Despite the protestations of ESPN partners, the professional sports bubble is in some jeopardy, and the football bubble is wobbling like sheet of Palmolive on a stiffening breeze. You can see it in the editorial choices made by the world wide leader. What is the lead story this week? NBA free agency. Huh? In the sports market of the past, this was a quiet week for the association, after all NFL training camps are opening. Ten years ago, the NFL combine could overwhelm news from the NBA, NHL, and even the opening of Major League Baseball. Now, NBA drama is drowning out the start of football season. ESPN is offering screen real estate to basketball, baseball, tennis, and soccer…football not as much.
There are many important points to discuss, in this post I am going to stick to the media industries stuff, which is not to say that there are not a lot of other points to make.
This is consistent with the trajectory of the league
Ratings were down last season. Industry explanations included the Presidential election cycle, the economy as a whole, and even baseball. Despite optimism during the later phases of the season, total viewership was down 8%. The league seems willing to talk about this story. Again, huh? This avoids talking about the bigger story: this wasn’t a single cloud on an otherwise sunny day. Ratings were down in 2015 as well. NFL live (a football talk show) ratings were down 13% that year, ESPN as a whole was down 10%. For that season, the NFL was down 3%. Oh, well that must have been the start of it. False. 2014 was a bad year too. Times were pretty good in 2013, the peak of the NFL.
Football writers assert, with little meaningful evidence, the game is more popular than ever. Wildly optimistic predictions are the norm. When things were bad last year, even a slight blip that the bleeding had stopped was taken as evidence that things were better than ever. In terms of total ad spend, non-sports media executives are willing to sign-on to the idea that the NFL will recover and ratings will get back to 2013 levels, at least as long as their networks have connections to sports.
Advertisers have taken notice: the NFL has had difficulty selling inventory during the upfronts. Movies, cars, and drugs have all fallen off on a sector wide basis. They will likely wait to buy inventory when it suits them during the season. Traditional expectations of clearing ninety percent of inventory before the season starts are out the window. For those of you not familiar with media buying, the vast majority of ad inventory is sold far in advance during the “upfronts.” 90% of advertising was sold in one two-week window. Strategically, you don’t want to sell all of your inventory upfront, but you definitely don’t want to end up with your upfront allocated inventory unsold. Upfront sales have an important role in debt service and other business matters.
Some of this drop-off is the result of the league being less than transparent about advertising products. Hyundai spent quite a bit of money to become the official car of the NFL, only for the league to then offer an official truck sponsorship the next year (overlapping with the Hyundai contract). With trucks being bigger, better, and dearer than cars for the NFL audience this would seem like a betrayal. Expensive sponsorship products are some of the weakest products in the market today. In stadium advertising is a considerably better investment.
There are still plenty of folks looking to buy advertising, but the league will increasingly depend on scatter markets throughout the season.
Viagra for everyone
If you were not previously aware, a drug known as Viagra treats erectile dysfunction. ED treatment firms have purchased vast inventories of advertising over the years. The problem: Viagra is going off-patent. Drugs with generic versions are not supported with adverting campaigns. These ads fit with the affect of the football program: often featuring an older man with a much younger woman as a fantasy qua joke. Of course, drug ads will continue. But for which drugs?
Opvido, Keytruda, another advanced cancer drug. If you watch Wheel of Fortune, you know about this drug and the long form commercials offering extended life with stage four lung cancer. Costly immune modulators are among the leading drug products seeing advertising as they could literally spend a lifetime of health insurance pay-ins in a matter of months. These are fascinating, effective, expensive drugs. At these levels, national advertising is very much a possibility. Viagra was targeting a wide swath of men looking for a low cost pill. These other drugs target a narrow band of customers looking to spend a fortune. Surely folks watching the game will google the drug and see the price. Health care debates will follow.
Even if folks don’t get into arguments about health care, the advertisements for these advanced drugs have very different aesthetics. These are not whimsical double entendre peddling spots, these are long, serious, stories. Raymond Williams’ idea of flow reminds us that the commercials are articulated into the program itself. Imagine the moments after an injury, already a difficult time for a football viewer. Instead of levity, the league now brings you a discussion of immanent death.
Hoping these prescription companies over-bid is the silver lining of the NFL ad season in 2017.
This week the Journal of the American Medical Association published what many are taking as dispositive evidence of the link between football and CTE. ESPN went ahead and didn’t cover the story as a headline on the website. The Kyrie-Lebron drama was just too much. Players are retiring early to protect their brains.
Huge salary figures are a parlor trick, they can be cancelled at any point. Unless one is a major star, much of the money on any given contract is not guaranteed. Among the professional sports, the terms of these agreements are the worst for the players. NFL careers are short, at a number of positions young, fast players are valued over players with some experience. Instead of allowing these young men to reach their maximum pay, they are required to sign contracts on a wage scale that suppresses their value.
While this provides some immediate profit for the owners, the average player will become invisible. Just another man in a helmet. The faces of the league are old and white, young passionate players are seen as a burden, rather than an asset. The league is doing it’s best to be sure that there are no replacements. In 2014 the average team was a just about five million under the cap, with several over. In 2017, the average team is eighteen million under as roster formation is reaching an end, and no team should break the cap. The owners are saving more each year. If you read these practices as evidence of the owners evaluation of the future of the league, the teams are already preparing for a future with less revenue.
Brain damage is breaking the NFL.
*All data in this paragraph derived from Sportrac.
The future of the sports economy
Just as the NFL is falling on hard times, the NBA is starting the season earlier, and baseball is doing well. NBA careers are trending such that an old player is now 38 (there is an NBA contract provision for older players to prevent salary cap circumvention), in the NFL old will soon be 28. The audiences available for advertisers during NFL games are still large, but increasingly they are seen as a one-off buy in a scatter market.
The trend lines for the NFL are decidedly negative. The fundamentals have been eroding for years. In 2013, the NFL owners believed that they could grow the league 300% in thirteen years. This growth would come through increasing television ratings, gambling operations, and leveraging the fortress of their brand. The risks? Player safety, other than that, major cultural change. 2017 is not the worst case scenario, but it is definitely not positive. The only real response on player safety at this point is the argument that folks who played football in the 1950s seem to be alright. For an ascendant brand, this might help. The NFL does not have the luxury of this sort of protection.
The first response to the challenge has been to reshape commercial breaks during games, fewer total breaks with all slightly longer. As brands perceive that decreasing NFL spend allows them more flexibility, the movement of advertisers away from the game will accelerate. Given the intrinsic problem of brain injuries, it is unclear if there is any level of brand strategy that can restore the game.
More generally, ESPN has also peaked, a topic for another post.
As I was editing this, ESPN finally put a concussion related story on the main page reporting that the NFL and NIH had ended their research partnership. Why? The NFL couldn’t abide by independent brain research. The lead stories this morning are basketball and baseball.
(I have done some copyediting post-publication).