SBJ/Oct. 26-Nov. 1, 2015/Media

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  • The moves that forced ESPN’s cuts

    As the names of the roughly 300 laid-off ESPN employees leaked though the sports industry at the end of last week, many longtime executives reacted with a sense of disbelief.

    These weren’t household names like Bill Simmons or Keith Olbermann, who left earlier in the year. In fact, none of ESPN’s on-air talent were part of the cuts. Rather, they were friends and colleagues. There were the producers who spent their entire career on the ESPN campus and executives who are raising families in Bristol, Conn. — hardly a hotbed for sports media.

    The cuts sent shock waves through the sports and media industries, incredulous that a company seemingly rife with cash would have to lay off so many good people. This was not a case of cutting fat, ESPN insiders say. Many capable executives and talented producers were shown the door last week.

    The moves continued a troubled period for the sports media giant that started when Disney CEO Bob Iger told CNBC that “the business model may face some challenges over the next few years.” His remarks led to a sell-off of media stocks during the summer.

    ESPN'S INCREASING RIGHTS PAYMENTS

      Average annual value  
    PROPERTY PREVIOUS DEAL NEW DEAL CHANGE (%) YEAR NEW DEAL TOOK EFFECT
    NFL $1.1 billion $1.9 billion +$800 million (+73%) 2014
    NBA $575 million $1.4 billion +$825 million (+143%) 2016
    MLB $296 million $700 million +$404 million (+136%) 2014
    College Football Playoff $123.8 million $608.3 million +$484.5 million (+391%) 2014*
    SEC $150 million $300 million +$150 million (+100%) 2014
    ACC $155 million $240 million +$85 million (+55%) 2013
    Rose Bowl $37.5 million $80 million +$42.5 million (+113%) 2014*
    MLS $8 million $75 million +$67 million (+838%) 2015

    Additional deals, since 2013

    - U.S. Open: 11-year, $825 million deal through 2025
    - American Athletic Conference: 7-year, $130 million deal through 2019-20
    - Mid-American Conference: 13-year extension valued at more than $100 million through 2026-27
    - Allstate Sugar Bowl: 12-year, $80 million deal through 2026 game
    - Little League Baseball: 8-year, $60 million deal through 2022
    - Missouri Valley Conference: Nine-year extension through 2023-24
    - Atlantic 10 Conference: Nine-year extension through 2021-22
    - Taxslayer.com Gator Bowl: Six-year deal through 2019 game
    * For January 2015 games

    Compiled by David Broughton
    Sources: Resource Guide Live, SportsBusiness Journal archives


    SportsBusiness Journal talked to more than a dozen senior executives — both inside and outside of Bristol — about how ESPN got to this point. All seemed surprised at the severity of last week’s cuts. None wanted to speak on the record because of the sensitivities associated with the layoffs.

    All the contacts pointed to a combination of skyrocketing rights fees and deep distribution cuts that put ESPN in the position where it had to shed about 4 percent of the company’s workforce.

    “The cost of goods is going up and sales are going down,” one longtime industry executive observed. “That’s not a good trend.”

    ESPN remains one of the most powerful entities in sports. It’s still in 92 million homes and makes a whopping $6.50 per subscriber per month. And it has long-term deals in place with most of the country’s biggest sports leagues. ESPN President John Skipper spent Wednesday afternoon walking ESPN’s campus, projecting an air of confidence during one of the company’s darkest days.

    “These changes are part of a broad strategy to ensure we’re in position to make the most of new opportunities to build the future of ESPN,” Skipper wrote in a memo that was distributed on the company’s website. “I realize this process will be difficult — for everyone — but we believe the steps we are taking will ultimately create important competitive advantages for our business over the long term.”

    But last week’s layoffs offered the clearest sign yet that all is not well for the Worldwide Leader in Sports.

    Many past and present employees place most of the blame for the layoffs on the company’s huge NFL, MLB and NBA rights deals. The most frequent criticism heard last week dealt with the NFL contract, which is worth a whopping $1.9 billion per year — $800 million more than the NFL’s next biggest deal. Second-guessers believe ESPN had the leverage to cut a better deal and question whether another media company was within $500 million of ESPN’s offer. There aren’t many other networks that could afford to pay close to $2 billion per year for the NFL’s least competitive package.

    “It’s been a total mismanagement of rights fees, starting with the NFL renewal,” said one former employee. “We overpaid significantly when it did not need to be that way, and it set the template to overpay for MLB and the NBA.”

    ESPN doubled its annual payment for MLB to an average $700 million per year — a deal that gives ESPN just one playoff game per year. And next year, ESPN’s NBA deal takes effect. That’s the one that will see its average annual payout triple in cost to an average of $1.4 billion per year.

    “I realize this process will be difficult — for everyone — but we believe the steps we are taking will ultimately create important competitive advantages.”
    John Skipper
    ESPN president, in memo on company’s website
    Photo by: GETTY IMAGES
    “You can’t keep spending on rights at high levels when the business model and fundamentals have changed,” another former ESPN employee said.

    The sports rights market at the time, however, was crowded, with NBC Sports Network launching in 2012 and Fox Sports 1 launching in the summer of 2013. These new TV channels needed live rights, and their bids caused right fees to escalate to stratospheric levels.

    ESPN was the biggest and most powerful of all the sports networks, and its executives thought they had the budget to pay for these thanks to a license fee that is multiples higher than any other network. Sources said that ESPN created its budgets by basing its affiliate revenue on pay-TV subscribers remaining flat.

    That, of course, hasn’t happened.

    ESPN’s business model — the dual revenue streams of advertising revenue and affiliate fees — always has been its strength. It still is. But that model has had some challenges, mainly due to a decision ESPN made several years ago that has come back to hurt it. ESPN had several cable carriage renewals in 2012, including big ones with distributors Comcast, Cablevision and Cox.

    At the time, ESPN wanted to increase the license fee distributors pay it to $6 per subscriber per month. So its executives cut deals that made sure that ESPN and ESPN2 would be on the highest-penetrated tiers of service — expanded basic. At the same time, ESPN lowered penetration benchmark levels from more than 90 percent of all subscribers to a number closer to 80 percent.

    “That’s part of every cable negotiation I’ve done,” said one industry executive. “If you want to negotiate a higher rate, you have to have more flexibility on penetration.”

    Over the ensuing few years, cable operators discovered the low-cost, skinny bundles and started marketing them without ESPN. Expanded basic still is the most popular tier, but the mini-tiers without ESPN have been gaining traction. As a result, ESPN wound up with a rate that was higher than they thought they would get. But they left themselves more vulnerable to subscriber losses than other cable networks.

    ESPN’s subscriber losses, which have seen it lose nearly 8.5 million homes in the last 4 1/2 years, according to Nielsen estimates, or down about 8 percent, are at a rate that is declining faster than the rest of the industry.

    “It’s not cord cutting; it’s cord shaving,” said one executive familiar with ESPN’s strategy. “ESPN is losing subscribers at a faster rate than others.”

    In retrospect, one of the first signs that ESPN’s pockets are not bottomless came in the summer of 2013. That was when Skipper told NASCAR’s Brian France not to expect a bid for the sport’s next round of media rights. At the time, the thought that ESPN would turn down a chance to amass sports rights seemed farfetched, at best. Just two years earlier, ESPN broke the bank with the NFL. One year earlier, it doubled its average annual payout to MLB. And the following year, ESPN did its NBA rights deal.

    Several sources said that Skipper told his longtime racing partner that he would not go public with his decision so that it would not hurt NASCAR’s bargaining position with other networks.

    NASCAR wasn’t the only property ESPN gave up. In the ensuing year, it lost properties like the British Open to NBC, the U.S. Open golf tournament to Fox and the FIFA World Cup to Fox. ESPN did not even submit a bid for the English Premier League’s soccer rights or the NHRA.

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  • Networks ho-hum about password sharing … so far

    University of Maryland students Jon Banister and Gabe Weintraub are typical young adults in at least one respect — they both use several different user names and passwords to watch video online.

    They pay for none of them.

    The 22-year-old Banister, a senior journalism major, watches Netflix via his parents’ account; he accesses streams of WatchESPN and NFL RedZone thanks to his roommates’ parents’ FiOS accounts; and he catches up on HBOGo with a user name and password that belongs to the parents of an ex-girlfriend.

    Banister’s friend, the 20-year-old Weintraub, uses different passwords but tells a similar story. A junior finance major in College Park, Md., Weintraub accesses Netflix from his family’s account, Hulu from his roommates’ family, WatchESPN from the family of one friend he has known since high school, and HBOGo from another high school friend.

    Some worry that college students sharing passwords will maintain their resistance to paying for video as they grow older.
    Photo by: GETTY IMAGES
    The cable industry’s six-year TV Everywhere rollout has created this type of market, one where young adults like Banister and Weintraub share online passwords as naturally as they share Snaps and Instagram photos. Search the Internet for “WatchESPN” and “password” during any big game on the network, and you’ll find dozens of password-sharing requests from people who don’t have cable subscriptions.

    Each sports network contacted for this story has employees monitoring what gets shared online. But the networks and their distribution partners surprisingly are quiet when it comes to shutting down those accounts.

    On one hand, it’s easy to look at the situation on college campuses and declare that password sharing is hurting the pay-TV industry by causing people to cut the cord. After all, why would people pay for video if they can get it for free, right?

    But most industry leaders describe the threat of password sharing as overly hyped these days. Executives from four of the country’s biggest distributors and the top U.S. sports networks say the password-sharing trend is getting much more attention than it deserves. So far, they see no correlation between sharing passwords and cutting the cord.

    “We don’t have a sense that it’s having any sort of material impact,” said David Bank, managing director of equity research for RBC Capital Markets, who follows trends like this. “I didn’t pay for cable when I was in college, either.”

    Comcast, the country’s largest cable operator, says that about one-third of its subscriber base — more than 7 million subscribers — use TV Everywhere every month. Those subscribers watch, on average, about 8 1/2 hours of programming per month, a figure that is up 22 percent year-over-year.



    “That’s a very small fraction of the total amount of video that the average person watches a month,” said Matt Strauss, Comcast’s executive vice president and general manager of video services. “TV Everywhere usage just isn’t big enough. If it was really contributing to cord cutting, I would expect to see a lot higher consumption of hours per month than what we’re seeing.”

    AT&T, which merged with DirecTV three months ago, delivered the same message. “We see no evidence that password sharing is an imminent threat to our TV Everywhere business,” the company said in an emailed statement.

    These are not executives with their heads in the sand. They all know that password sharing occurs, especially around college campuses. But they all believe that password sharing is not hurting their business.

    ESPN plans to implement a new password-tracking system by the end of the year.
    Photo by: GETTY IMAGES
    “We’re monitoring it closely but do not feel it’s a major issue at this time,” said Rick Cordella, senior vice president and general manager of digital media for NBC Sports Group.

    The question is whether password sharing has the potential to grow into a major issue. Some skeptics believe it can. Gone are the days when TV Everywhere authentication was a clumsy multistep process. It’s become much easier for subscribers to log in and watch TV online, which also means that it has become easier for nonsubscribers to access that same programming for free.

    “Everyone shares passwords,” said Banister, who lives in an off-campus apartment. “When I have a paycheck, maybe I’ll buy these on my own. Right now, I’m just not in a position to pay to get my own subscriptions.”

    As the cable TV industry continues losing subscribers to cord cutting — Nielsen estimates that pay-TV distribution shed 4 percent of its homes in the past 12 months alone (see chart below) — some have pointed to this kind of password sharing as a primary reason.

    Investment bank Jefferies & Co. made headlines this month with a report that pointed to password sharing among millennials as the most significant reason for the cord-cutting trend. They worry that college students who get their video for free will turn into 20-somethings who will keep getting their video for free and, eventually, middle-aged consumers who will continue to resist paying for video.

    Just last week, Verizon Chief Financial Officer Fran Shammo said on the company’s second-quarter conference call that millennials don’t want traditional television. “They’re disconnecting cable,” he said, which is why Verizon is pushing an ad-supported streaming video platform with big cable brands like Disney and Discovery to attract them.

    What can be done?

    The lack of overall concern over the password-sharing threat doesn’t mean that pay-TV companies are standing pat.
     ESPN, for example, plans to implement a new password-tracking system by the end of the year that will make it more difficult for password sharers to access those streams. ESPN has been in talks with distributors about implementing these plans. ESPN needs distributors to buy into it for the plan to work.

    “Password sharing is something that we definitely keep an eye on. It’s something of interest to us,” said Justin Connolly, executive vice president of Disney and ESPN affiliate sales and marketing. “The Walt Disney Co.’s view of the world is that digital piracy and unauthorized use on services like WatchESPN is something that we want to deal with and stamp out as much as possible.”

    The plan is to limit the number of concurrent streams attached to a particular user name and password. ESPN’s plan is to limit the number of streams to five so that when a sixth stream is accessed, ESPN will create an “auto ejection” of the first stream.

    The problem is that while ESPN can monitor the number of WatchESPN streams that are generated through ESPN’s online and mobile apps, it doesn’t know how many streams are accessed through distributor sites. Comcast is one distributor that has expressed interest in ESPN’s plan.

    “Those will start to get centralized,” Strauss said. “There is technology that we have not enforced yet because we haven’t really seen the overall fraud and abuse that has gotten us to the point where we think we have a material issue. We can’t ever be content. We need to continue to monitor this closely. It is always possible that anything that starts small can get bigger.”

    Though they say it has not had an impact on their businesses, distribution executives are taking steps to make sure that password sharing doesn’t become more widespread. Comcast and AT&T are putting the onus on their subscribers by syncing TV Everywhere user names and passwords with the log-ins consumers use to pay bills online, set DVRs or read email.



    “Sharing credentials has consequences aside from violating terms of service,” Strauss said. “It’s also sharing personal information, which I think people are becoming a little bit more mindful of. It maybe gives you pause before giving someone a credential that you shouldn’t be doing it.”

    Comcast set up an initiative called Xfinity On Campus that has cut deals with a couple dozen universities that makes a bare bones streaming service available to students on campus.

    “In that sense, there’s really no reason to steal a credential because you’re getting our service in conjunction with the university where we’re able to provide you with a high-quality experience,” Strauss said. “We’re trying to be more surgical in how we get the right products to these segments to give them alternatives to stealing the service and giving them legitimate ways to get it. We’re finding great success there.”

    Despite all the cord-cutting talk, Comcast lost only 69,000 households in the second quarter, a mark that company CEO Brian Roberts called in a prepared statement, “The best second quarter video customer results we’ve had in nine years.” Should password sharing become even more prevalent, Comcast, which allows up to five simultaneous streams from the same TV Everywhere user name and password, says it has tools in place to make it even more difficult to share passwords.

    “If we ever needed to reduce the number of concurrent streams, we could even further,” Strauss said. “While we’re never going to be content, there’s nothing at the moment that gives us the ability to conclude that there’s a material widespread concern. We are mindful that it happens. And when it does happen, we do try to enforce our terms of service to ensure that people are in compliance. But it’s hard for me to say at this moment that there’s a widespread concern.”

    HBO sees password sharing as a way for consumers to become avid followers of programming who would eventually pay for it.
    To that end, ESPN also has targeted five concurrent streams as the ideal amount so far.

    “It’s a work of progress,” Connolly said. “For in-home multichannel pay-TV subscription, where the average house has roughly three televisions in three separate locations, the concept expands there. We don’t see any issue with that. We think it’s consistent with the in-home experience and the licensing mode.”

    In some cases, networks and cable providers encourage young adults like the University of Maryland’s Banister and Weintraub. Networks and cable providers want consumers to sample programming more frequently by allowing homes to have many concurrent streams running at the same time.

    HBO executives, in particular, have been open about saying that password sharing is not pervasive enough to be a problem. CEO Richard Plepler has said that he wants to create “addicts” of his programming who eventually will pay for it.

    Connolly understands the view that networks should allow consumers to sample their programming.

    “The WatchESPN experience can be an interesting sample opportunity in terms of taking the access to ESPN out to as many devices and platforms as possible to reach that younger audience,” he said. “At the same time, we don’t bury our heads in the sand on this one. We are not OK with the idea of having widespread usage among unauthenticated, unauthorized users.

    “There is a delicate balance in terms of it being a sampling opportunity allowing sharing within a household among various members of that household and yet ensuring that you don’t have dozens and dozens of people who aren’t in any way connected to the pay-TV subscription using the product regularly.”

    Falling household distribution

    ESPN, ESPN2 and ESPN Classic have lost more subscribers since October 2011 than any other sports network, according to Nielsen household estimates.
    ESPN and ESPN2 have seen 7 percent declines from October 2011 to October 2015, and ESPN Classic is down almost 24 percent. During the same time period, the pay-TV industry’s distribution footprint is down nearly 4 percent. The drop hurts ESPN, which is the priciest national channel by far, with distributors paying more than $6.50 per subscriber per month, according to SNL Kagan.
    Some industry analysts blame the distribution problems on distributors’ strategy to provide low-cost bundles that don’t include high-cost channels like ESPN.
    “The reduction in ESPN subscribers is outpacing the reduction in overall pay-TV subscribers,” said David Bank, managing director of equity research for RBC Capital Markets. “This phenomenon is more about lighter bundles that don’t carry ESPN than cord-cutting.”
    ESPN executives, however, point to Sling TV as evidence that its channels can be part of any low-cost bundle. Sling TV’s over-the-top service carries around 23 channels, including ESPN and ESPN2, for $20.
    — John Ourand

    CABLE NETWORK HOUSEHOLD DISTRIBUTION (IN MILLIONS)

    NETWORK OCTOBER 2011 OCTOBER 2012 OCTOBER 2013 OCTOBER 2014 OCTOBER 2015 5-YEAR CHANGE
    TBS 99,796 99,375 100,489 97,036 94,602 -5.2% (-5,194)
    TNT 99,011 98,430 99,294 95,870 93,294 -5.8% (-5,717)
    ESPN 98,648 98.179 98,891 95,256 91,772 -7.0% (-6,876)
    ESPN2 98,470 18,126 98,861 95,233 91,679 -6.9% (-6,791)
    TruTV 91,407 91,796 92,343 90,138 90,023 -1.5% (-1,384)
    FS1 77,394 80,792 90,121 85,186 84,434 9.1% (+7,040)
    NBCSN 74,989 78,068 79,145 81,767 83,623 11.5% (+8,634)
    Golf 82,934 83,944 82,964 79,841 77,077 -7.1% (-5,857)
    ESPNU 71,948 73,258 75,603 73,882 71,445 -0.7% (-503)
    ESPNews 73,264 74,319 75,829 72,666 69,744 -4.8% (-3,520)
    NFL Network 56,550 62,093 72,464 72,203 69,032 22.1% (+12,482)
    MLB Network 67,220 69,811 71,026 69,882 66,564 -1.0% (-656)
    NBATV 54,400 59,845 59,950 57,566 53,933 -0.9% (-467)
    FS2 31,750 35,943 37,271 44,840 47,827 50.6% (+16,077)
    Univision Deportes N/A N/A N/A 37,674 45,897 N/A
    ESPN Classic 32,648 31,219 30,826 27,012 24,917 -23.7% (-7,731)
    Fox Deportes N/A N/A 21,193 21,258 21,560 N/A
    BeIN Sport N/A N/A N/A 14,071 18,793 N/A
    Total Pay TV 103,840 103,137 104,548 104,246 99,798 -3.9% (-4,042)
    Total US HH 114,700 114,200 115,800 116,400 116,400 1.5% (+1,700)

    Notes: Speed relaunched as Fox Sports 1 in August 2013. Versus relaunched as NBC Sports Network in January 2012. Fuel became Fox Sports 2 in August 2013.
    NA=Not available
    Source: Nielsen



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  • FanVision resets gaming affiliate as Crossfield Digital

    In-venue sports video provider FanVision has dramatically restructured its mobile gaming company PrePlay, turning it from a consumer-facing venture into an enterprise-level digital agency called Crossfield Digital.

    The New York-based Crossfield Digital will be a business-to-business agency aiding sports and entertainment properties on mobile application and Web development, digital rights management and other similar functions.

    FanVision and Crossfield Digital are both part of RSE Ventures, the portfolio of companies led by Miami Dolphins owner Stephen Ross and former New York Jets executive Matt Higgins. Early clients and projects for the fledgling Crossfield Digital operation have included bracket game development for Bleacher Report, Apple iOS app creation for daily fantasy operation Draft, prediction-based games for the U.S. Open tennis tournament, and website development for the International Champions Cup, another RSE property.

    “RSE Ventures is committed to companies that have deep expertise in sports and technology, and Crossfield embodies those goals perfectly,” Higgins said. “Crossfield’s unique position in the RSE family enables it to not only build elegant tech solutions for the sports and entertainment industry, but fill the void that currently exists for 360-degree Web and mobile development.”

    As part of the shift, the PrePlay brand name and suite of products have been shut down. FanVision acquired PrePlay in September 2014 in a stock-for-stock merger. Before that acquisition, PrePlay had raised $7.8 million in venture capital financing.

    “We wanted our games to reach massive audiences, and we had a very satisfying run building what we did. But when we looked around, we saw a real need for a shop with our kind of skills and background, particularly in New York,” said Andrew Daines, FanVision chief executive. “We’re going to be able to leverage a lot of our learnings and technology and be able to reach an even larger audience.”

    Said Daines: “And since RSE is involved in so many other facets of the business ourselves, we believe we have a unique perspective on the kinds of issues our clients face.”

    Crossfield Digital will be led by Ben Fairclough, previously PrePlay director of partnerships.

    Crossfield will encounter a range of competitors, all of whom approach the space from slightly different angles. They include YinzCam, MLB Advanced Media, NeuLion, WillowTree Apps and Adept Mobile.

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  • Home Team Sports brings in Cricket for NBA’s first week

    Home Team Sports sold an interesting sponsorship for the NBA’s opening week.

    The Fox Sports-owned group that sells national ads for all regional sports networks — whether they are owned by Fox Sports or not — sold an NBA opening week sponsorship to Cricket Wireless. The one-year deal marks the first time that HTS sold an opening week sponsorship across NBA games, with 25 of the 29 U.S.-based regional sports networks that carry NBA games.

    Cricket, a prepaid wireless carrier owned by AT&T, previously advertised with MLB and the NBA.

    Sprint had been the NBA’s official telco sponsor for the past four seasons, but walked after last season. At deadline, the category still was open.

    The deal is nearly identical to the sponsorship HTS sold Dairy Queen around the NHL’s opening week games in 2014 and earlier this year. HTS negotiated the deals in both cases, which include on-air branded features, on-screen logos and social media promotions. Both deals allow for sponsored video highlights on HTS Rewind, a video syndication business that accounts for around 17 million unique viewers per month.

    Deal terms were not disclosed. HTS sold similar sponsorships for the opening rounds of the NBA and NHL playoffs last season to KFC and Volvo, respectively. Those deals were in the low seven figures, sources said.

    — John Ourand

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  • ‘We’re still talking about’ Bills-Jaguars

    There was a huge amount of buzz around last weekend’s Bills-Jaguars game if you worked in the sports industry. It was the first time an NFL regular-season game was streamed exclusively, with Yahoo spending around $15 million for the rights.

    Outside of my circle of sports media nerds, though, the game was about as popular as you would expect a 9:30 a.m. Bills-Jaguars game to be. In the middle of last week, Yahoo still had advertising available and was offering ad spots at a deep discount from the price it originally sought. Not surprisingly, Yahoo also was looking to bundle other sports inventory with positions in the game.

    Interest was tempered leading up to Yahoo’s NFL game last Sunday.
    Several ad buyers said ads were available last week for $50,000 per 30-second spot. That is a far cry from Yahoo’s initial ask of $200,000 per 30-second spot. Yahoo based that pricing on Fox’s London game last season, which brought in a 5.5 household rating. Since nobody knew how many people would watch, many advertisers decided not to take a chance.

    Advertisers were not seduced by the historic nature of the game, which was the first time it was streamed exclusively.

    “But it’s not the first time an NFL game has been streamed,” said Optimum Sports President Tom McGovern, who added that none of his clients wanted to buy into the game. “At the end of the day, we’re still talking about a Bills-Jaguars game that only would have been available in the home markets anyway.”

    Yahoo is responsible for 96 percent of the ad inventory, with the league keeping control of 4 percent — standard for most NFL deals.

    Advertisers also were scared away by the fact that Yahoo was not offering viewership guarantees. On television, ad buyers can base their decisions on decades worth of Nielsen ratings information. There’s nothing they can compare with last weekend’s game.

    One ad buyer suggested that his clients wanted to take a wait-and-see approach. Once Yahoo gets an audience benchmark from this game, it will be a safer environment to buy into.

    Yahoo’s game comes just a week after the company posted disappointing third-quarter results, based partly on a weaker-than-expected ad market overall.

    — John Ourand

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  • Industry keeps eye on daily fantasy ad spend

    Remember DraftKings’ “Real People, Real Winnings” ad that was in heavy rotation all year?

    If you’re a sports fan, it was impossible to miss. DraftKings spent more placing that single ad than any other company spent on a national TV ad in the sports industry this year. According to estimates from the ad tracking company iSpot.tv, DraftKings bought $32,578,055 in ad time this year for the spot, which opens with a voice-over saying, “This is what it looks like when real people win $1 million playing fantasy football.”

    After pushing its “Real People, Real Winnings” message all year, Draft-Kings suddenly pulled the ad. It has not been seen in four weeks, last airing after Week 3 of the NFL season. According to iSpot.tv, its last recorded airing was at 1:01 a.m. ET on Monday, Sept. 28.

    That was the Monday after the weekend when a DraftKings employee created a scandal by winning $350,000 at rival daily fantasy provider FanDuel — a development suggesting that rather than real people competing against each other, real people were competing against insiders.

    At deadline, DraftKings had not responded to an email seeking comment on why it pulled the ad at that time.

    DraftKings replaced the “Real People” ad with another ad called “The Sleeper.” Since Sept. 28, DraftKings has spent $8,606,866 on “The Sleeper” ad across 1,940 national airings, iSpot.tv said. Since that time, “The Sleeper” was the DraftKings ad that had the heaviest rotation.

    DraftKings pulled its once ubiquitous “Real People, Real Winnings” spot.
    That’s the ad that opens with a voice-over saying, “The sleeper pick. The guy only you believe in. … So trust your gut, trust your numbers, trust your Uncle Vito if you want. But know this. That sleeper is out there. The question is: Who’s going to play him?”

    The money that the two main daily fantasy providers already have spent on advertising is staggering and is the main
    reason TV sports have not reported the same ad sales softness seen in other parts of the TV business.

    Several ad sales executives are questioning how the networks will be able to replace the daily fantasy revenue should they cut their ad budgets in the face of the growing scandal.

    DraftKings already has cut back on its national TV ad budget slightly since the scandal broke at the end of September, though it’s not known if its ad slowdown was related to the scandal or if the daily fantasy provider planned to pull back once the NFL season was in full swing. DraftKings spent $108 million on national ads since Aug. 1, peaking in late August and early September. By comparison, rival FanDuel spent $87,451,545 on national ads since Aug. 1.

    Since Oct. 1, however, FanDuel has outspent DraftKings by more than 2-to-1, iSpot.tv says. FanDuel has spent $34.2 million on 5,986 national airings since Oct. 1, which equates to more than a third of its annual budget. During the same time period, DraftKings spent $16,578,010 on 4,272 national ads.

    DraftKings still is the bigger spender year-to-date, spending $139,370,906 on 43,470 national ads, compared to FanDuel’s $95,722,320 on 25,302 national ads, iSpot.tv says.



    John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.


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