SBJ/November 14-20, 2011/MediaPrint All
Two and a half years ago, when International Olympic Committee member Richard Carrión was talking about potential bidders for Olympic rights, he listed the usual suspects: ESPN, Fox and NBC. But he also mentioned what many believed to be a far-fetched possibility: A company like Google could team with an over-the-air broadcaster on a competitive bid.
Two years later, it’s clear that Carrión’s comments, though premature, weren’t irrational.
YouTube, which is owned by Google, is building a sports operation, and though it’s unlikely the company will become a sixth player in the bidding wars for sports rights any time soon, it is intent on dabbling with online rights.
The company announced two weeks ago that it will launch seven sports channels: a soccer channel programmed in part by Major League Soccer, two sports channels programmed by Bleacher Report and SB Nation, an athlete channel called NOC (Network of Champions), and three action sports channels programmed by Wasserman Media Group, NBC’s Alliance of Action Sports (Alli) and Red Bull Media House.
Claude Ruibal, who founded World Championship Sports Network and was hired earlier this year as YouTube’s head of sports content, described the effort as an experiment. He said that after years of relying on user-generated content to attract viewers, the company has decided to pay for higher quality content in hopes that people will come to view the programming and stick around to watch user-created videos, or vice versa.
Ruibal said sports and entertainment were the two categories that YouTube focused on when it decided to launch the channels. The company selected soccer and action sports as founding channels because both already attracted a significant number of viewers for user-generated content and original content such as Ken Block’s Gymkhana video series
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“We thought [the channels] would be additive,” Ruibal said.
The presence of YouTube in the sports rights marketplace — even if it’s only bidding on niche sports right now — is being closely monitored by everyone from rights holders to TV networks to video distributors. Because of the deep pockets of its parent company,
YouTube streamed America’s Cup (top) and Copa America (center), and MLS is helping program a new channel.
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“The economic model is not such that I think they would go out and write a check for $4.5 billion for the Olympics to put on Google,” Chris Brearton, managing partner, O’Melveny & Myers, said at SportsBusiness Journal and SportsBusiness Daily’s Sports Media and Technology conference in New York last week. “I see them more now as somebody who is involved in archival programming, interstitial programming, maybe being a partner with [an existing broadcast or cable channel] in a bid for something to help monetize it.”
That’s a structure that some media executives find attractive. Turner has been working with YouTube on its NBA channel since 2007 and believes the company could be a viable partner to bid on future rights.
“We [worked with Google] to understand how it works and to be able to figure out how we work together, so as the rights fees keep going up, we find different ways to monetize them,” said Lenny Daniels, Turner Sports chief operating officer and executive vice president. “We learned it’s not a big business right now. It’s a great place to play. It’s a great place to learn who’s going where and when they are going to play. I don’t think they’re ever going to take the place of what we’re talking about here overall.”
When it comes to live rights going forward, Ruibal said Google will be opportunistic. He said it will show mostly underserved sports that have a disjointed, international audience with pockets of fans spread across a number of countries. He pointed to fencing as an example.
Last month, the International Fencing Federation streamed its world championships from Italy live on its YouTube channel.
YouTube already has begun experimenting with live sports. It partnered with the Indian Premier League, a Twenty20 cricket league, to stream games worldwide earlier this year, and it also streamed Copa America soccer games this summer and offered multiple video streams from the America’s Cup sailing competition.
Terms of each of those agreements differed, and it’s unclear if YouTube paid any production costs or rights fees. None were exclusive broadcasts but the total viewership was encouraging.
“We had really strong viewership and that said to us, ‘We think there’s an audience here for us,’” Ruibal said.
At least initially, Google’s cost structure is low enough that any bid on media rights for a major sports property appears to be a long shot.
Each participant in its YouTube channel plan was paid a production fee, reportedly worth $5 million, to deliver original content for its respective channel. YouTube will sell advertising against the channel, and after recouping its production investment, it will split advertising revenue with the content provider. They also jointly own the channel.
“It seems that YouTube made a decision that it will program largely non-premium channels,” said David Bank, managing director of global media and Internet research for RBC Capital Markets. “It doesn’t sound like they will be aggressive about getting into the rights business any time soon.”
The most immediate upside in launching a YouTube channel under those terms for Wasserman Media Group, Alli and others is the free marketing a channel offers. Each was handed what amounts to a $5 million marketing budget by YouTube to fund the creation of content that they believe can raise recognition of their athletes or brands.
“The visibility of YouTube is unparalleled,” said Circe Wallace, Wasserman’s senior vice president, action sports. “We couldn’t put something [on a website] with the same profile as YouTube. The talent we work with understand this is a great marketing opportunity for themselves, their sponsors and their own brands.”
Possibly the biggest winner under those terms is MLS. With little or no cost up front, the league will be able to mix its highlights and original programming around its teams and players with highlights and footage of other leagues, teams and players worldwide. The channel can put the league’s teams before a global audience alongside soccer powerhouses like FC Barcelona.
In short, the league gets a channel — underwritten in part by YouTube — that has international reach without having to haggle with cable operators over carriage.
In fact, international is the biggest upside for everyone participating, and the biggest focus for YouTube.
“I look at this globally, not domestically,” Ruibal said. “The U.S. is a key and important market, but for sports it’s just a piece and not even our biggest piece.”
Derek Chang, DirecTV executive vice president of content strategy and development, said YouTube’s strategy made sense, especially if it’s able to keep its costs low. That view suggests YouTube, and its parent company, Google, will not be bidding on premium sports rights any time soon.
“The hurdles aren’t high to make money on it,” Chang said. “If they can drive more eyeballs to the platform through that and monetize it enough, it’s just a different business model that may be a good enough business model for what they’re trying to do with it.”
For Brian Bedol, a cable industry veteran who founded Classic Sports Television in 1995, the YouTube channels feel a lot like the early days of cable. Bedol, who now runs Bedrocket, a new company that programs the Wasserman and soccer sports channels on YouTube, compared the new channels to CNN and MTV 25 years ago.
“What you’re seeing is a bit of a tip of the iceberg,” he said. “This is where the young male demographic gets more and more of its entertainment. If you’re in sports, you need to be looking at how you’re delivering sports over the Internet.”
That idea — a dream, really, for some distributors — was brought up again last week when Dish Network Chairman Charlie Ergen complained about the high cost of sports channels.
The complaint is a familiar one. For the past 20 years, distributors’ most consistent gripe has been about the cost of sports networks. Ergen last week complained that sports programming makes up 20 percent of daily viewing and 50 percent of the satellite distributor’s costs, a ratio that he’d like to switch.
Ergen, a former professional poker player, has a maverick reputation in the media world. He already has dabbled doing without high-cost sports networks. Dish Network doesn’t carry any of the four regional sports networks in New York and went about a month last October without any of Fox’s RSNs.
“If the economy continues to struggle along, that’s probably a valid long-term strategy,” Ergen told an earnings call last week.
With around 14 million subscribers, Dish Network is the country’s third-largest distributor behind Comcast and DirecTV. Because of its size, Dish Network is an important distributor to programmers, who get paid based on subscriber numbers.
But after reporting a loss of 111,000 subscribers in the third quarter, Ergen was in the mood to find new pay-TV models. It didn’t help matters that Dish Network’s satellite rival, DirecTV, added 327,000 subscribers in the third quarter, thanks largely to its exclusive NFL Sunday Ticket deal.
“You’ve really got four providers in every market now: the phone company, cable company and two satellite companies. Everybody sells the same thing,” Ergen said on Dish Network’s earnings call. “As contracts come up for renewal, there could be a day when one of the big providers just doesn’t have a sports offering, so they can differentiate their programming in a major way. In theory, their cost could be cut by half to the consumer.”
Ergen suggested that he wanted to test the theory out last year, during his carriage dispute with Fox that lasted four weeks in October 2010. The deal kept Fox’s 19 RSNs off of Dish Network throughout October. The satellite distributor ultimately cut a deal as the NBA season was about to start.
“We ultimately were able to reach an agreement,” he said. “But had we not, we were certainly prepared to not have regional sports.”
Of the four RSNs in the New York market, Dish Network has never carried YES Network. Just before the MLB season, it dropped SportsNet New York, which carries New York Mets games. It also is operating without MSG or MSG Plus, which carry the NBA Knicks and NHL Rangers.
During the earnings call, Ergen said Dish Network’s results in New York show that distributors can exist without local sports rights.
“We certainly have plenty of customers in New York,” he said. “I think that there’s a limit to where sports costs can go and at some point, it’s not going to be in 90 percent of the homes if the costs go too high.”
The numbers, however, show that Dish Network is hardly thriving in New York. Its costs are down; the four RSNs cost distributors around $10 per subscriber per month, according to numbers from SNL Kagan. But Dish Network’s subscriber numbers also are way off in the New York DMA, where five other distributors have more subscribers.
According to MediaCensus 2011 numbers from MediaBiz, Dish Network has 327,296 subscribers in the New York DMA, putting it well behind Cablevision (more than 2.915 million), Time Warner Cable (more than 1.352 million), Verizon (862,818), Comcast (714,970) and DirecTV (663,327).
Without the four RSNs, Dish has less than 5 percent of the pay-TV footprint in the tri-state New York area. Nationally, it has around 17 percent.
Last week, I asked Time Warner Cable’s Melinda Witmer if she would ever consider rolling out a service. She said no, citing the popularity of sports networks.
Industry analysts also question the limited sports strategy, saying that live sports is the one genre that distributors offer exclusively. Many, like media consultant Chris Bevilacqua, point to live sports as the main reason why cord cutting hasn’t taken hold.
“What’s holding the MVPD business together?” he asked, regarding multichannel video programming distributors. “As Hulu and Netflix and video on demand and non-linear viewing changes, and people’s viewing habits disperse in different places, the one thing you can’t get without an MVPD subscription is live sports. It just becomes more valuable.”
The idea of dropped expensive sports channels may be attractive to some — but evidence shows that distributors who drop sports channels will be shedding subscribers soon afterward.
John Ourand can be reached at email@example.com. Follow him on Twitter @Ourand_SBJ.
ESPN borrowed in part from the Olympics when it created a global sponsorship for the X Games, so it comes as no surprise that the network has turned to someone with Olympic expertise to lead that sales effort.
Mark Nolan, who most recently worked as director of Olympic sales at NBC, joins ESPN this week as vice president of X Games sales. At NBC, he developed sales and marketing plans for the 2010 Winter Olympics, the 2012 Summer Olympics, and the company’s winning bid for broadcast rights to the 2014 through 2020 Olympics.
Nolan, who will report to Johnson, will manage a small marketing and sales staff and will play a role in hiring members of his team. ESPN is still in the process of determining how many people it will hire, Johnson said.
ESPN’s sales force has identified 14 categories and is looking to secure six to eight global sponsors in areas ranging from technology to quick-service restaurant, and beverage to credit card services. Those deals will be complemented by local deals.
The sales structure mirrors the one the International Olympic Committee developed 25 years ago to support the Olympics. The organization sells 10 to 12 worldwide sponsorships in its The Olympic Partner (TOP) program and complements those deals with local sponsorships in select categories sold by organizers of specific Olympics, like the 2012 London Organizing Committee.
Johnson said the ESPN sales staff already has reached out to several companies about its global sponsorships. Those companies will have worldwide marketing rights across the X Games after it becomes an integrated, six-stop global property in 2013.
“Getting non-U.S. companies involved in this is going to be critical,” Johnson said. “Once we get those in place we’ll start talking about local things to do and how to get endemic [action sports companies] involved.”
Four months after reclaiming complete ownership of the Dew Tour, NBC Sports is moving action sports programming from Fox’s Speed and Fuel TV channels to Versus.
The first programming making that move comes from the AMA Pro Motocross Series, which the Dew Tour’s parent company, the Alliance of Action Sports (Alli), manages in partnership with the company MX Sports.
The move follows NBC Sports’ return to full ownership of the Dew Tour.
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Versus will air 11 hours of motocross programming live, and NBC will continue to air three hours of live motocross as it has the past three years.
“Now that we own 100 percent of Alli, we’re looking to deepen our investment in that space,” said Rob Simmelkjaer, senior vice president of NBC Sports Ventures. “We think the combination of a schedule of motocross on Versus and NBC and a renewed commitment to the Dew Tour will give us a nice umbrella presence in the space that we can leverage to sell sponsorships and have a significant and diverse set of opportunities for partners.”
This year’s broadcasts of motocross races averaged a 0.5 Nielsen rating and 717,300 viewers on NBC, and a 0.11 rating and 113,000 viewers on Speed, according to Nielsen data.
Alli President Wade Martin said that the consolidation will give motocross races better time slots, more live programming and more promotion across the NBC family of networks. But more importantly, he said it allows Alli to bundle its media and sponsorship inventory and sell packages that include both offerings for the first time.
Both Martin and Simmelkjaer said that moving motocross programming off Speed and Fuel TV didn’t signal an end to Alli’s practice of televising motocross, skateboarding or BMX programming on other networks like Fuel TV and MTV2, but added that action sports programming will increasingly be designated for Versus, USA and other NBC channels.
“I wouldn’t rule out doing things with other networks,” Simmelkjaer said, “but our priority will be to populate things on our network. We’ll do the best to promote it and the best to sell it.”
The nine-team indoor lacrosse circuit has signed a two-year deal that will see it get eight games, including its championship contest, on CBS Sports Network in April and May. The new deal is a barter arrangement, under which both sides will sell air time, and it puts the NLL on at a regular time slot at 7:30 p.m. on Saturdays.
“We’ve never had a regular prime-time TV slot in the history of the league,’’ said NLL Commissioner George Daniel. “It’s really what we were looking for in a new TV partner.”
Last year, the NLL had nine games, including its championship game, televised on Versus; seven started at 2 p.m. ET, while two began at 4:30 p.m.
“Just like any sport, you want broad TV exposure, and then it’s just a question of building your audience by promoting your stars,” said Hillary Mandel, senior vice president of programming and distribution at IMG Media. IMG handles NLL broadcasting and sponsorship.
“We’re making a big lacrosse commitment at the college and pro levels, because while it’s seen a lot of growth recently, we still see a lot of potential remaining,” said CBS Sports Network President David Berson.
Lacrosse’s top event, the NCAA Final Four, is on ESPN, which also carried more than 30 collegiate lacrosse matches on its ESPNU channel this year.
Stats LLC has signed a five-year partnership with XOS Digital to combine their respective football coaching and player evaluation products, ICE and Thunder HD.
Stats will take the wide variety of statistics, scouting reports, medical information and contractual data from its ICE, an acronym for Integrated Collaboration and Evaluation, and blend it with XOS’ Thunder, which has its foundation in video-based analysis.
The companies will participate in an undisclosed revenue-sharing agreement, with Illinois-based Stats leading efforts on product integration and technology and Florida-based XOS managing the bulk of the sales efforts.
“What we’ve done is really brought together the best of the data and analytics with the best of the media and video-based tools, and merged them into one seamless platform,” said John Pollard, general manager of Stats’ sports solutions group. “There was no need to replicate what they’ve done. They’ve got a very good installed base with Thunder, and video is not our core strength. Instead, we’ve made each other stronger.”
With the combined products, client teams will be able to isolate more than 160 performance metrics for any of their players and then immediately see clips of every instance of those plays. Among those metrics is Stats’ base of proprietary statistics, including burned defenders, quarterback alignment and play direction.
XOS has more than 100 NFL and college football clients for Thunder HD. Stats has about a half-dozen NFL clients using ICE or near contracts to do so.
The companies will be heavily promoting their co-branded offering during the American Football Coaches Association national convention in January and the NFL combine in March.
The combined platform carries a base cost of about $50,000.