Sports broadcasting: solving the Innovator’s Dilemma
All businesses will one day face the Innovator’s Dilemma: do they cater for their customers’ current needs, or adopt new innovations to satisfy their needs in the future?
Changing media habits have forced the major leagues into their own version of the Innovator’s Dilemma: do they protect their media rights income by continuing to do linear TV deals, or do they serve their younger audience through digital innovation?
The ‘traditional’ TV audience is eroding as viewers watch digitally and on-demand, and while viewership of media content thrives, broadcasters’ ability to monetise a digital audience is proving much harder than monetising a linear audience.
As content owners, these rights-holders now have more options and leverage than ever – and a focus on OTT can see them work with online publishers in this space, or build their own direct-to-fan relationships. But that brings revenue risk.
No rights-holder, rightfully, has yet awarded major exclusive rights to any non-tried-and-tested approach. The big OTT deal is still in the future. That said, each major league’s experimentations give an indication of what the optimum new broadcast model will look like.
New thinking, new business models and new ways of working are needed to stay ahead of the game. And the over-arching theme is that rights-holders need to gather as much intelligence around the consumption of live sports on digital platforms to make a long-term, data-driven media rights strategy.
The National Football League’s OTT experiment with Amazon gives no exclusivity to the online publisher as fans can watch the game on cable (via NFL Network) or on broadcast TV (via Fox); the model is for the main broadcaster (Fox) to extend the reach of its broadcast on OTT while retaining the lion’s share of advertising.
Non-exclusive NFL is unlikely to be a big subscription-driver for Amazon, but both the NFL and Amazon have been able to test how content can help advertisers more effectively sell to consumers with the available NFL audience data.
Amazon has also been able to experiment by putting broadcasts with game data integrated on screen on its e-sports streaming platform Twitch, enabling it to see how a younger, gaming audience consumes live sport.
Win-Win-Win: Fox gains more eyeballs for its broadcast – and therefore advertisers – via increased distribution; the NFL learns more about the power of its audience to form its future strategy, and gain leverage in broadcast negotiations; and Amazon obtains greater intelligence about what its business model might be for live premium sports rights, and how valuable sports rights are generally.
The National Basketball Association has probably gone the furthest in innovating for a digital, direct-to-consumer world – recently, of course, announcing ‘player-perspective’ coverage on Twitter at CES this month. This season, the league has given fans the ability to buy the fourth quarter of a game for $1.99 as part of the out-of-market League Pass product. However, it excludes nationally-broadcast games, as to not conflict with core TV rights.
Data-Driven: The NBA will be able to attract a casual or younger fan who wouldn’t otherwise pay for full games, but doesn’t want to miss the live moments in a season that could really matter – reflecting how Millennials and Gen Z consume media. Key to success will be execution: the NBA needs to really know its fanbase and where to reach them – and in real-time, to tell them exactly when they should be accessing content.
During the 2018 season, Major League Baseball gave Facebook the exclusive rights for 25 live games. While it was significant that Facebook got exclusivity, in reality the rights were for afternoon games that weren’t premium – and to better engage the Facebook audience, the platform also invested in interactive elements like graphics and user integration that were added to the broadcast feed.
Baby Steps: While this deal clearly wasn’t being done to drive revenue, the fact that the teams signed off on an experiment where broadcast rights were given back to the league to be sold on to Facebook shows the openness of the sport to better understand the market. However, more innovation from a production standpoint could have reaped more learning: using a traditional broadcast feed and adding in some interactivity doesn’t feel like re-imagining how live sport should be produced.
NHL – watch this space
The National Hockey League has been relatively quiet to date – but expect this to change as both TV and digital agreements come up for renewal, with NBC and Disney, in 2021.
Insight is Critical: Having not experimented to the same degree as other leagues, the NHL faces the challenge of having limited access to valuable insights and knowledge about differing business models at play, how their rights are going to be valued, and what their next rights packages should look like. If they aren’t already, the NHL should be courting the OTT players and finding ways to work together before they lose a big opportunity to get to know them, and create competitive tension in the market.