The beginnings of a quiet battle between online video providers and traditional broadcasters for sports rights are appearing. Live sports represents that last stronghold that traditional TV players have over the army of new entrants, but the digital players are beginning to edge in on that territory. The shake-up will be interesting to watch, as digital video providers are using sports assets in a completely different way from how broadcasters have traditionally used them.
Amazon is the best example of just how different motivations are between the incumbents and the new entrants: Amazon paid some $50 million for non-exclusive rights to stream 11 Thursday night football (TNF) games this season. While that $50 million is 10 times what Twitter paid for the very same privilege in 2016, it’s only a fraction of what CBS – or ESPN – paid for their own content rights. Of course, broadcaster content rights are more expansive: they include broadcast and streaming.
Broadcasters use sports assets to draw in large live audiences, the bigger the better, in order to generate oodles of advertising revenue from the ad breaks in between the plays. The model depends on those large live audiences, which is why ESPN is in such trouble now. After paying up the wazoo for its rights, it’s having a hard time delivering those audiences.
But Amazon’s $50 million investment in TNF games is largely independent of the live audience. Amazon will be selling some advertising against the games, but the business case for Amazon’s TNF live streams is not about viewers – it’s about Prime subscribers.
Amazon requires viewers who wanted to watch the game live online to sign up to Prime. Whether the viewers actually watched the game is beyond the point. Prime subscribers spend on average $1,300 per year on Amazon.com, nearly double what non-subscribers spend on Amazon. If Amazon is able to add 500,000 new subscribers during the entirety of the NFL season this year, it will have made its money back on the venture, plus any additional revenue earned from those new subscribers buying more stuff on Amazon.com.
Increasingly, the digital platforms are looking to sports content to draw viewers and mindshare in the competition for eyeballs, but the digital players are more interested in getting viewers more familiar and comfortable with “tuning in” to their platforms for content. In other words, it’s about developing a habit, not driving large live audiences to single pieces of content. Amazon will be spending $4.5 billion in 2017 on content, all in the hopes of getting more consumers to sign up to Prime. Facebook has sunk $1 billion into its own content strategy, all in the hopes of getting more users to spend more time on the platform.
Apple has pledged to spend $1 billion on content in 2018, all in the hopes of getting more consumers to buy into the Apple ecosystem of media adapters, tablets and smartphones; and Facebook, which has struggled to grow its video business, is using sports content in a similar fashion – to draw viewers on to its new “Watch” platform. Facebook struck a multi-year deal with the NFL last week for programming featuring game highlights. Under the deal, the NFL will post video recaps to Facebook from all 256 regular-season games, as well as clips from the playoffs and the Super Bowl, for global audiences. The NFL’s film division will create two programs for distribution on Facebook in the US. All of those programs will appear on Facebook’s “Watch” platform.
Facebook’s video strategy is certainly tied to its advertising business, but the value to consumers isn’t just the content itself – it’s what the rest of the platform offers. Facebook has already become a daily habit for most consumers, and Facebook is hoping that, by investing in video, it can draw more users to its platform, and squeeze out more time and engagement from existing users.
Part of the strategy for the digital players is to go after sports leagues that have large international followings. Doing so offers the digital players an opportunity to draw in eyeballs from under-served populations in the US, but it also enables them to leverage their global platforms by investing in content with global appeal –something that traditional broadcasters aren’t really able to do. YouTube, for example, became the official distribution partner of the World Surfer’s League back in 2015, hosting live broadcasts of surfing competitions around the world. And earlier this month, Facebook placed a $600 million bid for rights to Indian Premier League cricket matches, but ultimately lost to Star India – who paid $2.6 million for both broadcast and streaming rights. Facebook is rumored to have its eyes on the English Premiere League soccer rights as well, as soccer is a growing sports niche for US viewers.
OTT players are even using big sports events as supreme marketing opportunities. Google’s YouTube, for example, has partnered with MLB for the 2017 World Series to promote its new streaming TV offering, YouTube TV. Under the deal, YouTube TV will act as the presenting sponsor of the World Series, and will use the tentpole event to promote “a new, more flexible way to enjoy their favorite live TV programming – including sports – outside of a traditional cable subscription,” according to a press release. That’s a humorous irony for Fox, which owns broadcast rights to the series.
And there’s also the sense that digital players might be able to better serve both viewers and the advertisers, if given the opportunity to distribute more sports content. Amazon’s streams of TNF games, for example, offered commentary from CBS and NBC, along with commentary in Spanish, Brazilian Portuguese, and commentary from UK announcers for viewers unfamiliar with American football. By doing so, Amazon is helping open up new pools of audiences for the NFL to convert into fans. Amazon is also offering a taste of closed-loop analysis for its advertisers by offering purchase data for consumers who saw ads and then bought those products on Amazon.com.
These developments mark an important point in the growing trend of live sports moving online. Between Facebook, Amazon, Google and even Apple – which has made some moves in the sports sector with its dedicated sports app for Apple TV – it’s not hard to imagine a future where the digital big wigs are challenging traditional broadcasters for top sports rights, especially if those business models rely far less on live audiences.
For the sports leagues, of course, broadcasters are still the safest bet, as they deliver the most reach. But with linear TV ratings eroding – even for some regular season sports games – it’s unclear how much longer traditional broadcasters will be willing to fork over huge amounts of cash for sports rights. Leagues like the NFL, which suffered an unusual ratings dip last season, may soon be forced to incorporate more digital distributors if audiences continue to dwindle. By that time, Amazon, Facebook, Google and Apple may be ready to take their place.