The Wall Street Journal is reporting that the fees CBS, Fox, NBC and ESPN each pay to broadcast NFL games will double or more in new long-term agreements currently being finalized. Once again we are presented with the incongruity that sports rights are escalating even as the pay-TV subscriber audience able to watch these networks is shrinking.

As the Q4 earnings season wrapped up, the contraction of pay-TV was again in the news this week as analysts tallied the final losses for 2020. MoffettNathanson pegged the subscriber loss in 2020 among traditional cable, satellite and telco operators at approximately 6 million, with virtual operators (e.g. YouTube TV, Hulu, etc.) offsetting it by adding approximately 2 million subscribers.

The losses left the industry as a whole down about 4 million for 2020, slightly worse than the 3.6 million lost in 2019. Since 2010, MoffettNathanson estimates pay-TV operators have lost a cumulative 34.7 million subscribers. It projects continued losses of around 4% per year, resulting in an estimated 71.4 million pay-TV subscribers in 2025.

Those subscribers will surely see much higher monthly bills for pay-TV as the networks signing expensive new NFL deals seek to pass along their higher costs to pay-TV operators, who then charge subscribers more. Those willing to pay the higher cost will continue to narrow to heavy-duty sports (and to a lesser extent, live news) fans.

Against the backdrop of rising pay-TV rates, the bifurcation between sports and non-sports viewers will become even more stark. For non-sports fans there’s never been more choice in entertainment programming. And it’s only going to get better, through both paid and free options. On the paid side, the launches of HBO Max, Peacock and Paramount+ have added to the established SVOD choices. And on the free side, the wider distribution and improving quality of AVOD and virtual linear channels from The Roku Channel, Tubi, Pluto and many others mean even more viewing options.

With so much streaming content to watch, and pay-TV rates escalating (including for virtual operators), inevitably casual sports fans are going to cut the cord, or among younger viewers, simply never subscribe to pay-TV in the first place. The loop gets reinforced: pay-TV is primarily for sports fans, who are willing to pay any price to keep watching, while everyone else migrates to streaming.

How big a group sports fans are is a moving target. Another is the eventual appetite of Amazon (which CNBC reports is interested in Thursday night games) and other streamers for live sports. In this renewal cycle, aside from Amazon it seems tepid.

Yet another question is how advertisers view these shifts. Advertising is the other important way TV networks recoup their sports rights investments. The narrative has been that sports are the last opportunity to reach a mass audience at once. While true, in the coming years buying specific audiences using data is going to mean targeting will gain in importance (as it did in 2020 due to the pandemic). Lots of people watching ad-supported streaming on connected TVs means marketers have new ways of achieving their goals.

Not long ago, the TV business was pretty orderly. Most everyone subscribed to a pay-TV service which packaged sports and entertainment networks. Now the model is fragmenting - sports consumption staying on pay-TV and entertainment consumption moving to streaming. That means a different economic outlook for all.