Why is ‘pay-per-view’ a good idea?
Anonymous gets rich.
A new study by Harvard Business School has found that people who watch pay-per, live events tend to get rich, while those who pay for them don’t.
The study, entitled Pay-Per-View: Why Does It Work?, examines the pay-out model used by several major sporting events, including the NBA Finals, NHL Stanley Cup Playoffs and the NCAA Men’s Basketball Tournament.
“Our study shows that the payouts generated by a live event are likely to be highly profitable to the event sponsor,” said Harvard Business Professor David Pincus.
“People watching pay-Per View events will get rich because they are rewarded for paying for the event.”
The study looked at pay-in-full and pay-outs that were negotiated, or based on the likelihood of a profit.
It found that pay-In-Full events were profitable to live events, with the largest profit coming from the NBA.
The study found that the NCAA Women’s Basketball Championship was profitable to a live-event sponsor.
“Live events provide an economic benefit to fans by generating revenue from advertising, ticket sales and merchandise sales, as well as other revenue streams,” said Pincuses co-author, Dr Mark Fischetti, from the Business School.
“For example, a live sporting event attracts fans from all over the world, while traditional television broadcasts from the city of Los Angeles attract fans in California.”
In turn, these fans pay for tickets, which in turn generate revenue from ticket sales, merchandise sales and advertising.
“We think the key to success in a live events is for the sponsor to be able to get a significant return on investment.
For example, pay-ins-only events have a lower cost per ticket, are less expensive to host, and are more likely to generate a profit than pay-Ins-only.””
Live Events Can Be a Big Deal”The study found pay-for-performance was an effective way to boost live events revenue, with events such as the NCAA Final Four and Stanley Cup Finals earning $1.6 billion and $1 billion respectively, or more than triple the amount of their traditional pay-based counterparts.
However, it found the live event model could be a bigger success than the traditional one.
The fact that live events are often a big deal also means that live sports are a lucrative opportunity for sponsors.””
For example,” said Dr Fischett, “sponsors may use live events to generate revenue through live events marketing, such as sponsoring local television, radio and online broadcast of live events.”
“The fact that live events are often a big deal also means that live sports are a lucrative opportunity for sponsors.”
This is a significant way to generate large revenue streams for live events,” said Professor Pincos. “
In return, fans are rewarded by paying a substantial fee for a sporting event.”
In some cases, live sporting events may also be more financially viable than traditional sports in that they are a greater return on invested capital, because the events are more financially feasible to produce and the cost of the event is lower,” he said.””
The key to pay-Up-Per is that sponsors have an incentive to deliver a high-quality event to maximize their profits.”
“In some cases, live sporting events may also be more financially viable than traditional sports in that they are a greater return on invested capital, because the events are more financially feasible to produce and the cost of the event is lower,” he said.
“While live events do not generate a return on equity for the sponsors, they do provide a significant financial return to the sponsors.”
The Harvard Business study has implications for the future of the live sports industry.
The Harvard study found the payback for live sporting competitions was not always consistent across the sport.
If a sports event is financially viable but does not generate the kind of return that a live competition would, the sponsor may find it less profitable to offer live sporting services, for example by charging a higher fee.”””
So the pay out is likely to increase over time,” said Fischeti.
“If a sports event is financially viable but does not generate the kind of return that a live competition would, the sponsor may find it less profitable to offer live sporting services, for example by charging a higher fee.”
“This suggests that sponsors should be more willing to take on live events if the returns are significant and consistent, rather than simply taking advantage of existing live sporting opportunities,” he concluded.
“It also suggests that the live events business model should be considered as a potential future source of growth in the live sport industry.”
“Live events can be a big Deal ” is a co-authored report by Dr David P. Fischehetti, Dr Chris T. Henn, Professor P.J. Sohn, and Dr Christopher M. Karr.
It is the first study to examine the payout models used by major sporting competitions and examined the impact on live sports revenues.
Professor David P Incus and Dr Chris Sohn are the authors of the paper.
The research was funded by the US National Science Foundation (NSF) Graduate Research Fellowship and by the National Institutes of