Reverse Mergers
The profession of investment banking has become quite innovative over the years. Traditionally, raising capital was an expensive as well as time-consuming process. However, over the past few years, investment banks have devised ways to help their clients raise funds. These ways are neither time consuming nor expensive. A reverse merger is one such innovative […]
Degree of Financial Leverage Ratio
A high debt equity ratio makes the company financed by debt more than by equity. Therefore there are fixed interest payments involved. Hence when the going is good, the company makes a handsome return as a small percentage of change in EBIT creates a large percentage change in earnings per share. However the inverse of […]
Difference between Aggregator and Marketplace Business Models
In the previous articles, we have already studied the aggregator as well as the marketplace business models. These two types of business models have taken the start-up community by storm in recent years. Many start-ups which have become successful and have gone on to become unicorns are using some variants of this model in different […]
Lifecycle of Public Private Partnership (PPP) Projects
In the previous articles, we have undertaken careful consideration of how public-private partnership (PPP) projects work. A lot of details have been provided about the execution stage of PPP projects. However, little is known about how these huge infrastructure projects come into being in the first place. In this article, we will have a closer […]
Issues in Determining Discount Rate for Valuation of Sports Franchises
In the previous article, we have already understood the method used for deriving the discount rate which is used while deriving the valuation of sports franchises. The method was described in detail. However, even though theoretically, there is a method available to derive the discount rate, there are several practical issues that make it difficult […]
Technology all over the world has been advancing at a breakneck speed. Just a few decades earlier, radio was the dominant medium of transmission when it came to sports leagues. Then slowly, the transition from radio to television began.
In the past few years, television has turned out to be the predominant medium of transmission with regard to sports leagues. This is because television is highly interactive and is able to capture the audience’s attention.
However, it is also because television has a very wide reach and it is available in almost all households across the world regardless of whether they are in developed or developing countries.
However, with the proliferation of technology, digital modes of communication such as smart televisions, mobile phones, and tablets have reached a critical mass. This is truer in the field of sports broadcasting since the young male demographic is the key target audience for such leagues. It is a known fact that this demographic is not averse to technological change. In fact, this demographic enthusiastically adopts technological changes.
In this article, we will have a closer look at how the economic value of digital media rights is growing rapidly.
Digital media rights can be viewed as an extension of the broadcasting rights owned by media companies.
Broadcasting rights allow companies to broadcast sports league content via television channels. However digital media rights allow the same company or a different company to broadcast the sports league content via internet-based media such as OTT platforms.
Earlier, digital media rights were sold as an add-on in the broadcasting contract itself. This is because the social media niche was relatively smaller and hence there was not much economic value. However, now this is not the case. Digital media rights are now sold separately by sporting leagues since they have also grown in terms of economic value.
Digital media has been witnessing a steady and upward-rising trend vis-a-vis television broadcasts. In fact, most of the market share which has been gained by digital media has been at the expense of television broadcasts. It is important to note that the tables seem to have turned in certain sports leagues around the world.
For instance, in the Indian Premier League, the digital media rights for the sports league were sold at a higher price as compared to the broadcasting rights! There are many experts who do not think of this situation as being an anomaly at all.
In fact, there is a common belief amongst experts that the size of digital media rights is likely to become 4x of television rights in the next five to ten years! This is because an increasingly large number of audiences have started watching sports leagues on digital applications. The reason behind this shift has been explained below:
As far as mobile applications are concerned, viewers can be at work or even on the move and they can still have access to the sports league content. Most of the young males who form a big chunk of the viewing demographic highly value this mobility. As a result, the economic value of digital marketing rights is increasing exponentially.
Gen Z and millennial viewers value this immersive experience more and as a result the economic value of digital media rights is also increasing rapidly.
The fact of the matter is that the market for broadcasting sports leagues is changing rapidly. Newer technologies are evolving and allowing faster, better quality, and more seamless transmission of content to a wide variety of users on an even wider variety of devices.
This market is likely to grow at a very high rate in the future. Hence, broadcasting companies are bound to face tough competition from digital applications if they are not able to adapt to the changing realities of the marketplace.
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