Capitalize on sports media megatrends and own the future
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What are today’s megatrends, the tectonic shifts that propel change, shape the ecosystem, and fuel the industry? Maximizing value and creating opportunities for your franchise/league/property requires you to expertly harness these:
■ Cord Cutters/Shavers/Nevers. Increases in multichannel video programming distributors’ (aka cable, telco and satellite companies) retail pricing, partly due to growing sports costs, are changing the distribution business.
Pay-TV penetration has peaked, with higher prices (and the Great Recession) causing cord-cutting disconnects. Other customers have shaved their subscriptions, eliminating premium networks and/or downgrading to family or essentials packages without high-priced sports. Thus expanded basic service penetration, where RSNs and ESPN, FS1 and NBCSN are packaged, has declined. Sports network subscriber growth is now more dependent upon new household formation than penetration increases. “Nevers” are young adults newly out on their own that have never paid for their own MVPD subscriptions, and don’t see the need due to cost and a tendency to consume their video online. Will nevers numbers grow over time or will they enter the MVPD fold in ensuing life stages?
■ TV Everywhere. To satisfy consumers’ thirst for access to live programming on computers, tablets and mobile
|Video-on-demand services are among the forces that could reshape the sports media landscape.
■ Over-the-top (OTT). Netflix, Amazon Prime and Hulu Plus operate subscription video-on-demand services that stream a library of recorded entertainment content. Currently, they claim not to be interested in sports as their business models don’t support the purchase of live sports rights, leaving that turf for the linear networks for now. However, Sony and Dish are reportedly developing OTT services that will provide network programming without the need to buy an MVPD package. Google Fiber has launched and the company reportedly has had talks with the NFL about Sunday Ticket. The UFC and WWE have their own OTT services. Sooner or later, a nonconventional entrant is going to use the unique, proven power of live sports to differentiate, drive sampling and grow its customer base (like DirecTV did with the NFL). While Netflix has specifically eschewed interest in live sports, and Amazon’s platform is not able to deliver live programming, a Google or Amazon easily could make a huge investment in sports. Had the Supreme Court or Copyright Office found in their favor, Aereo would be just such a disruptive force today.
■ Rising relative importance and value of live sports programming. The mainstay of the broader media business, scripted entertainment, has become less exclusive and more commoditized, with availability on a proliferation of first-run TV networks, re-run syndication, live Internet streams, downloads (iTunes), SVOD (subscription VOD services like Netflix and Amazon Prime), and ubiquitous DVRs, DVDs and traditional VOD. This has positioned live sports programming as a prime salvation for many linear networks. Sports is proprietary, topical, promotable, differentiated, ultra-local and essentially DVR-proof. Sports ratings are growing or holding while those for most entertainment programming have fallen to historic lows. High demand for scarce major live sports across linear networks continues to drive up sports rights fees.
■ Industry consolidation. Comcast is buying TWC. AT&T is buying DirecTV. Fox is trying to buy Time Warner. All are heavily involved in sports programming and/or distribution, so each deal will affect the sports media marketplace. We can expect other MVPDs like Cox, Charter, Cablevision, Verizon and Dish to be mixed and matched in some fashion, driven by the need for scale in negotiations with programmers and operating efficiencies versus their competitors. The same also might occur for other sports programming players, like Disney and CBS, in search of more critical mass in a new entertainment ecosystem. This should slow the creation of new sports programming networks and could lead to reduced competition if independents like MASN, Altitude, NESN and Pac-12 follow in the footsteps of YES and Sports Time Ohio, which were recently acquired by Fox.
■ Retransmission consent. Retrans is driving some consolidation in the local station marketplace (e.g., Tribune/Local TV; Gannett/Belo). Bigger station groups gain leverage in negotiations with MVPDs for carriage fees. Sports programming is a driver of many carriage negotiations (Fox uses its RSNs to help drive fees and distribution penetration for its nonsports networks). Retrans revenue may help return some sports to local over-the-air stations, re-enabled and motivated to financially compete with RSNs. Sports permits the stations to attract desirable audiences and amp up their retrans leverage with MVPDs. Retrans already has facilitated keeping Sunday afternoon NFL football on broadcast TV.
■ Emerging trends. There undoubtedly will be additional megatrends arising out of such forces as big data, technological advances in new devices and services (which often capitalize on sports), the multicultural demographic evolution in the U.S. population, and political influences (e.g., a la carte).
These dynamic, interrelated forces are driving constant change at an accelerating rate throughout the entire sports media ecosystem. New technologies enable and empower fans and present increasingly complex challenges for all those invested in the future of sports. Expert understanding of these sports media megatrends is essential to solving your own unique puzzle, capitalizing on leveraging the power of media to maximize your opportunities now and in the future.
Ed Desser, a 37-year veteran of the sports media business, is president of Desser Sports Media, a consulting firm serving teams, leagues, programmers and distributors. DSM has advised on and/or negotiated more than $25 billion in sports and media transactions, including all of the Los Angeles Lakers’ current media deals. Prior, Desser was president of NBA Television and New Media Ventures. John Thomas and Sue Hamilton also contributed to this article.