If you believe the cord-cutting trend will continue and understand that existing alternatives to cable and satellite are expensive and inefficient in terms of delivering consistent, high-quality live video content, then it’s evident sports rights owners and rights holders need a new distribution solution. Most assume direct-to-consumer will eventually solve the problems associated with an eroding pay-TV bundle. But the economics and execution of streaming are challenging. Evoca TV CEO Todd Achilles suggests that it won’t be DTC, but a “rebirth of broadcast” television—a trend already underway—that ultimately provides rights owners and holders the control needed to meet and deliver content to their fans, wherever they are and however they want to consume it.
JWS’ Take: The FCC’s 2017 approval of a new broadcast standard (ATSC 3.0 or NextGen TV) sparked the “rebirth of broadcast.” As Achilles explained, the spectrally efficient technology destroyed the decades-old paradigm of, “You are going to distribute this [content] for free over broadcast and it’s going to be ad driven, or it is going to sit behind a paywall with a shrinking subscriber base. Now you can kind of blow that up and do both.” For the first time, rights owners and holders can choose the massive reach of broadcast and the ability to deliver live content over the air, behind a paywall. And because the ATSC 3.0 standard is internet-based, DTC is effectively a free byproduct of NextGen TV broadcast.
That doesn’t mean all broadcasters are taking advantage of the additional capacity and capabilities (think: broadcasting in 4K, premium channels behind a paywall, more local sports, overlay player stats, lots of long-tail content) the way Achilles’ company Evoca, which is using it to create an affordable, over-the-air (OTA) pay-TV solution, is—at least not yet. The bulk of them are “just using the new technology to replicate what they were doing with the [old] broadcast standard,” Achilles said. “Same signal, same channel.” Of course, to introduce the kind of offerings Evoca has would require building set-top boxes, having a subscriber management platform, billing and customer support services—not exactly core broadcaster competencies.
Jed Corenthal (CMO, Phenix) said many broadcasters and broadcast groups are actively developing use cases (think: monetization, viewer engagement) for ATSC3. But to roll them out to “their full extent will take some time,” he said, “as it requires development and experimentation by the broadcasters as well as a critical mass of capable TVs or adapters.”
Evoca is taking a different approach. The upstart, based in Boise, Idaho, is leveraging the new transmission format to deliver competitive pay-TV bundles built around local sports programming and offering them at lower prices than the established operators (the company also has free bundles). “Live sports is the killer app for NextGen TV,” Achilles said. Sports and news programming are “where you get all of the efficiencies of broadcast, that one-to-many efficiency of sending a signal out over a tower and covering an entire market,” he explained.
This could change the game for struggling regional sports networks. While the sports world is fixated on DTC’s promise, streaming remains a challenge from both an execution (see: latency, piracy) and cost standpoint. As Achilles explained, “The core economic problem is that if 100,000 people are watching a baseball game, that’s 100,000 parallel, simultaneous DTC streams [the broadcaster must deliver]. With broadcast, just one stream [of the game] will cover 80-85% of the homes in a market.” Of course, he noted that by reducing the cost structure “by three to four orders of magnitude,” Evoca has “more room to be able to pay the RSNs what their normal fee is” and still price its service significantly cheaper than the legacy providers. The base bundle currently costs $9.50 month (subscribers get the pricing for life).
In the short-term, Evoca should be able to provide reach to RSN businesses in markets in which it operates. The company already has distribution deals in place with Root Sports Northwest in Boise and AT&T Rocky Mountain and Altitude Sports in Colorado Springs.
In Colorado, Altitude Sports has been blacked out in 85% of the market for much of the last two years (as the company spars with distributors). So Evoca provides a pathway for an RSN that has been frozen out by the established distributors to reach fans. “Altitude was extremely pleased to join Evoca’s channel lineup when they launched in Colorado Springs,” said Kroenke Sports COO Matt Hutchings. “Their service allowed fans to once again have a new outlet to access their favorite teams.” Of course, Kroenke Sports owns both the Avs and Nuggets (whose games both air on Altitude).
Unsurprisingly, a service that brings games back into the fans’ home and at a lower price than legacy providers is gaining traction. “We understand that the response to Evoca has been extremely strong,” Hutchings said. Achilles indicated the company, which launched its bundle in Colorado Springs with Altitude less than a month ago, had already seen subs increase around five-fold month over month (we’re still talking about numbers in the hundreds).
Despite Sinclair Broadcast Group (Nasdaq: SBGI) having done arguably “more to drive the technology than anybody else,” Achilles said, Evoca has been unable to get a deal done for Bally Sports Arizona in Phoenix (launched in market on Oct. 1). It is not evident why the publicly traded media conglomerate won’t play ball (even with Evoca willing to pay retrans). Evoca’s 3.0 signals reach 80% of homes in the DMA; one-third of households in-market watch TV OTA (meaning they aren’t in the pay-TV ecosystem); and SBGI already distributes the content to a multitude of other MVPDs. Sinclair declined to comment.
While Evoca seeks to work with the RSNs today, it hopes that as the business grows it can either acquire exclusive broadcast rights or partner with clubs on a model that will give them the flexibility to “meet the fan where they are rather than forcing them to make a decision,” offering what amounts to the next-generation RSN.
Of course, if Evoca is going to buy rights it will need significantly more capital. The company, which has raised $20 million over the last three years, is currently in the midst of funding a $50 million Series D round. The latest round is expected to carry the company until it is cash-flow positive.
Several trends are working in Evoca’s favor, including the increasing number of homes watching television with an antenna (the fastest growing category among cord cutters). While the staggeringly high percentage of homes in the company’s Idaho DMA watching OTA can be attributed in part to the lack of pay-TV providers in those areas, the number of households falling outside of the traditional MVPD ecosystem is rising in larger markets, too. SNL Kagan data indicates “Phoenix is now 33% over the air, Dallas is 30% over the air,” Achilles said. For what it’s worth, the New York City DMA has among the lowest percentage of households watching OTA (~12%).
That’s no guarantee Evoca will succeed long-term. It has a long uphill battle ahead in terms of generating product awareness in a crowded market and overcoming a learning curve (as any new tech does). “ATSC 3 [also] enables broadcasters to create their own innovative solutions, which may decrease their reliance on external partners,” such as Evoca, Corenthal said.