Economics of Advertising

“It’s all a competition for eyeballs,” Bruce Lefkowitz said as he discussed the current

nature of the sports advertising industry. Lefkowitz, a former basketball player and two time Ivy

League Champion with the University of Pennsylvania, is the current Executive Vice President

at Fox Network Groups and is in charge of advertisement sales. But how does a network

succeed in the current competition for eyeballs? Lefkowitz explained that the advantage today

lies in live sports.

During his time at Penn, Lefkowitz made his initial step towards a career in the sports

industry where he met his wife. After graduating in 1987, he worked at MSG Network, before

transferring to Turner broadcasting and finally to Fox.

In his lecture during the Wharton Sports Business Summit on Nov. 9, Lefkowitz outlined

the ins and outs of the TV industry to students. He started by discussing the Nielsen ratings,

which are a calculation of how many people are watching a televised program. All

advertisement prices are negotiated based on Nielsen ratings, and are based off prices per

1,000 viewers. For example, a 30-second super bowl ad cost $5 million dollars in 2018 because

of the large volume of viewers for this program.

In order to obtain the rights to air sporting events, broadcast networks like Fox, Turner,

ABC, NBC, and ESPN, sign contracts with different leagues that give them rights to air Sunday

Night Football, The Super Bowl, The NBA Finals, etc. These contracts are extremely lucrative

as the average NFL game will have a 5 times higher viewership than an entertainment TV show

in prime time (usually 8-10 pm).

After laying out the basics of the industry, Lefkowitz spent the majority of his talk

detailing the changing industry that is sports media, and the challenges associated with media

in 2018. The challenges are rooted in the recent technology which has made media, specifically

sports media, more easily accessible in a society, where consumers want to consume their

sports media live and efficiently.

In 2007, entertainment played a large role in TV and advertising deals as according to

Lefkowitz, 96% of entertainment TV shows were viewed live, in comparison with 98% of sports

shows that were viewed live. But with the recent inventions of DVR, Netflix, and On Demand,

the need to watch entertainment programs lives has fallen off, and as of 2017, only 66% of

shows were viewed live. Streaming services like Netflix and OnDemand have completely taken

out commercials, and consumers are able to fast-forward through commercials on recorded

content to consume their entertainment TV shows more easily. Sports, however, still have a

need to be watched live, which is why much of the focus and revenue of TV advertising has

shifted to sports TV in recent years.

Yet sports advertising sales are still facing the problem of dual-screening and new

platforms or streaming outlets for sporting events. As Lefkowitz said, his job is to be an “eyeball

salesman,” yet with the invention of fantasy football and having non-regional events available on

TV, consumers will hardly ever watch commercials. Instead they will check their fantasy football

teams, or switch to another game that is not in a commercial timeout.

Additionally, some online sites like Facebook and Amazon have started streaming

games, which creates more competition for the typical big market TV companies like Fox and

Turner Sports. More competition, means fewer eyeballs and therefore lower advertisement

sales. Additionally, streaming almost any sporting event on a computer through websites like

Reddit has become more easily accessible and popular among consumers, especially

millennials who are the future of this industry.

Lastly, because of the immediacy that is demanded when it comes to sports news and

content, shows like Sportscenter, which millennials like myself grew up with are starting to

become outdated. Whereas in previous years people would get up and get their sports feed

from sportscenter, all the information and videos are readily available almost instantly through

mediums such as twitter and the ESPN app. As such, these typical highlights shows are losing

popularity.

In order to combat these new challenges, the industry of sports advertising is making

changes. These include new 6-second commercials, which are short and to the point so that

consumers do not have time to flip channels or check their phones. TV networks are also

turning to split screen advertisements, where an advertisement will occupy half the screen,

while action is being shown on the other half, as a way to retain viewers.

As the challenges continue to pile up, the industry of sports advertising is not going away

but rather adapting. Lefkowitz emphasized to students that it does not matter how eyeballs are

retained, whether it be from ads on the computer, TV, or phone, so long as eyeballs are fixated

on the advertising content. The TV and sports media industries cannot exist without advertising,

and as technologies shift those industries, advertising will be changing and shifting along with

TV sports media.

Isaac Silber (Class of 2022) & Jonnie York (Class of 2020)

USBC Journal Writers