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Stream a Little Dream: Declining Sports Rights? We Think Not

Updated: Feb 1, 2019

by Ed Desser and John Kosner


From the beginning of sports media, new technology has enabled more

consumption. Early live sports TV consisted primarily of weekend events

on the three national broadcast networks and club/school events on local

stations and syndication. Then, widespread cable and its dual revenue

stream opened the floodgates, introducing multiple 24/7 national sports

networks and RSNs, delivering thousands of additional games and

ballooning sports revenues (and player salaries).



In the last two decades, digital technology multiplied sports channels and

ushered in multi-game subscriptions like Sunday Ticket and League Pass.

Meanwhile, the internet made worldwide scores, news, and highlights

instantly accessible, mobile untethered viewing, and social media enabled

“virtual” sports bars.


Today, streaming technology is changing the sports media paradigm again,

like cable did four decades ago. The incumbent networks (e.g., ESPN,

Fox) remain well-positioned, but the digital tech titans have entered the

field of play, so far focused on shorter-term rights, experimentation and,

non-exclusive grants (e.g., YouTube has regional rights to some MLS teams

and virtual MVPD cousin YouTubeTV has become a major sponsor of the

World Series and NBA Finals). Amazon bought EPL and TNF rights, and

Facebook has daytime MLB games. Among legacy players, ESPN+ has

daily MLB and NHL games, MLS Direct Kick, and UFC. Turner’s B/R

Live includes Champions League, 65 NCAA Championships, and

intriguingly, partial NBA League Pass games.


While the techs have the money, recognize the importance, and therefore

have an interest in live sports, they are not yet willing to spend massive

amounts of it for major exclusive rights packages. There are at least five

reasons:


1. Most live sports viewing exists on linear TV and none of the tech

giants possess that asset yet (though Amazon has shown an interest

in buying some Fox RSNs);


2. The traditional incumbents continue to have substantial budgets to

continue buying these rights, based upon broad distribution, high

subscriber fees and large advertising income; and


3. They have the motivation to do so: existing sports networks are

dependent on exclusive sports rights because their very identities

remain directly tied to sports TV. In addition, as broadcast networks

get priced-out of the top entertainment programming by Netflix,

Amazon, Apple, HBO, etc., sports is even more important, as must-

have programming to stay in skinny bundles; and


4. In an offense/defense strategy, linear players are expanding their own

streaming/DTC capabilities to better serve fans and attempt to keep

the tech goliaths at bay; Finally,


5. The techs view sports acquisitions more as R&D expenditures than

their primary business. There is not a proven digital business model

that generates the kinds of live sports revenues (and viewership) that

legacy linear media still can.


Therefore, as NFL, NHL, AAC, NASCAR and NHRA rights are soon

negotiated, the traditional networks will continue to provide substantial

payments and wide distribution … the twin media goals of most sports

enterprises. The question remains, will today’s tech dabbling prove to be

just an appetizer, or will they stay on the sidelines when the big bidding

begins? We expect to see the following:


  • Traditional linear players will keep most of the major packages, generally at higher prices (the roll-out of legalized sports gambling will provide new rationale), but with some significant modifications, such as leagues carving out streaming rights, or creating a new package of events which are excluded from TV;

  • The rich will get richer and those properties in the middle (e.g., NASCAR) will get squeezed;

  • New digital packages, like MLB on Facebook and NFL TNF, will be created/expanded specifically for streamers. Unlike cable which largely replaced broadcast as the primary platform for live sports, over the next contract cycle, digital packages will expand and supplement, not replace TV.

  • Amazon, YouTube, Facebook and Twitter will expand their sports programming offerings, including through acquisition of events they can distribute worldwide, such as eSports, tennis and volleyball;

  • New entrants will also take their piece of the programming pie, such as FloSports buying up Olympic sports, DAZN taking more boxing;

  • More sports will super-serve their biggest fans through targeted niche streaming offerings like NHRA All-Access and PBA Xtra Frame. NBA League Pass is a truly global, robust offering customized for different territories;

  • Most sports fans will continue to demand wide selection of major sports, so expect them to retain the TV “bundle.” Most would not be satisfied just getting certain sports/matches, as Amazon Prime or Netflix subscribers can be satisfied with a single SVOD package featuring a wide range of entertainment programming, nor would it be cost-effective to buy multiple packages. Pay attention to sports- focused Virtual MVPDs like YouTubeTV and FuboTV and sports- specific bundles;

  • Smaller sports properties, which don’t generate meaningful rights revenues, will transition their events to streaming platforms, developing direct customer relationships, reducing TV production costs, and improving programming hours, scheduling, and net revenues, but sacrificing viewership potential;

  • Tech players will consider buying traditional linear sports media platforms (e.g., New Fox, Fox RSNs, CBS) to gain entry to the major league sports club.

For almost 50 years, critics have predicted the end of the sports TV rights

bubble. We’re still waiting.


Ed Desser is President of sports consulting firm Desser Media, Inc.

(www.desser.tv). Prior he served 23 years in the NBA Commissioner’s

Office, where he negotiated all league media deals and launched NBA.com,

NBA Entertainment, NBA TV, NBA International, and League Pass. John

Kosner is President of Kosner Media LLC, a new sports and digital

consulting company (www.kosnermedia.com), following 20 years leading

ESPN’s digital efforts, including ESPN.com, the ESPN App, fantasy and

streaming. Together they ran the NBA’s media operations in the 80’s and 90’s.


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