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3 December 2015

2016 will be the year live sports go OTT

By Kendra Chamberlain

By Kendra Chamberlain at Rider Research

The NFL made history this fall when it broadcast, for the first time, an entire American football match over the Internet to a global audience. That game, which reached 15 million viewers and generated over 33 million views online around the world, effectively broke the dam on live streaming sports. As Time Warner CEO Jeff Bewkes said recently, things are changing a lot faster than anyone expected, and the same is true for sports. 2016 will see the sports industry rocketing towards Internet TV.

NFL’s Roger Goodell earlier this year announced his plans to make NFL games more accessible to viewers and fans online. “We are aggressively pursuing the streaming of a regular season game with our first over-the-top telecast,” Goodell said in his “State of the League” address in January. In October, it executed its first live streaming experiment with Yahoo. The event was deemed by both parties as a smashing success. It proved to the world the Internet has become a viable distribution path for high-quality, premium content.

“We’re a lot closer to the Internet being a real, legitimate distribution platform for NFL games than we were one or two years ago,” NFL EVP of media Brian Rolapp told MMQB after the game.

Now, the sports genie is out of the bottle, so to speak. This week, Goodell and San Francisco 49ers CEO Joe York met with executives in Silicon Valley to explore more opportunities for Web delivered sports. York is a member of the NFL’s digital media committee.

“Roger and I met with multiple executives. We’re certainly looking at the success we had with the OTT game with Yahoo and how we can expand on that for a larger package for the 2016 season,” York told last week.

The Internet is the next distribution platform we’ll see live sports delivered on. OTT distribution will enable sports leagues to meaningfully improve their reach, not just to larger audiences in the US, but to global audiences as well.

Ratings for sports matches across leagues and TV networks in the US have been strong, and big tentpole games such as the Super Bowl attract huge audiences on linear TV. Any expansion online won’t come at the cost of jeopardizing that linear TV business, which is still incredibly lucrative for the leagues and the TV networks that bid on those rights. Live streaming sports will only serve to expand audiences and generate new revenue streams. Sports leagues can build global demand for content by expanding online, which is just what the NFL is hoping to do with its Yahoo experiment.

There is a growing appetite for sports content off the TV set, and particularly on mobile devices. A recent Consumer Technology Association study found a third of sports fans want access to sports programming on their smartphones and tablets, though all viewers tend to gravitate towards the best screen possible to watch video, where ever they may be. Live streaming becomes particularly important during long tentpole events and global tournaments that are held over a number of days, such as the Olympics or the World Cup. Internet distribution of sports can also help reach niche audiences more efficiently for smaller games or less popular sports.

“We are incredibly excited by the fact that we took a game that would have been viewed by a relatively limited television audience in the United States and by distributing it digitally were able to attract a global audience of over 15 million viewers,” Hans Schroeder, senior VP of media strategy for the NFL, said after the game.

NFL’s commitment to stream games online is directly tied to how viewers are consuming video entertainment – aka off the TV set and outside traditional linear TV offerings. This reality was tacitly acknowledged in Goodell’s January speech. “How our fans, especially younger ones, connect with the game is changing every day,” he said, and offering live games online would enable the NFL to “reach a worldwide audience, including millions of homes that do not have traditional television service.”

The NFL isn’t the only big sports league that’s ready to meet viewers online. The National Basketball Association (NBA) has also expanded live offerings of its basketball games. Last year, it partnered with Fox to offer live streams of in-market games across Fox’s regional sports networks (RSNs). Those games were made available on Fox Sports Go app and Websites. The NBA made a similar deal with NBC for the 2014-2015 basketball season, covering six of its RSNs and 440 games that were made available to stream in-market on NBC Sports TV Everywhere apps and Websites.

Viewers were eager to watch these games on connected devices. According to Adobe Analytics, live streams jumped 122% during the NBA season on NBC’s TV Everywhere platforms. “We are pleased with these early adoption figures and encouraged by the positive trends surrounding this significant value add for our viewers and distribution partners,” said Jon Litner, group president of NBC Sports Group, at the time. “Live sports is among the most compelling content available, and our implementation of TV Everywhere provides subscribers with our award winning coverage—live and in HD—no matter where they are and on whichever device they choose.”

The Major League Baseball (MLB) has followed suit. This week, MLB commissioner Rob Manfred announced the MLB and Fox will be offering live streams of in-market games for pay TV subscribers in 2016. The three-year deal includes 15 RSNs. Viewers will be able to stream in-market MLB games using the Fox Sports Go app and online sites. The deal is a first for MLB, who has offered out-of-market games online for years on MLB’s own subscription OTT service, MLB.TV.

Baseball fans are eager to stream games, too. MLB released a live digital data ratings (LDDR) study last month, which tracked live streaming viewership across its OTT products MLB.TV, and its “At Bat” app. It found fans consumed 17% more live video streams in the 2015 season than the 2014 season.

Even more telling of the future of sports, NBA updated its OTT service, League Pass, earlier this year to offer fans the ability to purchase a live streaming game for $7, without needing a pay TV subscription, digital antenna or subscription to League Pass. Fans can also purchase a team pass, which gives access to live streams of all the games a particular team plays, for $120 per season. Its standard League Pass subscription costs $200 per season, and gives access to live streams of thousands of out-of-market games.

Similar bets about demand for OTT access to sports programming are being made by the PGA Tour, the Tennis Channel and of course the WWE – which launched a subscription-based Internet TV channel last year.

The PGA Tour launched its subscription OTT service, PGA Tour Live, earlier this year. It offers live streaming select coverage of the parts of golf tournaments that aren’t broadcast on TV’s Golf Channel. “PGA tour Live is an important development for golf fans, as it will bring live action to the devices they use most, while building great momentum and viewership for the ensuing broadcast coverage each weekday afternoon and into the weekend,” said Tim Finchem, commissioner of the PGA Tour.

The Tennis Channel launched Tennis Channel Plus, an a la carte direct-to-consumer OTT service that gives viewers access to live streams of all of the Tennis Channels’ coverage and matches. The Web channel, which launched last year at the French Open, offers 650 live events to stream and over 1,000 hours of on-demand content to watch. It costs viewers $12 per month or $80 a year.

“At this year’s French Open, we saw massive growth in year-over-year viewership on our digital platform and a tenfold increase in engagement,” said Adam Ware, Tennis Channel SVP and head of digital. According to the company, subscriptions have grown 400% year-over-year, and 25% of subs access the OTT service daily.

Even ESPN has a live streaming OTT video channel in the works. It signed a deal with the NBA in 2014 that included framework for an a la carte basketball-focused Internet TV service, but has yet to announce anything official. “We’re well-positioned to go direct to the consumer if the marketplace demands it, but we don’t feel a need to do that now,” said Disney CEO Bob Iger, speaking at a quarterly earnings call late last year.

Broadcast networks, pay TV networks and even pay TV providers like DirecTV and Verizon pay billions of dollars each year for sports programming rights. The OTT competitors – Amazon, Google, Yahoo and others – will have to pay up, too. Yahoo is thought to have paid somewhere around $20 million for its one NFL game. More competitors will only mean higher prices for sports leagues’ content. Except of course where the sports group goes direct to the consumer.

Netflix’s top executives have said over and over again it’s not interested in sports rights, but what about Hulu? Or HBO for its OTT service HBO Now? Google has explored bidding on sports rights for the past three years, and has the deep pockets it would need to do it. And Amazon seems willing to try just about anything to get more people to sign up to its Amazon Prime service.

Yahoo has other sports programming in its coffers. Yahoo entered a 10-year partnership with the San Francisco 49ers in 2013 that designates Yahoo as the exclusive Web distributor of content for the team and its home stadium.

Verizon, which incidentally has been offering NFL games to live stream to mobile phones for its wireless customers for years now; is also bringing a slate of live sports programming to viewers on connected devices instead of the TV set.

It recently announced an agreement with the NBA that will see live games available to customers of its free mobile OTT service, Go90. The deal only covers a selection of out-of-market games that Go90 users will be able to stream for free. These NBA games will join a handful of other sports programming networks that have signed up as content partner to the Go90 service. Those include select live games to stream from ESPN, NFL Network, ACC Digital Network, Campus Insiders, 120 Sports, and CBS Sports. Verizon also announced recently it’s expanding its NFL live streams to all its Verizon customers for free. All of that is without the need for a pay TV subscription, or even a TV set.

The social video platforms are playing a role in the transition to Internet TV too, and especially for sports leagues and networks.

Snapchat has pioneered a new format of storytelling on its “Discover” platform. ESPN is one of Snapchat’s content partners. It creates daily content for the app, including game highlights and short clips of games. It’s also partnering with sports leagues and broadcasters such as the NCAA and Turner Sports to create and broadcast content on its “Live” feature, which highlights and pieces together user-generated content about particular events or places around the world. It partnered with NCAA for its Final Four tournament earlier this year that saw clips and short videos of the games from both the teams playing and fans at the game.

The NFL was featured on Snapchat “Live” during its opening weekend. Its story attracted 10 million views on the platform over the 24 hour period that video lives on the platform (all videos on Snapchat only have a 24-hour life).

Sports brands are also experiencing growth booms on the platform through their own Snapchat accounts, which any user can follow and receive video clips throughout the day. These firms are now creating programming for the platform to reach viewers on the go and on their mobile phones. Chat Sports has launched a daily “talk show” on Snapchat called “Quick Hitters,” which covers the top headlines in sports through a number of short videos. The firm has seen its viewership increase tenfold over the span of a month on the platform.

Social video platforms such as Snapchat and Facebook are new frontiers for sports leagues to reach viewers; and these rising off-TV sports brands only point to the potential of online video platforms for attracting TV-sized audiences, and in the case of Yahoo’s NFL game, global audiences that TV can’t offer.

We believe that demand for faster broadband will increase, as fans who are watching sports games online will want the best possible viewing experience, with no buffering pauses or frozen frames.

This will lead to better TV Everywhere adoption: Sports games have been the number one driver for pay TV’s TV Everywhere sign-ups. By striking deals with leagues to offer more full in-market games online for streaming, pay TV providers can drive more subs to sign-up for and begin using the TV Everywhere services. Once subs become familiar with TV Everywhere services, their satisfaction with the pay TV package and service provider is improved.

And in turn this could lead to higher prices for sports programming: with more firms able to bid on the content, sports programming rights will only increase in value. It’s unlikely the sports leagues will do anything in the short term to upset their current lucrative arrangements with TV networks.

But in the long term all of this will expedite the death of linear TV. There’s no question that sports programming is the most important programming on traditional linear TV. But as viewer’s content preferences continue to fragment, and as more sports content becomes available off the TV set and outside the pay TV bundle, viewers will have less and less incentive to watch (or subscribe to) traditional linear TV. The NFL live streamed a game held in a foreign country to a global audience for free; and the NBA now enables fans to purchase games a la carte, as a pay-per-view. It won’t be long before other leagues offer similar options for fans.

This will in turn lead to more pay TV cord-cutting. If and when Internet TV providers are successful in bidding on sports rights just as TV networks do, a great many more pay TV subscribers will be tempted to cut the pay TV cord than have done so at present. Imagine if Amazon Prime subscribers could pay an extra fee per month to receive live streams of NBA or MLB games during their respective seasons? Or what if Hulu subscribers could pay an extra fee to live stream an NFL game as it is broadcast on NBC or ESPN?

And finally, we’ll see more “broadband-plus” packages that incorporate sports programming. Broadband/pay TV providers will be able to capitalize on the proliferation of direct-to-consumer OTT sports packages by bundling them with tiers of broadband, as we’re seeing broadband providers do now with the likes of HBO Now, Showtime and Hulu.

This first ran in Rider Research’s Online Reporter.