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Volume 21 No. 1

Media

F
or the better part of a decade, the sports media industry looked to the early 2020s as the time when deep-pocketed Silicon Valley companies finally would make a big investment in sports rights.

Amazon, Google, Facebook and Twitter already have dabbled with various sports packages over the years. The theory has always gone that if these companies follow a similar business plan that cable television used three decades ago, they will use exclusive sports rights to grow their business. The first test of this theory comes in 2021, the year when the NFL, MLB and NHL media rights deals end.

But the view that these companies will compete with TV networks for big-time sports rights in four years is starting to change. TV network executives increasingly believe that the deep-pocketed digital companies will be in the market for streaming packages that complement traditional TV packages in 2021. They believe a league like the NFL will have little appetite for selling exclusive access for, say, “Monday Night Football” to a digital media company.

The NFL’s Vishal Shah calls digital viewership “a small but growing asset for us.”
Photos by: TONY FLOREZ PHOTOGRAPHY
Head of sports for Amazon Video's Jim DeLorenzo said the company is still deciding how much it wants to invest in live sports.
Much of that reason comes down to viewership. Amazon’s “Thursday Night Football” stream has been much more popular than Twitter’s stream last year. But the number of people watching games via Amazon this season and Twitter last season is tiny compared to traditional television.

“The digital contribution from Amazon is around 2.5 percent of the overall consumption across television plus digital,” said the NFL’s senior vice president of digital media business development, Vishal Shah, speaking at the 2017 NeuLion Sports Media & Technology Conference earlier this month. “It’s a lift. In a world where people are trying to drive as much incremental consumption as possible, this is a small but growing asset for us.”

Amazon has averaged more than 300,000 viewers for its games this year. By contrast, CBS’s “Thursday Night Football” telecasts with NFL Network averaged 14 million viewers for its games. That’s a huge amount of viewership that digital media companies need to make up in three years. The question for leagues like the NFL, MLB and NHL is how willing are they to sacrifice viewers for dollars.

Shah expressed confidence that the gap will continue to close over the next four years and digital media companies will be ready for an exclusive package by 2021.

By 2021 when the NFL renegotiates all of its media packages, Shah believes “the marketplace and the readiness is there for exclusive digital packages. But overall, we want to make sure that we’re driving value for our existing partners.”

But Shah also identified several areas where digital media companies need to improve, starting with their production capabilities.

“The production element is not a minor one,” he said. “A lot of digital companies are investing in content. Live sports production is something that is still relatively new to them and hopefully something that they’re building a skill set around.”

For Amazon’s part, it’s still deciding how much it wants to invest in live sports, even while it touts its “Thursday Night Football” numbers.

“We’ll have to wait and see how things progress,” said Jim DeLorenzo, head of sports for Amazon Video. “There are certain opportunities where we may have to do our own production as opposed to partnering up with somebody like CBS or NBC. That would definitely be a factor that goes into our thinking about whether we want to pursue that.”

The NFL is setting “Thursday Night Football” up almost as a test case for digital companies. Twitter had the rights last year; Amazon has them this year. The league’s “Thursday Night Football” rights deals with CBS, NBC and Amazon end after this season. Shah said the league will start to negotiate new deals once the season ends.

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


READER EMAIL

Question: Why did the Michigan-Wisconsin game kick off at noon ET on Nov. 18? How could it not have been a 3:30 p.m. ET kickoff? This was Fox’s best game by far — better than Maryland-Michigan State at 4 p.m. ET and California-Stanford at 8 p.m. ET. What was Fox thinking? Did they schedule this to try to get viewers away from ESPN, which put “College GameDay” in Madison?

Scott Weiss
Wisconsin Alum

Answer: I reached out to a Fox source who told me that the decision came down to the network’s rights deals with the Big Ten and Pac-12, not ESPN’s pregame show. The source said Fox is obligated contractually to do a certain number of Pac-12 games on broadcast television. It also is limited contractually with how many Big Ten games it can carry in prime time late in the season.

Those two factors are the main reason why it put a Pac-12 game that wasn’t its best game of the day in prime time on Nov. 18 (California-Stanford). Fox is expected to face a similar situation this weekend when a Pac-12 game is in prime time and Ohio State-Michigan is scheduled for noon ET.

Last weekend’s Wisconsin-Michigan game involved two top-25 teams with rabid fan bases that would do well in any time slot. Until Fox is better established as a go-to place for college football, it will prioritize “owning” some of the weaker windows rather than competing head-to-head in more competitive ones.

The source also suggested that the Wisconsin-Michigan game would have been a more effective lead-in to the Maryland-Michigan State game than the other way around. “If the two games were reversed I think both might rate a little lower.”

As it moves forward with a college football schedule in coming years, it’s a good bet that Fox carries fewer games in prime time.

— John Ourand

The narrative of declining TV ratings is not affecting NFL Network, which has seen its ratings skyrocket this season. Overall, NFL Network’s viewership is up 11 percent compared to last season, an increase that is second only to NBA TV (up 18 percent) among sports channels.

“We’re bucking the trend,” said Mary Ann Turcke, the NFL’s president of digital media and NFL Network.

Turcke pointed to two areas of growth, in particular: Sunday pregame and weekday morning shows.

“We’ve resurrected the morning daypart with ‘Good Morning Football,’ and our ‘GameDay’ morning programming has had some of the best weeks ever in the history of that program,” Turcke said. “That’s one way to grow, from an organic small-scale perspective. Stick to your knitting, do what you do, make your programs better, hire better talent, market better.”

NFL Network’s “GameDay Morning” (9 a.m.-1 p.m.) is averaging its biggest audience through Week 9 — 620,000 viewers is a whopping 17 percent increase from last season’s 529,000. That’s a far bigger increase than any other Sunday NFL pregame show.

By comparison, ESPN2’s “Fantasy Show” is down 15 percent, ESPN’s “NFL Countdown” is down 12 percent and CBS’s “NFL Today” is down 7 percent. Fox’s “NFL Sunday” is up 1 percent and Fox’s “NFL Kickoff” is up 5 percent.

NFL Network’s weekday morning show, “Good Morning Football,” is up 8 percent among all viewers during the regular season and up 10 percent in the 18-49 demographic.

“We’ve got some great young superstars on that show,” Turcke said. “They combine pop culture with sports. Some of our avid fans give us a hard time for that.”

— John Ourand


The UFC’s top executives have met with media companies across the country over the past month trying to whip up interest in the sport’s media rights.

So far, the response from many traditional media companies has been underwhelming, at least at the price the UFC is trying to get.

Multiple sources said the UFC is trying to craft a media rights deal that averages $450 million per year, a huge increase over the rights fee Fox currently pays.

The UFC’s seven-year deal with Fox ends next year. The current Fox deal is worth an average of $120 million per year, with the fee jumping to $160 million in the final year of the deal, sources said.

Fox allowed its exclusive negotiating window to lapse early last month without submitting a formal bid. Sources say the two sides would like to continue their deal, but as of now are far apart in price. Fox Sports President Eric Shanks told Endeavor CEO Ari Emanuel and co-President Mark Shapiro that Fox was prepared to make an offer worth around $200 million per year, less than half of the $450 million per year average the UFC wants.

The UFC’s seven-year TV rights deal with Fox ends next year.
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Talks between the two are ongoing. Shanks has remained in steady contact with Emanuel and Shapiro, sources said.

Executives with CBS, ESPN, NBC Sports and Turner Sports took the UFC’s meetings over the past month, during which UFC executives presented a deck outlining the growth of the UFC and justifying why its media rights should increase.

Turner Sports executives showed the most interest in a potential deal, sources said. But uncertainty over the pending AT&T-Time Warner merger, which currently is experiencing trouble as it moves through the Justice Department, has dampened enthusiasm for a UFC deal. A merged AT&T-Time Warner could let DirecTV handle the UFC’s pay-per-view, AT&T oversee UFC’s mobile apps and Turner use UFC content on its channels and OTT platform.

Every TV network executive interviewed for this story said that any media rights fee increase would have to include better fights that previously would have been showcased on pay-per-view. They also said they expect the UFC to try and split some packages to bring in other interested media companies.

To that end, the UFC has had a lot more interest in the digital arena, having taken meetings with digital providers, including Amazon and Oath, the combined AOL-Yahoo company. It’s not clear whether the UFC would sell its entire package to one of these providers, try to carve out a streaming package for them or just use them as a stalking horse to get traditional TV providers to pay more.

Complicating matters is the fact that WWE’s rights are up in the fall of 2019. WWE’s scripted programming and audience makeup is much different than the UFC’s. But a channel like FS1 could look at WWE as acceptable replacement programming in case it loses UFC rights.

WWE executives met with Fox executives in Los Angeles earlier this summer, with Shanks meeting with the WWE’s top executives, including George Barrios, chief strategy and financial officer, and Paul “Triple H” Levesque, executive vice president of talent, live events and creative.

The meeting was part of a WWE road show where it spoke with various networks, including CBS and Disney, plus digital companies like Amazon and YouTube to show the power of its programming.

Because WWE’s exclusive negotiating window with NBC doesn’t end until the spring of 2018, they did not negotiate contract points or talk about rights fees. WWE will make around $180 million from its NBC deal in 2017.

Ironically, Endeavor has served as an adviser to WWE Chairman and CEO Vince McMahon.