November 5, 2019
By: David Paro - President, Deep Alliance
Winning the Rights: How to Engage Fans Where They’re Consuming Content
Technology that allows fans to become even more immersed in the games they love is increasingly a factor as sports leagues make decisions on the best platforms to distribute their live content. The challenge of today and tomorrow is balancing the desire for maximum reach with the need to create a more engaged fan. Changes are already underway and many more are coming.
For the major sports leagues (i.e. NFL, NBA, MLB, NHL, NASCAR, PGA TOUR), live streaming as the primary distribution source remains untenable at present due to a number of issues, including scalability. The landscape, however, is rapidly shifting as Silicon Valley has recognized the power of live sports and has the money to hedge some big bets.
Why are distribution decisions so critical to the sports business model? Among major sports properties, media rights deals are the largest revenue stream. In the case of the NFL, America’s most-popular and most-viewed sport, they account for over 50% of total revenue. The distribution deals, usually long-term in nature, are a major reason that valuations of professional sports remain high. In fact, even in the face of stagnant (and in some cases decreasing) viewership, rights deals for major properties continue to increase.
The reason for this escalation lies in the power of live sports. Despite fragmentation of the marketplace, viewing habits that are changing with the rise of mobile viewing, and the availability of new content services, sports are one thing that viewers want to consume live. Need proof? In 2018, 89 of the top 100 most-viewed shows were sports broadcasts. And because of that, advertisers continue to pour money at them, thus helping to justify the ever-increasing rights fees for major sports properties.
But while the formula that delivers big payouts to member teams remains steady, the seismic shift in both technology and consumer behavior are garnering significant attention by sports business decision makers. Most experts agree that during the next wave of media rights deals, one or more of the FAANG companies (Facebook, Apple, Amazon, Netflix, Google) will be a factor. While linear TV distribution still provides the greatest potential reach — a critical factor — it has become imperative that the purveyors of sports content address changing viewing habits, particularly among millennial and Gen Z audiences. As the technology advances, more people will be able to concurrently live stream. That said, it will be years, if not a decade, before the live stream of a major sporting event will deliver a viewership number that comes close to linear TV.
Cord cutting and cord shaving are real phenomena. This, however, does not mean that younger fans are not consuming sports content. According to Nielsen data, NFL ratings among millennials dropped 9 percent during the 2017-18 season, even though the overall number of millennials watching the NFL had increased. The decline was due to a drop in the number of games watched and the number of minutes watched per game. This data is a ringing endorsement for the need to increase fan engagement. Not only will that increase the amount of programming consumed, but it will also make the time spent with that content more meaningful.
With the financial formula that’s currently in place, the gravitational pull of the market will move a bit slower than physics might suggest, but unequivocally, all major properties are working to address the mobile viewer, while developing more engaging viewing.
Gaming, gambling, VR and AR all hold promise for engagement and long-term revenue. But unfortunately, many of these platforms that are already available won’t reach their full potential until distributors are able to develop workable monetization strategies.
It’s reasonable to believe that Facebook, Amazon and/or Google will make a bold play to acquire an exclusive streaming package for one or more of the major sports properties within the next five years. But the majority of major sports will still be distributed via linear means. The big change, however, is already being seen. For instance:
- Major sports properties are dabbling in predictive offerings via second screen competitions, such as NBC Sports Predictor. More highly engaging offerings like Your Call Inc.’s predictive product, set to launch with the AutoZone Liberty Bowl, will be an even better showcase for the level of in-game engagement fans are longing for.
- Newer or lesser-known sports are using a digital-first strategy to establish and burnish their brands. ESports has largely grown on the back of Twitch, an Amazon-owned streaming service focused squarely on eSports. Services like FloSports have provided lesser known sports properties a means to build and monetize an audience.
- Content that is supplemental to a property’s core regular season is landing on streaming services to facilitate greater engagement and mobile viewing. For instance, Warner Media’s subscription-based streaming service, B/R Live, held exclusive rights to The Match, the winner-take-all showdown between Tiger Woods and Phil Mickelson.
- The Supreme Court’s 2018 decision to overturn the federal ban on sports betting has sports business executives scrambling to find ways to take advantage of the inherent engagement and revenue that it will drive. FOX Sports has even launched its own digital sportsbook, Fox Bet, and is already accepting wagers in states that have legalized sports betting. Additionally, Fox Bet is a natural extension of the Fox Sports brand, providing detailed data about the most-popular sports.
It’s an exciting time to be involved in the sports content space as new options and technology are creating demand that we didn’t even know existed 10 years ago — along with distribution options that weren’t yet in focus. As monetization opportunities are rolled out on the “engagement side,” we can expect to see even more emphasis placed on engagement. And while reach will continue to be a factor in setting ad rates, it will be far from the only game in town.