Yankees games available via Amazon Prime. Cowboys action streaming on HBO Max. And the Lakers holding court on an app of their own. That future—or one like it—isn’t as distant as you might think.
Along with YES Network partners like Amazon and Sinclair, the Yankees are currently exploring how they might deliver games over-the-top (OTT) of traditional linear cable channels. As part of that effort, they were set to stream 21 non-exclusive games on Prime Video this summer, but the delayed start to the season, now set to begin July 23, has pushed those plans until next year. Still, the pandemic hasn’t hindered the rise of sports streaming options, according to team president Randy Levine. In fact, it’s driven innovation.
“The question is, when does the cable model switch to the OTT model?” Levine said in an interview. “I always thought it would take seven to 10 years, but I think this COVID experience has accelerated that shift.”
Key players across entertainment have already made the move. AT&T’s HBO Max, NBC’s Peacock, Apple TV+ and Disney+ have all launched over the last 12 months to compete with earlier entrants like Netflix, Amazon Prime Video and CBS All-Access.
However, sports are sparse on those services for two reasons. One, broadcast rights to live games are tied to long-term agreements, and while Disney+ can simply release Hamilton as an exclusive, they can’t exactly create more NFL games. Two, the existing business model is too good to give up.
“Sports on cable was an incredible business model because everybody pays,” said Tracy Dolgin, a 30-year media veteran now working for The Raine Group. “It doesn’t matter how much you watch or if you watch, you pay, and you pay a pretty high rate.”
But younger generations have proved less willing to pay for cable. This year alone, Dolgin estimates cable penetration could drop by as much as 10 percent. A May analyst report mentioned “the possibility of a rapid death spiral for the entire category,” with up to 40 percent of households no longer having a cable subscription. Continued losses would require a rethinking of the underlying business model.
Meanwhile, new platforms might be able to extract as much value from sports. Content and distribution companies like FOX and DirecTV propped up entire businesses largely on exclusive sports content. While services like Prime Video have already built massive businesses with less help from live games, subscriber acquisition is still vitally important, particularly in an increasingly crowded field.
A new Prime subscriber not only pays $119 a year but is also expected to spend twice as much on Amazon overall. Sports could also help AT&T boost phone service signups or help Apple sell more devices, which would allow those companies to compete for coveted sports rights. Ultimately, showing live games would result in a large financial return beyond their direct video subscription revenue. Next week, NBC’s Peacock service will launch with a day’s worth of exclusive Premier League games. NFL and Olympics coverage will show up later as parent company Comcast uses sports to build an advertising-based streaming business that will also serve as “a hedge against the market forces pressuring NBCU’s TV networks,” according to Variety.
Those business models have developed just in time. A number of leagues have rights becoming available over the next few years, most notably the NFL in 2021 and ’22. And technology has improved to a point where executives should be comfortable streaming big events. Streaming latency, long a bugaboo in the sports world, “is going to get worked out, probably in next 12 to 24 months,” said Scott Gutterman, the PGA Tour’s senior vice president for digital operations.
Sports will still be available on cable. With millions of fans already there, leagues will take a hybrid approach, experts suggest, splitting rights between old and new broadcasters. Sometimes those new outlets, such as Turner Sports’ B/R Live and NBC Sports Gold, will be owned by traditional players. Other times, they’ll be Silicon Valley competitors.
Sinclair, which recently made a $9.6 billion bet on local sports by acquiring 21 Fox-owned regional sports networks, is preparing itself for that two-headed world. It has teamed up with OTT tech provider Deltratre to replace the Fox Sports Go App it inherited, hoping to increase engagement on the digital platform. Sinclair is also considering a “super fan” option. While access to most games will still be tied to a cable login, “super fans” would be able to pay to receive exclusive content. That type of direct offering could provide a stepping stone one day to a direct-to-consumer product that cuts out the cable provider.
With new bidders like Peacock and DAZN in play for the next round of rights deals, fees are expected to rise despite a macroeconomic slowdown. But beyond the bottom line, the shift to digital also offers leagues and teams something else—a chance to meet their fans.
“This sounds crazy but it’s true: Historically, teams didn’t know who their fans were,” media consultant Ed Desser said. “They didn’t know who was setting foot in their arena. They didn’t know who was listening to games on the radio. They didn’t know who was watching games on TV. They had been disintermediated.” Even online, teams were often cut out from the conversation happening on social media. That too, is changing.
In many cases, team content production has evolved from a marketing component to a play for fan engagement. The Memphis Grizzlies’ Grind City Media now covers Memphis sports beyond those housed in the team’s FedExForum. The Dallas Cowboys offer exclusive shows and access to practice on their team-owned platform. European clubs have gone even farther, with FC Barcelona launching a $5 per month video service and Manchester City offering a similar subscription.
“Normally, you might have a membership for going to the stadium, a membership for buying merchandise, and maybe then a membership for OTT content,” Deltatre executive Carlo De Marchis said. “Now imagine all of this as one unique membership.” For a monthly fee paid directly to their favorite team, fans could get access to tickets, concessions and jerseys, as well as exclusive content and even advantageous betting odds.
While many leagues and teams put content on social platforms in the hope of expanding their reach, Phenix CMO Jed Corenthal pushes clients toward direct-to-consumer experiments, not only because of the potential revenue, but because of the valuable data teams can collect on their own platforms.
Now that they’re competing with every other alternate form of entertainment—not just rival teams but also Fortnite and Netflix—data collection is crucial in helping teams target potential fans and keep current consumers.
Washington Capitals, Mystics and Wizards owners Monumental Sports & Entertainment have been learning that lesson for four years now, ever since launching—in partnership with NBC—an OTT platform of their own in 2016. Last year, Monumental Sports Network streamed more than 500 games across 20 leagues. “We’ve learned a lot about what it takes to acquire a customer, to keep a customer,” MSN general manager Zach Leonsis said. “We’ve learned about price points and pay-per-view versus subscription models, we’ve tested bundling video with merchandising and in-person events…. We’ve learned a lot.”
Personalization and rapid, consumer-focused updates will also be a key to future success, Leonsis said, just as they’ve boosted the likes of Netflix in the scripted space. This spring, a lack of games and a dry advertising market only further proved the need for teams to have ways to engage their fans directly.
Still, ownership doesn’t plan to move its highest-value content onto the platform just yet. “The cable model is the best value,” Leonsis said. “It has the largest reach, and it’s the most lucrative business model right now.”
Leagues have also experimented with direct offerings, with the NBA selling NBA TV access for $7 per month and MLB putting select games on YouTube and Facebook. The NBA’s 2K league has provided lessons on livestreaming via Twitch and building a business on top of free content. But going all the way is simply too large of a risk for most entities.
Mid-tier and smaller properties rely on the ESPNs of the world to promote as well as broadcast their games as they attempt to grow, and even massive franchises often don’t reliably sustain interest. An exclusive Warriors Prime membership might have boomed over the past decade, but a repeat of this year’s 15–50 record would eventually undermine the product. And that’s the other thing about online services—they’re generally easy to cancel.
Only the biggest franchises, like the Yankees, Cowboys or Lakers, can truly hope to build a sustainable platform themselves, and even they are likely better off letting a higher-margin business like Amazon or Apple leverage their content than go at it alone.
When it comes to making these decisions, Desser says, it’s worth noting that sports have been here before.
“Back in the 1970s and ’80s, regional rights were almost exclusively on local over-the-air broadcast stations and what happened was, increasingly, networks got formed in each market,” he said. “They started out by licensing rights to games that were not on broadcast, and over time, they started to take over the games that had previously been shown on broadcast.”
“In the early days it was sort of like the wild, wild west,” he added. “It’s completely analogous to what’s happening today.”