Live Sports Could Overwhelm TV’s Ad Game

[Commentary] In the age of the DVR and online streaming, media networks have turned to live sports, which cater to people watching in real time, as a reliable way of getting viewers to watch ads. In turn, the leagues, recognizing the growing power of their content, have negotiated for huge increases in their contracts with networks. They have also added games and carved out more rights to sell. Such moves, though, may now be leading to an oversupply of sports-ad slots -- driving down pricing. Indeed, networks showed 10% more hours of content from major sports leagues in the fourth quarter than they did in the same period a year earlier.

TV ad slots during major live sporting events are likely still more valuable than most. But the risk for networks is that the growth in live-sports hours may be outpacing the growth in demand from typical ad buyers, such as car makers, beer companies, movie studios and wireless providers. Weakness in TV advertising featured prominently in media companies’ third-quarter earnings season, fueling concerns about a permanent shift in spending toward digital platforms. This could make it more difficult for media companies to cover rights fees demanded by the leagues.