The Great Realignments of Sports Viewing
How sports viewing will evolve in the streaming age & the resulting brand implications
By Ryan Miller
Media conglomerates and new OTT platforms are firmly entrenched in a contest for content in what has come to be known as the “streaming wars.” While this battle is currently being waged over original content, there lies a much more lucrative opportunity in live sports content looming over the horizon.
Media rights to the major American sports leagues are set to expire beginning in 2021, which, coupled with shifting viewer behavior, could mean that we are on the precipice of a fundamental realignment rivaling the magnitude of The Great Schism. Historically, the only companies with the requisite buying power to acquire sports rights have been traditional linear TV entities, but as emerging OTT and online streaming platforms continue to scale and mature, there exists an opportunity for them to disrupt the traditional model when the current contracts for sports broadcast rights expire.
The Lucrative Yet Fragmented Sports Market
As it stands, the U.S. is home to four of the top six professional sports leagues by revenue worldwide: the National Football League ($6 billion annually), National Basketball Association ($2.5 billion+ annually), Major League Baseball ($1.5 billion annually) and the National Hockey League (200 million annually). Broadcasting rights for these leagues comprise a significant portion of the $22.4 billion the United States sports market is set to generate in 2019, according to the SportsBusiness Global Media Report,representing nearly half (44%) of the total global sports right market.
The National Football League’s deal extends across four major ownership groups: the CBS Corporation, Comcast, Fox Corporation and The Walt Disney Company/Hearst Corporation. Why not strike a deal with just one multimedia conglomerate to broadcast all the NFL games, you may ask? For one, a $6 billion price tag + exclusivity fees that would inevitably be tacked on to the agreement are ultimately too steep for one network to shoulder independently on an annual basis.
Additionally, there would be increased regional fragmentation for the dissemination of content. As it currently exists, the NFL — and its major American sports counterparts — broadcast live sporting events on a geographical basis in order to get the maximum coverage out of their networks. What that means is that although there may be two games being played simultaneously on a network, you’re going to be served the one that aligns with the market you’re in. Regional and local sports right further complicate this coverage conundrum. Though the NFL’s relatively light schedule allows for all games to be broadcast across national networks, sports with longer seasons — everyone else — partner with other stations to ensure 100% coverage throughout the year. For example, you might be able to watch the Knicks when they’re on ABC, but you’ll need to subscribe to a supplemental network such as the independently owned Madison Square Garden network in order to watch the Knicks games not broadcast on ABC.
This regional fragmentation poses a major problem for most consumers as 64% of fans live far away from where their team plays according to Digital TV Research Limited.Media entities are recognizing the importance, and the need of catering to this increasingly distant and digital consumer with a finite amount of resources available at their disposal in the linear realm.
The Upcoming Realignment
Technological evolution has shepherd an entire generation away from pay TV in the era of “cord-cutters” and “cord nevers” — with eMarketer reporting 50 million people will have dropped cable or satellite TV subscriptions by 2021. More importantly, eMarketer also notes that a loss in viewership of that order will slash the ratio of pay-TV subscribers to cord-cutters and nevers from 4:1 to 2:1. While these audience trends are certainly not a death knell for pay TV, the trend is forcing more programmers, especially ones that focus on live content, to build streaming products to serve shifting consumer attention.
Broadcast networks are building or already have streaming add-ons in their portfolio, available both as an independent purchase and a supplemental payment tacked on to your pay TV package. ESPN+, NBC Sports Gold, and B/R Live are Disney, Comcast and Turner’s OTT solutions respectively and offer a host of unique programming in addition live sports coverage that’s simulcasted across their family of networks.
These solutions were contrived not only to expand and supplement these major corporations’ distribution reach, but to appeal to disappearing younger audience. A recent McKinsey study showed that more Gen Xers than millennials follow sports closely (45% versus 38%) and according to a Magna Global study of Nielsen TV ratings of 24 sports, all but one (women’s tennis) have seen the median age of their TV viewers increase during the past decade. Though a dip in sports viewership amongst younger audiences is evident, it’s not solely due to disinterest. The way in which Millenials and Gen Z consume content is radically different than that of their predecessors.
The Shift in Sports Viewing
With the human attention span continuing to dwindle in the digital era — fans are seeking innovative viewing experiences that go beyond planting yourself in front of your home entertainment center for hours on end.
Social has become an increasingly important part of the sports conversation from both a discussion and content perspective. The aforementioned McKinsey study identifies that 60% of Millennials use at least one social media platform for sports coverage — a 20% increase to that of Gen X at 40%.
Statistics like the one above reinforce the fact that sports coverage is fundamentally changing, more importantly demonstrate the problem linear TV has in keeping audience attention. According to Deltatre, 2021 is the year OTT is set to explode from a sports investment perspective, with an estimated $6.8 billion to be spent in the space. A study conducted by Telaria + Adobe justifies this shift in investment as 42% of people keep the cord exclusively for live programming, with 30% of people willing to cut the cord if there was a streaming solution for live content.
In turn, we’re seeing a response from leagues, broadcasters, and other online viewing platforms offering direct digital solutions. In addition to the streaming add-ons currently offered by traditional media providers, Axios has identified other types sports streaming services — skinny bundles, pure plays, and tech platforms — that could stand to steal some of the market share.
Perhaps the most troubling to the linear TV empire are the OTT solutions offered directly through the leagues. Each of the four major American sports leagues offer subscription based content-on-demand models. Take the NFL, the biggest U.S. sports league, for example.Currently, an NFL Game Pass subscription, which grants access to all of the out-of-market games, costs $99 annually and is significantly more cost-effective than paying for a cable or satellite subscription just for NFL coverage. Satellite and cable providers have long provided services such as NFL Sunday Ticket, but even that price points ring in a little high for dedicated fans at $293.94. When DirecTV purchased NFL Sunday Ticket — coverage of every out-of-market game — in 1994 it cost them $25M, that price tag has since surged to an incredulous $1.5B annually. Cord cutting is having a significant impact on DirecTV’s sports distribution strategy, per the Wall Street Journal, causing the AT&T Warner Media owned entity rethink the value of the deal. Though these services enable professional sports leagues to cut out the middleman, it seems improbable this model will see widespread adoption as it requires a tremendous amount of additional infrastructure investment in order to ensure 100% reliable service delivery as the offering scales.
In addition to direct-to-consumer league solutions, there exist other options for sports packages outside linear TV. Skinny bundles have become increasingly popular amongst sports fans uninterested in paying for full cable packages. Both Hulu — who now have live sports in case you haven’t heard — and YouTube offer add-on subscriptions to both their free and premium models for sports fans.
Big tech companies such as Facebook, Twitter, and Amazon’s Twitch are also venturing into sports broadcasting. Facebook experimented with sports live streaming in 2018 through a 25-game trial with MLB afternoon broadcasts to mixed results. Latency and quality proved to be an issue, but the significance of creating an interactive environment was not lost on MLB officials.
As of the 2019 season,Twitch secured the rights to broadcast Thursday Night Football games on its platform. Perhaps most interesting about the agreement is that not only is the game available for viewing through the Thursday Night Football channel, but Twitch users have the capability to broadcast over the stream on their own channel. This again demonstrates the big leagues’ awareness as to the increasingly social interaction heavy nature of modern sports viewing.
Maximizing fan engagement through OTT solutions leads to a 24% uptick in subscriber acquisition according to Deltatre, proving that experimentation with innovative formats could be worth it for major sports leagues. At the end of the day, tech companies are also equipped with a bigger cash flow to spend on acquiring sports right, should they choose to compete with the declining Pay TV providers.
The Future of Sports Viewing
With the media rights free-for-all in the not so distant future, what does all this mean in terms of posturing and positioning from each of these content distribution platforms?
It’s obvious that mega corporations like Disney, Fox and Comcast have a legacy advantage. Not only have they provided reliable service to the major sports leagues for years, most of the audience still resides there. These partnerships are forged in years of lucrative success and are extremely tight-knit, according to Bloomberg Businessweek, “one reason the NFL has been so reluctant to dive into streaming is that it understands its importance to the legacy networks and wants to protect them.”
Perhaps best positioned to dethrone the linear sports options are the big tech companies. While skinny bundles offer the sports content consumers want at a much more desirable rate, they lack the requisite innovation to position themselves for the future.
Tech companies like Twitter are building integrations that keep fans engaged like their partnership with Turner Sports and the NBA. Offering live-stream games on the social platform with the option for viewers to vote on a single player to follow during the stream.
While Twitter’s collaboration encouraged fan participation through the polling system, the player-lock capability is something that e-sports have specifically honed in on in recent times. 2019 saw Riot’s League of Legends debut its pro-view for LEC and LCS matches while Blizzard’s Overwatch League mirrored that move with its professional viewer. As opposed to the broadcasts locking in on a player, these tools enable viewers to control their viewing experience in totality by allowing them to seamlessly jump between different players’ POVs and the live game feed.
Amazon’s Twitch already has the infrastructure to support live-viewing content, hosting millions of visitors each day, though more widely distributed than a live-sports stream. Twitch also has the ability to add interactive features much like Twitter, with interesting in-stream overlays, polls and peripheral content. Earlier in 2019, Twitch debuted a new functionality in conjunction with Reese’s that gamified the viewing experience by adding interactive elements directly on screen for users. While this use case might not translate one-to-one for sports, there are companies that are considering this experience specifically from a sports perspective.
A sports-specific example of an extension built specifically for sports would be Court Vision from the LA Clippers powered by technology company Second Spectrum. CourtVision uses machine learning, data visualization, and augmented reality to enhance the broadcast. It also offers a variety of different camera angles and audio commentary options. Perhaps the most interesting functionality of Court Vision is the hyper customization aspect that allows viewers to track game information in real time, such as advanced statistics and heat maps for respective players.
While it’s nigh impossible to forecast who will emerge victorious from this battle that begins a year from now, all the early signs strongly indicate there is going to be an increased diversification in terms of where content is hosted and eyeballs are moving.
Brand Takeaways
If sports viewing goes totally digital,there will be a significant increase in ad opportunities. No longer will brands be limited to :15 and :30 spots or title sponsorships. Brands will not only have the opportunity to provide additional value to the experience — through custom integrations and interactive overlays — but will be able to target individuals on a one-to-one level, subsequently increasing media’s efficiency.
Sports moving to online platforms also affords brands opportunities to push products at the point of sale, making ecommerce strategies more seamlessly implementable. Twitch recently rolled out Amazon Blacksmith — allowing streamers to showcase their favorite products so that viewers can purchase directly through the in-stream overlay. This level of accessibility could easily be translated to sports broadcasts with plenty of opportunity during breaks in the action to bring you a word — and product recommendation — from your sponsors.
Live sports moving to a digital-first platform would provide brands an opportunity to surround the conversation more holistically. All ancillary sports content already lives on the web — from post-game recaps, to pre-game custom content segments and even player-promoted social posts. This approach to content creation gives brands an opportunity to surround the conversation from kickoff to the final whistle, or carve out a slice of the action if they’re seeking a more efficient media play.
One obstacle that will prove challenging to brands should live sports ultimately move to OTT solutions is the employment of ad-blocking tech. Per Statista, 25.8% of internet users employed ad blockers in 2019, with that figure only set to rise over the course of the next few years. Though ad blocking is not a new phenomena, it’s certainly another consideration for brands when determining how to most effectively run on OTT. Ultimately, the brands best positioned to take advantage of this potential shift to online viewing are the ones pursuing innovative formats that do not detract from viewing experiences.
As 2021 draws closer, the prospect of linear TV behemoths relinquishing any of the broadcasting rights they currently possess would only expedite the mass exodus from linear TV that has already begun.Skinny bundles will no longer be “skinny” but “standard” and cable boxes may become relics of ancient history.There are grave implications for the future of television should sports start to emigrate elsewhere, but what is certain is that the way we consume sports will never be the same.
