Much has been said about how the fracturing pay-TV environment has negatively affected regional sports networks (think: declining subscriber counts, carriage disputes, struggles over subscription fees). But there is one segment of the RSN business model that continues to thrive—advertising. Playfly Sports founder and CEO Michael Schreiber said “advertising [revenue] has been increasing in a significant way for these networks… They went from generally 90% affiliate and 10% advertising [a few years ago] to in the range of 70% affiliate and 30% advertising [today]; and the [segment is] continuing to grow. It’s one of the few growth areas in all of local sports right now,” and it is a story that is largely being overlooked.
JWS’ Take: Playfly Sports is college sports’ second-largest multimedia rights business (behind Learfield). “Not only [does the company] run the ad sales, sponsorship sales, TV production, radio [and] media distribution for 30-plus properties across the country. But [it] also sells national advertising using [the Home Team Sports platform],” Schreiber explained.
Playfly acquired Home Team Sports from Fox last spring. The consolidated national platform empowers marketers to buy advertising pods across every local game broadcast within a given league and on a given night (giving them national exposure), in the same way that they would purchase a single 30-second spot on a national network. Schreiber views Home Team Sports as a competitor to single-feed national networks (like ESPN, Turner and Fox Sports) for advertising dollars.
Prior to having the Home Team Sports as an option, brands who sought to advertise at a local level across the country had to buy ad spots on each individual RSN (an inefficient process that prevented marketers from implementing the strategy). But with the ability for an advertiser to easily acquire the same ad inventory across all RSNs, major brands “are pouring more money [than ever] into local,” Schreiber said. In just the last 12 months, spending on the HTS platform is up 12% and “over the last few years,” it is up 35%, he added.
There are a few reasons why spending on the HTS platform is up at a time when all national spends are in a period of low growth. For starters, major brands are reallocating their resources in search of engaged fans. “[There is this] really wild sea change happening from national networks to these [regional] networks and local fans on a national level,” Schreiber explained.
The logic is “if [an advertiser] buys a national network’s Game of the Week, there are really only two markets that care about [the matchup]; everyone else is kind of passive [about the game] and has it on in the background.” But by buying local on a nationwide basis, that same brand can reach more eyeballs than they would with a national network buy and speak to a more invested audience. Not only can the campaign “get up to four times the ratings locally, it can get four times the engagement and then four times the ROI,” Schreiber said.
That explains why 35 of the company’s existing clients have increased their local sports spend within the last six months. “We’re seeing blue-chip brands, whether it is Amazon (+50%), AllState (+460%), Subway (+100%), Under Armour (+1,000%) and Verizon (+30%), all of these folks are increasing their spend significantly within the space because it drives activations in front of those passionate fans, versus someone who is watching a national network and is more of a casual [observer],” Schreiber said.
Brian Castagna (VP, director, strategic investment, MAGNA) says, “The lack of avails caused by national ratings declines, combined with increased demand,” has also been a factor in HTS’ growth. “Home Team Sports can provide live sports GRPs with major scale and is becoming a very viable alternative [to the national networks].”
Schreiber said he is also beginning to see marquee brands move money from other sectors—like entertainment—into local sports. As entertainment content becomes less “appointment viewing” and more people are watching less ad-supported content, “blue-chip advertisers are looking [elsewhere] for these highly engaged audiences,” and they are increasingly going to RSNs to find it.
Castagna confirmed that was the case, pointing out “on M18-49, 97 of the top 100 linear programs in 2020 were live sports and were consumed live over 90% of the time vs. 71% for entertainment. On W18-49, 75 of the 100 programs were live sports. Our clients recognize the value in sports content and [have] redeployed volume from entertainment to live sports programming.”
A significant inflow of new brands have joined the HTS platform in recent months. Schreiber said that since the company’s May upfront, 20 high profile brands, including Facebook, Walmart, Chipotle, Samsung and Disney+, have started buying local sports inventory.
Sports betting is the category responsible for generating the most growth on the HTS platform (+250% YoY). “Every single major sportsbook spends with us, and the category represents some of the largest partnerships for [local advertising] that we’ve ever seen,” Schreiber said.
If RSNs need to offset waning affiliate revenues and advertisers are finding value in delivering their messaging across local sports, it is reasonable to wonder if NBA, NHL and MLB local broadcasts are going to become inundated with commercial spots (even more than they are already). But Schreiber said that won’t be the case. “We’re [actually] decreasing the number of [ad] pods [and] putting noninvasive virtual ads on the field [or court/ice]… so we’re not interrupting the flow of the game,” he said. “We want the games to be faster, not slower.” It’s worth pointing out that the HTS platform spans beyond standard commercial and broadcast options, opening the door to digitally driven assets via DTC platforms.
While advertising is helping RSNs to “fill the hole” left by the fragmented cable environment, and will only become a larger portion of the business moving forward as more advertisers jump in, Schreiber acknowledges the income stream is not—and will not be—enough to completely offset the revenue lost.