NBC and the $250 Million Gamble

On Tuesday, August 20th, Slate's superlative sport's podcast "Hang Up & Listen" did a segment on NBC's coverage of the Premier League. It's rare that they cover soccer -- unless the Men's or Women's National Teams are doing something interesting -- and so rather than talk about the upcoming season they chose to focus on NBC and their coverage.

Around the 25 minute mark Mike Pesca remarked, "so the last contract, Fox was paying $80 Million for three years, and now NBC is paying $250 Million for three years, or about $80 Million a year. Is it worth it? ...I don't know, as an outsider, if soccer suddenly became three times more valuable...in the United States." 

Pesca went on, however, to say that he thinks it was a smart move, that NBC is targeting a niche audience that will turn to NBC for coverage of what is, ultimately, the most valuable brand in all of world sport. 

But there's something specious about that argument. After all, FoxSoccer was targeting the same audience, and yet NBC was still willing to bid three times the amount that FOX bid for rights to the next three years of the Premier League. 

Thanks FoxSoccer2Go (Left) and NBCSports (right)  

Thanks FoxSoccer2Go (Left) and NBCSports (right)  

Not only that, but while FoxSoccer shows games online at FoxSoccer2go.com, and NBC has NBCSportsExtra, Fox charges $169.99 for the year AND blocks out all games being shown on television. Meanwhile, at least for the time being, NBC is streaming all their games (including televised matches) for no extra fee.

In other words, not only is NBC paying more than FOX but they're also losing what must be a significant revenue stream online. 

I believe Mike Pesca was wrong, NBC isn't targeting a niche audience. They are targeting the audience that will be. 

In 2008 average attendance at MLS games was 16,310. In 2009 it was 16,037. In 2010 it was 16,675 (Source: Soccer America), and in 2012 it was 18,807 (source: Wikipedia). That's an 11% increase in attendance.

During the '08-'09 Premier League season, the average numbers of viewers on FoxSoccer was 90,000. In 2010 the Champions League final drew 2.2 Million, in 2012 the number was up to 4.2 million viewers

In short, attendance and viewership is skyrocketing across America. But more specifically, it's been skyrocketing in direct line with the accessibility of the World Cup. 

According to Nielson.com

The average American TV audience for the first three games played by Team USA are up 68% in 2010 compared to the same point during the 2006 World Cup... Although more people than ever chose to watch live streaming video of the games...

It seems logical to assume that at least some of those viewers were brand new to the sport, and the numbers would suggest that those converts to the beautiful game then continued on to watch the Premiere League on FoxSoccer and ESPN.

Therefore, NBC's $250 Million contract would seem to be an investment in the viewing bump that they're expecting to get from the upcoming 2014 World Cup. 

Anecdotally, it seemed that in 2010 New York City was soccer crazy. People that hadn't watched ten minutes of the sport sat glued to TVs in bars and cafes all over the city. The 2010 World Cup was in South Africa, a full 7 hours ahead of NYC. This year the tournament will be in Brazil -- only one hour removed from the East Coast. It's easy to imagine that NBC is predicting enormous numbers that are sure to carry over in some way to their Premier League coverage.

And, as if I have to say it, viewers = advertising dollars. 

Meanwhile NBC has pumped what must be millions of dollars on smart and funny viral campaigns and  conventional advertising to establish them as the "go to" source for the game.

So far the plan seems to be panning out. This year's opening weekend saw a boost of 67% from last year. An average of 680,000 viewers watched the opening games compared to 300,000 last year. And lest you believe that this is strictly an "east coast" phenomenon, the second largest market for the Manchester United v. Swansea game was Tulsa, Oklahoma. (source: SBnation.com)

But the real numbers to watch will be what next years ratings will look like. 

Two years ago MLS became, on average, the 3rd most attended sport in the U.S. The game is gaining popularity, and I predict 2014 will be massive. 

UPDATE: I added a citation on average attendance... for that matter, I added the words "on average" which was certainly missing, my apologies.