonymously with The Daily Upside said the deal has been the elephant in the room in subsequent sports media rights negotiations. “When you talk to streamers and you talk to people in the industry, they’re still kind of surprised by the amount that [the NBA] was able to get,” the source said of the NBA’s new 11-year, $76 billion deal. “The value is not clear. What’s clear is the audience will be there. But the question is, ‘How are you going to monetize that and who’s extracting the value?’”

Lesson from the Labels

The league’s broadcast partners, including the new-look ESPN, will have a little less competition, at least. Last December, two ultra-popular illegal streaming sites for NBA games, CrackStreams and MethStreams, went dark. While it remains unclear why, the Alliance for Creativity and Entertainment — an anti-piracy coalition of major media companies — claimed earlier that month it had helped to take down domains associated with a major Vietnam-based sports piracy ring, which may have included the two sites. The coalition stated that domains operated by the ring had received 812 million visits in 2024. (Note: Watching illegal streams remains a bit of a legal gray area in the US, though courts have found that hosting illegal streams is clearly a violation of copyright law.)

Perhaps not-so-coincidentally, the NBA saw a major ratings rebound across the course of its regular season. The league had experienced a 17% year-over-year ratings decline from the start of the season in October through mid-December, although a second-half bounce pushed that to just a 2% overall year-over-year decline by the time the regular season ended in April.

For media companies, it’s just one step closer to closing the piracy gap. Next? Getting consumers comfortable with the new streaming landscape.

“People want to make sure they know where they can get their sports predictably and consistently,” Etheridge said. “You’re probably going to see something similar to what you saw in the music industry piracy battles, where what the labels figured out was that they just needed to make it easier [for consumers to connect with their product].”