Over the past decade, television broadcasters have bet that DVR-proof live sports will remain highly profitable, and shelled out tens of billions of dollars to acquire broadcast rights to the NFL, NBA, MLB, Olympics, World Cup, college football and basketball, and all other sports imaginable. Fox, CBS, and NBC all created sports-only cable channels, and the Longhorn Network, SEC Network, Big 10 Network, and Pac-12 Network were all launched.
To a large degree, paying rights fees is an exercise in extreme speculation. In a recent example, CBS and Turner decided to pay $8.8 billion for March Madness rights that extend through 2032. By that time, the combined effects of cord cutting, a la carte, over-the-top, mobile, and other concepts we can barely conceive of (virtual reality?) will mean that the way television is broadcast, consumed, and paid for will be radically different. Agreeing to pay $1.1 billion annually—a 40 percent increase on what the rights used to cost—18 years out is a tremendously speculative bet on the idea that live sports will continue to generate vast amounts of money.
If you want a data point that argues against that, consider that the two biggest cable sports channels are already, right now, starting to struggle. ESPN has lost seven million subscribers in the past three years, while Fox Sports 1 has lost close to two million. ESPN laid off 300 employees six months ago, and reportedly needs to trim $100 million from its 2016 budget, while Fox Sports is undergoing buyouts and layoffs for the second time in the past year. (Rights fees are largely set for the next decade; production and salary costs are the largest budget items that can be trimmed.)