SBJ/December 3 - 9, 2001/Opinion

Technology goes to work in a quiet success

Convergence, integration, synergy. I hear, read and say these words often when dealing with entrepreneurs, venture capitalists and corporate executives. Most want to be at the forefront of the "advanced" version of the Internet, where access will come seamlessly and quickly, and interaction with other media channels is done without any real thought. This future is especially attractive to sports broadcasters, leagues and other media industry stakeholders looking to enhance the in-arena/at-home viewing experience (thereby drawing in associated revenues).

The challenge with interactive television, digital cable and broadband is the still-developing delivery standards, the lack of large-scale mainstream presence, and the chicken-or-egg issue — which comes first, the pipes to deliver digital content or the content that justifies building those pipes. A host of business executives (certainly those in the sports realm) are also still battling over which business models — mass-market, customization, advertising/sponsorship, subscription, etc. — will be the most appropriate in this convergence marketplace.

While billions of dollars are being poured into figuring out those aspects of convergence, there has been a quiet and tremendously valuable example of success in the sports and entertainment realms. It has brought together the technology-driven features of the video gaming world with the competition-based foundation of the world of sports. Both industries are benefiting from this convergence and are poised for outstanding growth.

Sports broadcasters such as ESPN, CBS and Fox, and dozens of leagues, teams and technology companies are now creating and utilizing the breakthrough 3-D graphics, animation and motion technologies that have been a staple of the video game world. Video gamers who fancy role-player games, other strategy games and first-person shooter games are already used to assuming a virtual character, being able to employ multiple view technology features, and experiencing virtual worlds.

Why has this use of advanced technology features become important in the world of sports? Because fans have witnessed a steady increase in price of viewership (tickets, cable subscription) without an attendant increase of new, compelling content.

Video game companies have actually grown their user base (and overall revenue) over the past 15 years by continually introducing better software and hardware for the player.

Are sports broadcasters, properties and other industry stakeholders learning from burgeoning video game industry? Sure seems like it. Companies such as AniVision, Trakus and Orad have created technologies that, next to signing a multimillion-dollar contract, put the fan as close to the game as possible. Multiple spectator views, real-time game simulation and robust player/game data are features that give a peek into what fans desire and what the technologies are capable of providing.

Why is this happening now, this convergence of sports, entertainment and technology? Frankly, when we think of one of these industries, we are often driven to think of the other two. The evolution of these respective industries has brought them together. Our enjoyment of athletics has not only become our favorite leisure activity, it has also become our favorite spectator activity. And what makes viewing sometimes even better than playing is technology — all the way from radio, TV and mobile devices, to 3-D, motion technology and voice activation.

There is obviously a financial impetus as well to this convergence. Leisure dollars are relatively scarce. There is a lot of money out there but it is chasing an ever-increasing number of entertainment options. Customer acquisition costs remain high (bankrupting many dot.coms over the past two years) while brand loyalty is continually challenged by both domestic and international offerings.

Products and services driven by technology enable the providers (whether they be sports executives, music producers or movie directors) to offer a distinctive entertainment experience to the fans. The ability to stand out improves the chances of attracting a significant share of those leisure dollars.

And what has the video gaming world gotten out of this convergence? By understanding the sports marketplace and its evolution, stakeholders in the gaming industry have been able to effectively tap into our society's love of formal competition, public adoration of top players and performers, and media coverage.

There are thousands of locally run tournaments, large-scale tournaments taking place online, and major off-line events led by organizations such as the Cyberathlete Professional League (its world championships attract hundreds of players, thousands of spectators, and prize money topping $100,000). Top players hold endorsement contracts, are sponsored and are considered stars by hundreds of thousands of players and fans.

The video game market, currently pegged at over $10 billion in annual revenue and anticipated to surpass $20 billion over the next five years, owes much of its growth to sports and the competition-based foundation that supports the games we play.

Has this convergence reached its ending point? Far from it. From the sports side, broadcasters and content property owners are just beginning to see and respond to the need for simulation, heightened access, virtual characters and worlds. Turner Sports Interactive, a division of AOL Time Warner's Turner Broadcasting Systems, just signed animation firm SportsBlast to produce a weekly three-minute animated Web series for nascar.com.

Other opportunities abound, such as in fantasy sports, which is still a somewhat passive (paper and computer screen) activity. What about the ability to select players and run your own games online each week? To run simulations for your offense led by Brett Favre, Curtis Martin and Randy Moss? With advanced simulation, 3-D and digital features, fans will do this at home, and eventually on various mobile devices.

For video games, sports properties provide rich content that can be leveraged to create even more exciting games with better simulation and interactive features. The video game market, while large, does not now have the same grip on American society as sports do. As the number of star gamers, the level of endorsements and the press coverage (i.e., dedicated TV/cable channel) increases, video games will truly break out into the mainstream "competition" market currently monopolized by sports.

A key factor in the growth of these respective industries, as highlighted above, is the effect of the content vs. infrastructure equation. Sports, and video games, provide the most compelling content for pipe providers such as AT&T, Comcast and Cox Communications. Will it be enough for these and other players to roll out the type of Internet connection speeds, integrated hardware and interactive features to accelerate the convergence we have benefited from so far?

The billions of dollars from traditional revenues, supplemented by potentially lucrative television commerce, subscription-based models and newer ad/sponsorship vehicles should be enough to keep the convergence ball rolling.

Sab Singh is director of sports business for Growthink, a business strategy consultancy in Venice, Calif.

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