Why Watching Sports is About to Change — and what it means for you
I remember what it was like to record an NBA game using a VCR. I would stop the recording when a commercial came on, and wait for the game to resume so I could hit record again — trying not to forget. Now I can turn on my AppleTV and choose from multiple broadcasts for any game in the entire season to watch in HD, with commercials already cut out.
Technology has made our lives easier in a lot of ways, but when it comes to what is presented on our TV screens during an NBA game, not much has changed. Look at the evolution of the NBA on TNT TV scoreboard from 1990 to 2016. Our screens got bigger and the picture got better, but they way we were presented the game of basketball is more or less the same. But that doesn’t mean our experience watching the game remained the same. If you watched this year’s NBA Finals, it probably looked something like this.
A new screen has augmented our experience, and while the devices in our pockets have seen steady improvement in the last 10 years, the broadcast on our TV has been pretty much the same. Not much has changed.
But it will.
In the following sections I’ll outline a few trends making this shift inevitable, and then give some thoughts as to how the future might look.
Linear to Digital
ESPN and TNT are estimated to pay $2.6 billion per year for the rights to nationally televise NBA games through the 2024–25 season. Many have argued that they paid too much.
Traditionally, high demand for live sports meant that costs could be recouped through advertising from mass-market consumer companies (automotive, CPG, etc) looking to reach a large, captive audience. Although advertising for sports programming has grown (with the exception of regular-season NBA basketball), it hasn’t grown nearly as fast to keep up with costs.
However, networks such as ESPN and TNT have been able to overcome this difference because of the carriage fees they collect from cable operators — which have been the highest among all cable networks. And they were able to collect these fees from each cable subscriber, regardless of whether they watched those channels or not. Unfortunately they didn’t anticipate a decline of cable subscribers, and now will struggle to keep up with rising content costs.
Even though the current contracts seem expensive, the next round of negotiations will likely include bidders that can afford much more.
As linear TV viewing shifts to digital, companies like Disney (ESPN) and Time Warner (TNT) find themselves in a bind when it comes to making that content pay for itself. Owning the broadcast rights used to mean exclusive direct access to consumers, with proven monetization vehicles. Not any more. Content can now reach fans through a variety of social channels — often produced by leagues and teams themselves.
Owning the relationship with fans through these channels becomes just as valuable as owning the broadcast rights. Why turn on Sportcenter to see the latest highlights when they’re delivered directly to your Instagram feed?
How can the legacy sports media buyers compete when its time for the next round of bidding?
Social networks have more data about consumers, allowing them to give advertisers better targeting and more insights into the effectiveness of their ads — while giving the end consumer a more personalized experience. Companies like Amazon and Apple don’t even need to make money directly from broadcasts rights because they can be monetized through Prime subscriptions or iPhone sales (and the increased value that comes from customers on their platforms).
While both ESPN and Turner will look to launch OTT sports streaming services, they still remain tied to their legacy businesses.
“…if we wanted to take ESPN direct, we could. There are elements to the distribution agreements that we have that would cause us to — if we were to bring the service direct to the consumer — or create some, I’ll call them, suboptimal circumstances for us.”
― Robert Iger, Disney CEO
Can they let go of what made them successful in the past to increase the chance of success in the future? Often it’s not so easy. For more insight into this topic, Ben Thompson — a technology writer focused on business and strategy — gives a great analysis in his article Disney’s Choice. Thompson starts with a brief history lesson on how cable TV got to where it is today, the difference between horizontal and vertical business models, and how this relates to Disney’s current conundrum.
The New Medium
The same thing happens every time a new media technology is invented. The telephone was first pitched as a one-way broadcast device (allowing subscribers to listen to live opera and theatre performances), not recognized for its breakthrough two-way communication capabilities. The first TV dramas were filmed plays — a video camera pointed at a stage and broadcast to peoples living rooms — not the Breaking Bad/Game of Thrones-type series we are able to binge on today. We first thought of websites as ‘pages’, but they soon become much more.
No matter the technology, we always look at existing things that worked, and apply that to the new medium.
“We look at the present through a rear view mirror. We march backwards into the future.”
― Marshall McLuhan, media theorist
Mobile computing and social networking have changed how we connect to information and to one another. But understanding their potential for sports broadcasts has so far been limited. It still feels like we’re sticking the old things into the new format.
Even the way social content is monetized feels like we are taking the past and applying it to the new, blind to the new opportunities to engage and connect with an audience.
This will change over time. Twitter, Facebook, Amazon and Youtube have all experimented with sports streaming. Most of the rights for major U.S. sports are tied up for the next several years, but that only applies to domestic rights. Facebook streamed 20 NBA games in India last year, and new players will have ample opportunity to experiment before the next major bidding for domestic rights takes place.
Delivering video over the internet is a fundamental advancement in technology. We are moving from linear broadcasts, to highly intelligent aggregation and publishing systems that have data about us — our interests and behaviors — as well our friends. The experience will change dramatically. The commissioner of the NBA recently said about meeting with execs from these new companies
“…the conversation is not let’s take that same feed and put it on Facebook or wherever else. [It’s] how are we going to change the experience of our fans? How are we gonna take advantage of the kind of engagement [sports] have for our users?”
― Adam Silver, NBA Commissioner
It remains to be seen what direction these companies will pursue, but advances in understanding data and distributing content will make it look much different than the past.
The Rise of Machines
Sportradar—where I currently work as a product manager—recently signed a 6-year partnership with the NBA, giving us access not only to traditional data such as points, rebounds, etc, but also new player-tracking data. This has some NBA team owners very excited.
Steve Balmer is excited about new player tracking technology that will be outfitted in every NBA arena by a company call Second Spectrum, another partner in this six-year deal. By analyzing the movements of every player at every second of every game, we can learn interesting things that are not apparent to the naked eye. Below the CEO from Second Spectrum explains how they taught a machine to see with the eyes of a coach, or as he calls it, the science of moving dots.
Integrating this data into a live broadcast will be an interesting challenge. For most sports broadcasts, we’ve traditionally been served by a ‘scoreboard bug’ supplementing live action with statistical tidbits, or full screen overlays that dominate the screen.
If we want a hint at what the future might look like, it’s probably not a bad idea to look at a sport where a huge amount of player-tracking data is already available, eSports.
Adam Silver recently hinted that he thinks the NBA broadcasts could start looking more like eSports streaming platform Twitch (owned by Amazon). These games are created with overlays for vital information and supplementary graphics that pop up depending on what is happening. It seems likely that similar techniques could be used for traditional sports.
New 3-dimensional data will help us understand what is happening on the court, but it’s not clear how it could be integrated into live action or to break down replays. This will likely involve some trial and error.
Machine learning will not only help broadcasters make sense of the data coming directly from sports, but could potentially help in other aspects as well. Snapchat’s recently unveiled a new Crowd Surf feature stitches together various angles of a music concert recorded on people’s smartphones to create a seamless video of multiple angles. Imagine the applications in sports.
What does this mean for you?
Access to content will change. The traditional cable bundles we subscribe to will unravel, and new bundles will be formed looking to connect directly to consumers. Purchasing direct from suppliers (Netflix, Disney, HBO, NBA, etc) will make it easer to subscribe — and unsubscribe. An integrated platform (think Apple or Amazon), rather than a cable provider, will manage access to these subscriptions (as well as subscriptions to their own services) and enhance the overall user experience.
Sports rights will remain expensive, but the way the costs are allocated will change. Hardcore sports fans may end up paying more to watch the same amount of sports, because they will no longer be subsidized by the non-sports watching cable subscriber. However, these costs may be recouped by providers in other manners — bundled with an Amazon Prime subscription or subsidized through increased advertising revenue on platforms willing to give away content for free. New interactive revenue streams will change how sports rights can be monetized.
Access to less popular sports will expand. Leagues can now leverage infrastructure across platforms to reach their fans directly, whether that means streaming for free on Facebook or partnering with an infrastructure provider to stream and monetize games through their own sites.
But when it comes to how these new media technologies will allow us to consume this content together, it seems like we still haven’t solved some of the simplest problems.
This a solvable problem, the question is who will solve it. I don’t know the answer, but I expect the near future will look much different than the past 25 years. Integration across screens and among devices (smartphone, tv remote, tv screen) will enhance the experience. Alternate audio and video feeds will give us more personalization while new interaction paradigms will augment the viewing experience. Rather than the image I presented at the beginning of the article, The future will look more like this:
The next several years will be interesting…
As new articles continue to be published regarding this topic, I will provide links below for further reading
The following article offers a contrarian viewpoint, that warns that the tactics used by major sports leagues in the age of scarcity, will no longer be effective in the age of abundance.
I can watch highlights of most games on ESPN or HouseofHighlights on Instagram and extract most of the entertainment marrow and cultural capital of knowing what happened without having to sit through three hours of mostly commercials and dead time. That a game can be unbundled so easily into individual plays and retain most of its value to me might be seen as a good thing in the age of social media, but it’s not ideal for the sports leagues if those excerpts are mostly viewed outside paywalls.
This feature from Variety gives a nice overview of current and upcoming streaming deals, highlighting the choice of new players to disintermediate current distributers, or partner with them.
“For a TV network, it makes sense to use sports to drive value — you aggregate large audiences, advertise, promote your other programming,” Gandler says. “For a tech platform, it doesn’t make sense.”
There’s a natural framework for sports rights, he says: “Long term, I just don’t see technology companies — the FANG [Facebook, Amazon, Netflix and Google] group — really doubling down on all these rights.” That’s especially true, Gandler adds, given that Amazon can see a higher return by acquiring a real asset like Whole Foods for $13.7 billion, as opposed to renting sports rights for a couple billion dollars over a few years.
This REDEF original gives numbers on the current state of sports broadcasts, and predictions of the future state.
Sports programming is the most valuable audience cultivation tool for networks hoping to launch other content and a critical customer acquisition play for pay-TV distributors.
The viewing experience is likely to become more differentiated, personalized and individualized….But all this personalization and fragmentation and extension doesn’t have to come at the expense of the collective viewing experience that has helped make sports an American religion.
