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March 18, 2010

Squawking Baseball

Sports TV's Golden Age

by Shawn Hoffman

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 Many of you have probably seen this chart in the past week or so:

That's the water usage in Edmonton during the USA vs. Canada gold medal hockey game, which had approximately 80 percent of Canada watching it on TV. No surprise there; hockey equals life in Canada.

But how many of you saw this chart:

That's the number of status updates on Facebook— not just in Canada or the US, but among all of Facebook's 400 million or so users around the world during the game. In other words, it wasn't just Canadians watching; it was being watched by millions and millions of people worldwide.

This is actually part of a larger trend: all of a sudden, ratings for major sports events have skyrocketed in the past year or so.

Mark Cuban pointed this out in October: "Just this week: The NBA on TNT had its highest ratings in TWENTY-SIX YEARS. Versus had its highest rated regular-season NHL game EVER. The first game of the World Series was the highest rated in five years. The NFL was setting records on cable and achieving viewing levels not seen in TWENTY YEARS! College Football ratings are killing it as well."

That has continued­—and even strengthened—since then. The Super Bowl was the most-watched show in US history, and had its highest rating in 14 years. The NFC Championship game had more viewers than any non-Super Bowl American television program since the Seinfeld finale. And of course, the gold-medal hockey game was the most-watched hockey game since the Miracle On Ice game 30 years ago.

Needless to say, this is great news for MLB and its 30 teams. Although the league's national rights contracts don't expire until 2013, individual teams have local rights contracts coming up all the time. Plus, for the growing list of teams that own their own regional sports networks, it should mean more advertising dollars right away. It's almost impossible to get local ratings numbers for all of the RSNs, so it's hard to say how much an increase there will actually be. But it's extremely likely, given the trends we've seen nationally, that far more people are watching games on the local level as well.

There are plenty of theories as to why this is happening. The most obvious is the economy­—people have less money, so they're not going out as much, and instead spend more time watching TV. There's also the thought that these games have simply been extraordinarily compelling, but that doesn't come close to explaining why ratings are up across the board, reversing a trend that has been going on since cable originally started fragmenting the audience 30 years ago. (We certainly haven't become less fragmented in the last year.)

So what's going on here? I think there are two major forces at play: one is social media, and the other is what I would call the natural selection of television programming.

I'll explain the latter in a bit. We'll start with social media, which is a pretty easy concept to understand. Here's how Cuban broke it down, in that same blog post:

 Every type of content has some quotient of participation value... At the top of the scale are games/shows/movies/events that potential viewers have predicted to have high participation value. These are events that we look forward to not only watching or attending, but that we plan in advance how we are going to extend our participation...

The role of the internet for high participation games/shows/events is not to show them, it's to enable the participation. The explosion of Social Networking and social networking enabled games and applications have strengthened this as the internet’s role. It's improving TV ratings of shows with high participation value.

 If you were on Twitter or Facebook during the gold-medal hockey game, you know exactly what he's talking about. I'd say 90-plus percent of the tweets or updates I saw for about an hour or two were about the game, and that chart above confirms that it wasn't just because I have a sports-heavy group of friends and followees. Think about how powerful a force that is, which didn't exist just until just a couple of years ago. If you weren't watching the game, you felt like you were missing something (and for the record, you were). How incredible a marketing channel is that?

 I have no doubt that this is playing a huge role in increasing ratings, particularly for big events. But it doesn't quite explain why smaller games are getting better ratings, too. For that, I'll turn to my "natural selection" theory, which I explained on my blog during the fall:

 People are time-shifting a much higher percentage of their TV watching. DVR, Hulu, torrents, iTunes—there are so many alternative ways to watch scripted television that there’s no point in basing your schedule around your favorite shows.

Except sports, of course, which will always be time-sensitive. So all of a sudden, sporting events are the only shows that people need to base their schedules around. Time shifting other shows has lifted some of that burden—if before you were going to choose between going out Thursday and missing the Office or going out Saturday and missing the football game, you’re now always going to choose the game, since you can watch the Office whenever you want.

I've been on the sports media bandwagon for years now for this exact reason, so I'm not surprised to see it actually happening. Sports are, for the most part, DVR-proof— because they are so time-sensitive, most people will always watch sports live and with commercials, just as they always have. This is a major boon for the leagues, which I'd say are in the strongest position of any major content creators in the world right now.

As much as advertising is becoming more and more fragmented, it should remain a viable model for sports programming until the end of time— something you can't say about cable subscription fees, which are already getting their lunch eaten by pirated streaming sites. Social media should only make this trend that much stronger. If you could bet on sports television contracts as futures, I'd be going very long right now.

Shawn Hoffman is an author of Baseball Prospectus. 
Click here to see Shawn's other articles. You can contact Shawn by clicking here

23 comments have been left for this article.

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