Here Are the 5 Highest-Rated TV Events of 2018 and What They Mean for TV's Future

Television is about capturing eyeballs: More people watching a show means more money can be charged for advertising. As we look back at the biggest television events of 2018, it becomes pretty clear that one event type dominates all others. And that explains why networks, and now some of the streaming upstarts, have been willing to push the competition for the rights to these events into high gear. If the highest-rated TV events of 2018 are any gauge, that trend isn’t going to end.

The BIG one

Television events are generally rated by the number of people watching, data that is provided by companies like Nielsen Holdings. Although this data provider has a vast toolkit, offering a broad set of research and data-analysis services, it is probably best known for its TV ratings. The company works with homeowners to track viewing behavior and then aggregates the resulting data to provide estimates of total viewership for shows. Networks and advertisers use this information when deciding how much to charge for advertising and on what shows advertising should appear.

Image source: Getty Images.

This past year’s numbers paint a very familiar picture: sports events get huge viewership. Most impressively, the Super Bowl is the undisputed king of event-driven viewing. That one game on Comcast‘s (NASDAQ:CMCSA) NBC had over 100 million homes tuned in to see if the New England Patriots would beat the Philadelphia Eagles. They didn’t, and roughly 70% of that audience stuck around to watch the blow-by-blow postgame analysis of the Patriots’ loss.     

This one game blows all other television events out of the water, which explains why networks fight for the right to air the game. To put a dollar figure on that, in 2011, NBC, CBS (NYSE:CBS), and Fox each agreed to yearly costs of around $1 billion over nine years for the rights to air football games, notably including the Super Bowl. The right to that game bounces back and forth among the three companies.   

2018 Event

Channel

Approximate Number of Viewers

Super Bowl

NBC

103.4 million

World Series (five games)

Fox

71.8 million

NBA Finals (four games)

ABC

70.3 million

Winter Olympics opening ceremony

NBC

27.8 million

Stanley Cup Finals (five games)

NBC and NBC Sports Network

24 million

Data source: TV by the Numbers and Nielsen.     

But that huge cost may be worth it. In 2018, industry watchers estimate that NBC generated around $414 million in advertising revenue from that single game. There were a total of 49 ad spots lasting roughly 35 seconds each, with giant companies like Anheuser Busch Inbev (four minutes of advertising), Fiat Chrysler Automobiles (four minutes), Toyota Motor (three minutes), and Amazon.com (two minutes and thirty seconds) lining up to pay millions of dollars for advertising slots. Interestingly, Super Bowl advertising is almost as important to viewers as the game, and there’s a big push among advertisers to have the most talked-about ad of the night.   

The rest of the crew

As the table above shows, however, the Super Bowl isn’t a one-off event. Sports of all types are a huge draw. That said, the big events noted above are generally all culminating events for full seasons, including the Super Bowl, the World Series, the NBA finals, and hockey’s Stanley Cup Finals. Monday Night Football, however, routinely generates huge viewership numbers and frequently tops the weekly most-watched list. In fact, that weekly televised game, depending on the matchup, can beat individual games of some of the season-ending events from the other sports above. 

Which is why sports television is in such high demand. It isn’t just one (or a few) nights of big ratings; sports draw viewers throughout the season. Networks are willing to pay up for those eyeballs. In 2012, for example, Major League Baseball inked agreements with Fox, Turner Broadcasting, and Walt Disney‘s (NYSE:DIS) ESPN unit worth an estimated $12.4 billion a year through 2021. That’s locked-in revenue for the sports leagues. And, assuming consumers keep tuning in to sports events, it could be just the starting point for the next round of negotiations.   

But spending for the right to air sports events comes with a downside: As prices go up, margins get pinched. For example, Disney specifically highlighted the rising cost of sports deals when it reported that its media division, which houses ESPN, saw an 11% operating income decline in fiscal 2017. That’s notable because revenues in the division fell only 1%. That’s not the kind of thing investors want to see, but without the rights to such high-drawing sports events, revenues at the media giants might tumble. 

The one odd inclusion in the list above is the opening ceremony of the Winter Olympics. That’s a single event within a sports event that lasts a couple of weeks. If you add up all the eyeballs watching the Olympics over the full event, the number is over three times as large as for the Super Bowl’s one-night draw. However, it’s probably the same people watching all these events. The same is true for multi-game playoff series in baseball, basketball, and hockey, as someone who watches game one of the NBA Finals is likely to watch games two, three, and four, as well. So there’s some redundancy in there. But the power of sports events is clearly huge.

More to come

The list of top events makes it pretty clear why there’s so much competition for the rights to air live sports events. As long as sports remain such a draw, the costs that networks are willing to pay will likely only go higher over time. The fight for these rights, meanwhile, is likely to get even more contentious now that viewers have more options. For example, Yahoo!, now owned by Verizon Communications, has live streamed NFL games to great success, Disney’s ESPN is starting its own streaming service, and Amazon and Alphabet‘s YouTube also want in on the action.     

Sports rights are a huge cost for broadcasters, as Disney has laid bare. That’s not going to change if current trends continue. In fact, it looks set to get worse. If you own a media company, including internet-only names like Alphabet and Amazon, you’ll want to keep this fact in the back of your mind. Just how important is it? When Disney’s ESPN negotiated a new deal with Major League Baseball in 2012 (covering the years 2014 through 2022) its average annual costs nearly doubled. It would be hard to absorb an increase like that without it causing a margin squeeze.   

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.