“Cutting the Cord” will change the game
This weekend I opened up the latest issue of GQ to find a fascinating piece on Reed Hastings, the founder of Netflix, and the company’s strategic shift towards original programming. One person has described it as Netflix becoming HBO before HBO becomes Netflix. The new Netflix view of the world could best be summarized as follows:
Within the next decade, probably the next five years, he figures, ours will be a seamless, multidevice on-demand world, a place where services like Netflix will be so fat with content that the idea of paying a $150 monthly cable bill for a bundle of unwatchable crap will seem as quaint as gathering around the Sony Trinitron with Ma and Pa on Tuesday at 8 p.m. for All in the Family.
He believes that investing deeply in original content and driving deals like the one he made with Disney in December (exclusive streaming of all Disney films during the premium-cable window starting in 2016) will enable Netflix to grow to 90 million subscribers in the United States alone. That would be a hell of a trick, considering that at the moment there are only about 81 million homes with broadband. But he seems certain that Netflix will survive in entertainment's New Order, along with ESPN and HBO once those mighty brands figure out a graceful way to transition to stand-alone streaming. Those other guys? All those marginal channels that depend on being packaged in a basic-cable bundle, not to mention the cable companies themselves? He's not so sure.
Those marginal channels are often the home for non-NFL/NBA/NHL/MLB leagues. If they depart then non-big four sports leagues are going to face a substantially different media environment. The equation used to be that a television deal mattered. In fact, the equation mattered so much that a league like the United Football League would spend immense amounts of money to have their games aired.
The NFL, and others, will face their own pressure in this environment as evidenced by a major piece in the New York Times last Sunday.
The eye-popping price tags have restarted debate about a topic near and dear to sports fans, fairness: many TV customers never watch the mightily expensive channels at all, yet almost all must pay. There was a shudder in the industry when John Malone, the business tycoon who helped create the modern-day cable system, said in November that “runaway sports rights” costs amounted to “a high tax on a lot of households that don’t have a lot of interest in sports.” The only short-term fix, he said, was government intervention.
The price increases reflect the leverage big sports leagues have as distributors like Time Warner Cable and programmers like ESPN desperately try to hang onto live programming in the age of the digital video recorder and the Internet.
The business model for the NFL is built on ever expanding rights deals. Now imagine if the market no longer supports those deals?
The truth is that the television industry is on the verge of a sudden change, as sudden as the change that seemed to hit newspapers. When television changes, the business model for all of the leagues will change.
I would argue that non-big four leagues (from the North American Soccer League to Major League Lacrosse) and any one of the three spring football leagues that are trying to launch would be well served to build a model that meets the changing times.
At the UFL we inched towards the new reality. We broadcast our games online through a partnership with Ooyala. I helped lead the charge to get our games on Boxee and FanHouse. We were all excited when our 2010 Championship Game was aired on YouTube.
Now imagine if we had gone all in on the new model? If we had spent the money that we spent airing games on Versus (now NBC Sports) and instead spent it on building audience online we might have been a true trailblazer.
Now is the time for a new league to take that mantle. Startup leagues have long blazed a trail for innovation and upended the sports landscape in the process. How about we do it again?
