The LA Dodgers were sold for 2.1 billion dollars this week. A billion dollars more than was expected and twice what a sports franchise has ever sold for. I’m calling it the DVR premium. Follow me on this for a minute and then I show you the next place where values are going to increase.
A DVR (Digital Video Recorder) allows a viewer to fast forward through commercials. So if your okay with watching CSI later you can watch it in 40 minutes by fast forwarding through the commercials. But sports is a contest that is best watched live so its value as a deliverer of viewers to commercials is higher than that of shows that can be recorded like dramas and comedies.
The $2 billion valuation of the Dodgers franchise is an estimate of this new reality. It is however contingent on a few assumptions that have yet to be tested. One potential issue is that network driven, free to the consumer, advertising financed television is not the only model available. Another is that competition to sports as a deliverer of advertising viewers is already developing in the form of reality TV contests. Shows like American Idol, Dancing With the Stars and The Great Race have injected an audience participation element, typically voting, that causes some viewers to want to watch live. This is good for advertisers.
But there is a way it could be better. If a show like Dancing With the Stars also gave its voting audience points that were redeemable for discounts and free stuff they would increase viewership of their target demographics and with the premiums the brand loyalty of the viewers. This is a win-win the audience would receive rewards for playing and the advertisers would get live viewers. Move over Frank McCourt this is a billion dollar idea.