Back in early March, Facebook director of sports league and media partnerships Rob Shaw penned a guest column for Sportico explaining how sports’ “historically lucrative broadcast business model needs to evolve, or [leagues] risk losing an entire generation of fans.” The op-ed offered up free-to-air distribution as a potential solution to address the ongoing decline in pay TV subscriptions and the increasing difficulty rights holders face in reaching young fans. Shaw suggested free-to-air could “fuel a promising new business model for leagues and networks,” one based on “the benefits that come from establishing a direct relationship with consumers, [as opposed to] from rights payments.”
But the Facebook executive acknowledged that, at the time of publication, the jury was still out on if sports fans would be willing to “spend money to have these moments; to be a part of these events.” The social network has since seemingly achieved proof of concept. More than 17,000 fans spent $2.99 on a virtual ticket to stream Challenge Miami (a triathlon event) and “thousands of people paid to have different [non-live] experiences with the World’s Strongest Man competition,” Shaw said.
Our Take: Historically speaking (and particularly during the pandemic), free-to-air distribution has helped rights holders maintain and/or increase engagement. “But [the platforms] didn’t really answer the question of how do [the rights holder] keep the lights on,” Shaw said, noting publishers typically had to rely on sponsorship sales to generate revenue.
Facebook’s video monetization tools, which include the ability to place content behind a paywall on a pay-per-view basis, change that dynamic. Leagues and networks now have the “opportunity to get in front of a highly engaged, mass audience and actually be able to drive revenue profits [without brands having to be involved],” Shaw explained.
The bull case for free-to-air distribution (particularly as a long-term strategy for the big four leagues) is that fewer people are subscribing to paid television than in the past. “If you don’t have cable, are you going to move to new forms of distribution? [It’s not clear] whether or not the vast majority of people will watch live sports events on a subscription basis [in the future],” Shaw said. Vertere Group founder and CEO Tim Hanlon agreed, saying a subscription to a media service is already viewed as “an option, not mandatory, in younger audiences’ minds. The initial zeitgeist is ‘where can I find it’ and ‘can I find it for free’.”
Challenge Miami and World’s Strongest Man are a far cry from the NFL and NBA. But as Shaw explained, Facebook’s content monetization tools were not developed with the biggest leagues in mind. The social network hosts thousands of events on the platform daily (including some at the rec league level). In fact, at least initially, Shaw envisions Facebook’s paid online events functionality will largely serve the needs of “high schools and smaller colleges, that don’t really have the resources to build a direct-to-consumer product [but have passionate fans willing to pay for quality content].” The countless pro leagues without billion dollar media rights agreements would also seemingly find value in the platform. For what it’s worth, Facebook is said to be talking to “every league imaginable.”
Hanlon believes amateur sporting events will ultimately be Facebook’s sweet spot. “The nature of Facebook is much more of an information sharing or social connection platform than it is an entertainment destination.” Because of how people use the site, “the bigger opportunity is in making personal sporting events, kids sporting events, local club soccer team matches or dance recitals into [paid] events,” he said.
In the short-term, the big four leagues are more likely to use free-to-air distribution for non-live, behind-the-scenes and/or pre- and post-game content than for the actual game broadcast. Existing long-term media contracts aside, “the sports business model is incredibly complex and prosperous. There’s not going to be many leagues willing to take a chance on [giving up] a significant contract to see if they can reach an incremental audience,” Shaw said. Remember, Facebook isn’t offering rights holders large revenue guarantees.
Shaw is confident that over time, as pay TV attrition continues, free-to-air distribution will become more attractive to the big four leagues and their broadcast partners. They “are going to become more solutions-oriented as far as trying to get their product in front of as many highly engaged people as possible, while being able to drive [their] business,” he predicted. Facebook has the scale already on platform (think: less friction)—and now the content monetization tools—that rights holders desire.
The Facebook executive said he could envision a future where games air simultaneously on both a local regional sports network and on the social network behind a paywall. “One of the great challenges [currently] within the industry is how do [leagues and networks] put their content in front of engaged audiences on social platforms, which are historically young and a different demographic than the ones they typically reach on broadcast,” Shaw explained.
The fact that younger millennials and Gen Zers are willing to pay for a live sports moment (see: Triller’s last two events)—even if they are not necessarily willing to pay for a monthly television subscription—is viewed as a promising sign for the industry. “It means that [the younger demo] is not lost, that you can still program to them,” Shaw said.
As Hanlon noted, Gen-Z’s initial tendency is to see if they can get content for free–which makes piracy a macro issue for rights holders reliant on PPV revenues. But if Facebook’s platform is going to be used primarily for youth/amateur events, Hanlon thinks privacy is actually the bigger issue. “It’s more about maintaining the integrity and privacy [of the event],” Hanlon said. “Facebook is the ultimate sewer when it comes to people chiming in on stuff, and the last thing the world needs is middle school soccer players being trolled on social media.”