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Volume 21 No. 47

In Depth

Amazon Prime had digital streaming rights in the U.K. and Ireland for the U.S. Open Tennis Championships.
Photo: Getty images

All of the TV networks  — CBS, ESPN, Fox, NBC, Turner Sports — lined up when the PGA of America started negotiations for the PGA Championship two years ago.

 

But the digital media companies that the sports business hopes will start making big financial bets in sports media essentially were nowhere to be found. 

The PGA of America ended up signing a deal last week with two legacy media companies, CBS and ESPN, that will last until 2030.

“They kicked the tires,” said PGA of America CEO Seth Waugh of digital and tech companies Amazon, Facebook, Twitter and others. “It’s still too early for them.”

Some sports business executives are starting to wonder if the time ever will be right. For the better part of a decade, league and conference executives have viewed digital media companies as insurance to keep their media rights fees growing at a rapid clip. As TV networks dealt with shrinking subscriber bases, league executives had been courting digital media companies and their deep pockets. The theory is that their presence at the negotiating table would keep the TV networks honest.

A lot can happen between now and 2021, the year when media rights deals for Major League Baseball, the NHL and “Monday Night Football” expire. These tech companies have a reputation for being nimbler than legacy media companies and could change their sports strategy quickly. All it takes is one senior executive to decide to pursue a sports-centric strategy.

But league and network executives have taken notice of the lack of serious bids these financial power players have made in the U.S. market so far.

It is not just the PGA of America’s negotiations. Earlier this spring, the WWE signed traditional media deals with Fox and NBC, and the UFC signed one with ESPN. After showing initial interest in picking up those packages, Facebook and Amazon never came close to cutting a deal with either group.

It was the same story last fall when Amazon and Perform Group, which owns DAZN, showed initial interest in picking up rights to Formula One. Neither company came close to sealing a deal, and the racing circuit took its media rights to ESPN.

Amazon, Facebook, Twitter and YouTube have made sports investments in the United States. But they view those investments more as market tests than full-blown business strategies. 

Amazon holds the global digital rights to “Thursday Night Football” for a reported $65 million per year, though sources say most of that fee is made up of marketing expenses. Facebook signed a deal to carry 25 weekday afternoon baseball games exclusively, Twitter has live MLB and MLS games and YouTube has cut several local streaming deals with MLS teams.

But executives with those companies freely concede that they consider those deals as experiments to see if they can develop profitable sports strategies. 

It’s the other big technology companies that have caused angst. 

Take Apple, for example. The company is flush with cash and has tremendous reach, as evidenced by its 1.3 billion devices worldwide. Plus the Apple executive that oversees content, Senior Vice President Eddy Cue, is a big sports fan who is regularly seen at Golden State Warriors games.

Even though Apple has committed more than $1 billion to produce entertainment content, it is not even kicking the tires on sports rights, according to several executives surprised at the lack of interest.

Netflix is another one that has said it will not pursue sports rights even though it is spending up to $8 billion on original content. 

“I’m not sure that they even know what their plan is for 2021,” said CBS Sports Chairman Sean McManus. “It’s a huge question mark.”

• • • •

It appears to be a big question mark even inside those companies. Executives see the effect live sports have on their users — creating more engagement and more time spent on the service. A question is whether the companies need exclusive access to those games, which means they would pay more. 

While exclusivity is the norm on TV, Twitter has found that simulcasts tend to work just as well. 

“The key thing we learned from ‘Thursday Night Football’ in 2016 was the more live, the more premium, the more rich content that we bring onto a platform, the more engaged our users are and the more they’ll stick around and tweet,” said TJ Adeshola, Twitter’s head of U.S. sports. “To us, that is a priority.”

Similarly, Facebook is testing several different business models to see which ones work, said Peter Hutton, head of live sports. It cut exclusive deals for 25 MLB games in the U.S., the Copa Libertadores soccer tournament in South America and La Liga games in India. It has partnered with broadcasters like CBS for Conference USA games and Univision for Mexican football games. It has worked with WWE on a live show, simulcast 10 Chicago Cubs games and carried shows like Tom Brady’s “Tom vs Time” and Shaquille O’Neal’s “Big Chicken Shaq.”

“We’ve made a few experiments in different countries, around different sports and with different types of content,” Hutton said. “It’s important that we look at a range of possibilities to see what fits best with us as a platform. We need to really focus on executing those and genuinely looking and learning from lessons. It’s very easy to leap into things. That’s not what we’re trying to do.”

Of course, that testing led to some problems because of the complexities of producing live sports. During this year’s U.S. Open, British users complained about Amazon’s production, particularly picture and sound quality. Early in Facebook’s MLB deal, viewers complained about picture quality and buffering issues.

Octagon’s Dan Cohen suggested that these new players may bet on sports internationally, where there’s not as much competition, pointing to Facebook’s deal with Copa Libertadores soccer tournament as an example of a cost-effective sports experiment.

“Facebook can figure it out where it’s less expensive and it can still draw people in,” said Cohen, Octagon’s senior vice president of global media rights consulting. “It wants to get content that is still relevant in the markets in which it plays, but it’s going to cost a lot less to test out products and strategy and a revenue model behind all of it. … Getting 20 meaningless games from MLB is not going to push the envelope to test their business models and their business products far along enough to make them a serious bidder in 2021.”

• • • •

Legacy media companies have been developing pitches that emphasize their reach. Digital viewership tends to be a fraction of their TV counterparts. “Thursday Night Football” provides a good example. Through Week 4, Fox averaged 13.9 million viewers on television. Digital viewership, which includes Amazon, has averaged 326,000.

“The challenge of the social media companies is that their metric for success is not the same metric as cable and broadcast television,” said Charlie Ebersol, CEO and co-founder of the Alliance of American Football, an eight-team professional league set to launch in 2019. “Their ultimate goal isn’t necessarily aggregation. … When they look at something like carrying an NFL or NBA or MLB package, they are much more interested in figuring out what the engagement translates to than they are in figuring they can get 100 million people to watch something at the same time.”

Digital and social media companies have found that streaming live sports keeps users more engaged with their platforms. But so far, those companies haven’t been willing to pay for exclusivity.
Photo: getty images

Still, league executives hold out hope that these media companies will discover the power of live sports by 2021.

“Had this been a couple of years from now, they may have had a more aggressive and informed bid,” the PGA of America’s Waugh said. “I’d be surprised if you don’t see them show up soon in these negotiations.”

Speaking at an event in New York before the NFL season kicked off, Brian Rolapp, the NFL’s executive vice president of media, sounded confident that the digital media companies will become more aggressive.

“Will the world look different by 2021 or 2022? Probably,” he said. “Money is not an issue for these guys.” 

The two most aggressive media businesses chasing sports rights this year are barely six months old.

 

ESPN+ and B/R Live, two streaming services from ESPN and Turner Sports, both launched in April and have been amassing an impressive amount of live streaming rights (see chart, left).

Where some of the deep-pocketed technology companies — such as Amazon, Facebook and Twitter — largely have been using sports rights to experiment with new business models, ESPN and Turner have embraced the streaming platform and are signing deals to fill their services.

But that’s where the similarity between the two ends. Each company is using a radically different strategy to grow in the streaming marketplace.

ESPN+ provided in- market streaming of all non-national Chicago Fire games this season after reaching a three-year agreement with the MLS club.
Photo: Allen Kee / ESPN Images

ESPN opted to follow a model used by services like Netflix and Amazon Prime. ESPN charges a smaller monthly price ($4.99 per month) as a way to entice more subscribers to sign up. ESPN+ recently eclipsed the 1 million subscriber mark, a number that benefited from ESPN’s early August decision to combine the 20-year-old ESPN Insider with ESPN+. Sources say the number of Insider subscribers that were converted to ESPN+ was around 300,000.

“The thing that we all felt has been a boon to folks like Netflix and Prime is that there’s a simple model and simple pricing to it,” said Kevin Mayer, chairman of direct-to-consumer and international at The Walt Disney Co. “We like the simplicity of the business model and also the ongoing nature of the relationship that you can get through subscriptions versus these one-off purchases. We can track our subscribers’ affinities and usage patterns in a way that will be difficult to do if you’re just selling a one-off access to a program. There are different models and different consumer insights you get from each. We wanted to maximize our service of consumers by understanding them better.”

Turner, on the other hand, has adopted more of a pay-per-view model for its B/R Live. Take its UEFA Champions League, the most popular programming it currently offers. B/R Live is selling subscriptions to watch the Champions League per game ($2.99), per month ($9.99) and per year ($79.99).

“There are many ways you can go at this,” said Turner Sports President Lenny Daniels. “You can go amass a lot of different subs and put them all together. That sounds like what ESPN is doing. Or you can take a more tactical approach, which is more of what we’re doing, to learn and grow from there. You can spend money. For us, it’s about learning first and making smart, strategic moves as we move into the space.”

Faced with a dropping subscriber base and rising rights fees for its linear cable channels, it seemed like a natural for ESPN and Turner to get involved in the direct-to-consumer market. More than a defensive strategy, both media companies consider their streaming services as big growth opportunities, ones where they can get a better idea of how people watch their shows.

“The companies that have that direct relationship with consumers are able to fully understand through data how those consumers behave and what they want and therefore serve them better,” Mayer said. “We can serve our consumers better. We can also enter into a part of the value chain, which will provide us with a lot of growth.”

Only a month into the UEFA Champions League season, B/R Live already has started to tweak its offering based on how its subscribers are watching the games. 

“We’ve been testing and pivoting immediately depending on what we see, what we know, what we’re thinking,” Daniels said. “We’re going to understand what people are actually doing. Once we get to the point where we understand how to scale, we understand what we want the audience to do throughout the entire ecosystem of Bleacher and Turner broadly, then it will give us a much clearer direction of where we go and what we look at in the form of properties.”

Programming on these services runs the gamut from B/R Live’s upcoming Tiger Woods-Phil Mickelson pay-per-view golf match that broadcast networks wanted to the World Armwrestling League that it carried over the summer.

Carrying World Armwrestling League programming was about B/R Live reaching an engaged audience in different ways, says Turner’s Lenny Daniels.
Photo: Courtesy of Twitter

“The arm wrestling was less about amassing an enormous audience or a young male demo,” Daniels said. “It was about learning how to take an engaged audience and seeing if we can reach them in different ways and talk to them in different ways.”

ESPN+ has a similar mix, with Top Rank boxing and Grand Slam tennis matches appearing on the service alongside college rugby and international cricket.

“Those are the two biggest differences in today’s world with ESPN+ — there are deals where we would have been partially interested before and now we’re interested in a comprehensive way; and there are deals where we may not have been interested in at all, we’re now interested in on a baseline level,” said Burke Magnus, ESPN’s executive vice president of programming and scheduling. “This is part of the key promise of ESPN+. There are pockets of super avid fans of a whole lot of sports that are underserved from a linear perspective. We believe there is a good business there if we can string a number of these sports back-to-back-to-back within the same product providing great depth and great value for ESPN+ subscribers.”

ESPN+ 

BASEBALL
MLB
Little League World Series
College baseball 

BASKETBALL
NCAA men’s and women’s basketball (America East, Atlantic 10, Atlantic Sun, Big South, Horizon, The Ivy League, Metro Atlantic, Mid-American, Missouri Valley, Conference USA, Ohio Valley, Southern, Southland, Sun Belt, WAC)
Select University of Kansas games
FIBA basketball

COMBAT SPORTS
Top Rank boxing
UFC (beginning Jan. 2019)

CRICKET
Cricket Ireland (Cricket Ireland Test, ODI and T20 matches)
Cricket NZ

ESPORTS
League of Legends LCS

FOOTBALL
College conferences (Big South, Ivy League, Metro Atlantic, Mid-American, Missouri Valley Football Conference, Conference USA, Ohio Valley, Southern, Southland, Sun Belt)
CFL   

HOCKEY
NHL
ECAC college hockey
IIHF World Championships

LACROSSE
FIL World Lacrosse Championships
NCAA lacrosse (across multiple conferences)
Major League Lacrosse

RUGBY
Pro 14 Rugby
SANZAAR Rugby (including Super Rugby, The Rugby Championship, the Lions Series, Mitre10 Cup, Currie Cup, Bledisloe Cup and other international matches)
HSBC World Rugby Sevens series
Major League Rugby
College rugby

SOCCER
Serie A
FA Cup
MLS (MLS Live package)
Exclusive in-market rights to Chicago Fire (MLS)
UEFA Nations League
English Football League
Coppa Italia
SuperCoppa Italiana
Dutch Eredivisie
Australian A League & W League
USL
Chinese Super League
Indian Super League
Danish Superliga
Swedish Allsvenskan

TENNIS
Grand Slam tennis (U.S. Open, Australian Open, Wimbledon)  

B/R Live 

BASKETBALL
NBA out-of-market games
Jr. NBA World Championship

SOCCER
UEFA Champions League
UEFA Europa League
Scottish Premiership
Belgium Jupiler League
Polish Cup
Swiss Cup
UEFA Youth League

OTHER
NCAA championships (outside of March Madness and College Football Playoff)
The Spring League (football)
National Lacrosse League
World Surf League
World Armwrestling League
Red Bull Global Rallycross

FACEBOOK 

BASEBALL
MLB

COMBAT SPORTS
Golden Boy Promotions boxing
UFC (U.K. and Ireland)

FOOTBALL
Conference USA football and Mountain West Conference football (via Stadium)
High school football games in South Florida (via the Miami Dolphins and ASBN)
NFL

GOLF
LPGA

SOCCER
English Premier League (Thailand, Vietnam, Cambodia and Laos)
La Liga (Three deals: India, Afghanistan, Bangladesh, Pakistan, Sri Lanka, Bhutan, Nepal and the Maldives; Portugal; U.K. and Ireland, via Eleven Sports)
Liga MX (in English via Univision)
Serie A (U.K.)
UEFA Champions League (Two deals: Spanish-speaking territories, via Fox Sports; Portugal via Eleven Sports)

OTHER
Big3 (via Fox Sports)
ESL Pro League and ESL One (English and Portuguese-language rights)
ESPN’s “First Take” (English and Portuguese-language rights)
Reebok CrossFit Games
Tough Mudder Championship Series
World Surf League

AMAZON 

ATP World Tour (worldwide, excluding China)
English Premier League (U.K. Prime members)
NFL “Thursday Night Football”
U.S. Open tennis (U.K. and Ireland)
UFC pay-per-view events (nonexclusive U.S. rights)

DAZN 

Bellator (global)
Matchroom Boxing

FLOSPORTS 

EuroLeague basketball
International Volleyball Federation
Jr. NBA World Championships
Professional Bowlers Association
The Rugby Channel
Western Collegiate Hockey Association

HULU* 

English Premier League
College football and basketball
NHL

TWITCH** 

NBA 2K League
NBA G League
Overwatch League

TWITTER 

MLL
MLS (in English, via Univision)
National Women’s Hockey League
NFL
NHL
WNBA

YAHOO^ 

NBA
NFL

YOUTUBE# 

Fox Soccer Plus
IOC
LAFC
NBA TV
Seattle Sounders

Walt Disney Co., Fox and Comcast each own 30 percent of the service; AT&T owns the remaining 10 percent. Disney’s stake is expected to double once it closes its proposed acquisition of Fox.
** Amazon owns Twitch.
^ Verizon owns Yahoo and AOL.
# Google owns YouTube.
Source: Sports Business Journal research

In this week’s First Look podcast, Executive Editor Abe Madkour and writers Bill King and John Ourand discuss our front-page story on tech firms contending for sports media rights.