The Unknown Unknowns of Buying Sports Rights

The process of deciding whether to greenlight a movie in Hollywood involves a lot of variables and input from multiple studio divisions, but the math is pretty straightforward: Each distribution unit — domestic theatrical, international, home entertainment, TV, etc. — is asked to estimate how much revenue it could deliver based on the “elements” attached to the proposed film (script, director, stars), the genre, the proposed timing of its release, competing projects at other studios, and other such factors.  Each division, in turn, has its own methodology for arriving at its estimate, based on the track records of the stars/director/etc., the performance of “comparable” recent films, and so forth.

Those projections are then weighed against the project’s proposed budget and projected marketing costs, allowances are made for non-quantifiable variables (star relationships, etc.), and a reasonably well-informed gut call gets made.

The process of approving franchise sequels is even more straightforward since many of the numbers are hard-coded before there’s even a script. The movies may still flop, due to creative failures, marketing miscalculations or shifts in the zeitgeist, but at least the people making the call know what they can’t know.

Compare that with the challenge facing TV sports rights buyers. Speaking at the Second Screen Society’s Sports Summit in New York this week, executives from two of the biggest buyers of sports rights — CBS and Turner — highlighted the growing number of unknown unknowns facing sports buyers.

“One of the most significant changes in the business in the last year or so is figuring out what to pay for rights,” CBS Sports Digital VP of business development Adam London said. “We spend a lot of times figuring out what rights we’re going to need six months from now, two years from now, six years from now with all the new platforms that are coming online.”

Read the rest of this post at Concurrent Media.