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Why Sports Business May End Up Firing The Media

Most mornings, my first-thing routine includes my email, which usually contains one with Ad Age’s major headlines.

Two articles from Tuesday’s Ad Age email woke me up in a hurry, because they yet again rang a bell that I’ve been ringing during class lectures for several years.

That bell pertains to sport properties fully and finally becoming their own media outlets.

The first article described how CBS Corp. will introduce a new “Star Trek” series in January 2017, but not on its flagship broadcast TV network.

After a “special preview” on CBS TV, the new “Star Trek” will only be available in the U.S. on CBS’s All Access streaming video platform, which was introduced last year and commands a $5.99 per month subscription fee.

That means the new “Star Trek” is the first original CBS series created (almost) exclusively for live and on-demand programming. Heretofore, CBS All Access only provided content that had already run on CBS TV.

Although the news comes more than a year prior to the first episode, the announcement’s timing coincided with CBS’s plans to release its latest quarterly earnings on Tuesday.

Nat Ives, author of the article, said that CBS will be one of many media companies soon placed under financial analysts’ microscopes to determine their levels of preparedness for a digital media future.

Ives noted that traditional media stocks were pummeled earlier this year amid growing fears that consumers will continue to abandon traditional cable-and-satellite, ad-supported TV models en masse in favor of streaming services such as Netflix.

When Politicians Fire The Media

In the second article entitled “When Will Politicians Entirely Fire the Media?,” Ad Age’s Simon Dumenco discussed the wake of the Republican presidential candidates’ collective uprising against CNBC over the network’s handling of the previous week’s GOP debate.

Dumenco reported that the candidates’ campaigns held a mini-summit Sunday night in Alexandria, Va., to rethink their future strategies for working with networks.

He also noted the approaches of the GOP’s two leading candidates:

Meanwhile, Trump and Carson are, at the moment, acting like content marketers [emphasis added], secure in the presumption that if they just keep on entertaining the electorate, journalists will have no choice but continue to show up and dutifully take dictation. And if they don’t, screw ’em!

With that paragraph, Dumenco rang my bell loudly enough for me to postpone what I was doing to write this column.

While I realize that sport properties have taken and are taking many steps to deliver their content digitally, and while I realize things on the inside are never as simple as they seem from the outside, I resolutely believe that sport properties are still leaving far too much money on the table with regard to their media rights for live game broadcast content.

In fact, sport properties are missing out on money on two ends: sponsors and subscribers.

Sponsorship Strategies Are Digitally Focused

Sport properties need to carefully consider both long-term and short-term strategies for digital broadcast inventory. Let’s talk about the long-term reasons first.

To begin, on practically every live game broadcast on every digital sport platform I watch, ad inventory is sparse.

No, sport properties can’t really do anything about a pool of advertisers who feel reluctant to sponsor a certain platform, but surely sport properties can show enough solid data to prove how large the mass migration from traditional media to digital media has grown and will grow.

Tantalizing sponsors toward digital platforms with long-term digital deals that lock in the sponsors’ rates at bargain prices must become a front-burner strategy for sport properties as they develop their digital strategies.

Why? The digital domain is where consumer eyeballs are headed, and when that gathers enough critical mass, sport properties are going to be selling directly to advertisers, not just selling typical sport sponsorship packages.

Second, sport properties need to get into the direct-outreach-to-advertisers game now because the current rights rates paid by traditional media companies to sport properties are simply unsustainable.

Analysts and stockholders will not indefinitely allow traditional media executives to continue to sign money-losing rights deals with sport properties in the name of using it to promote other inventory, or simply to keep competing outlets from seizing it.

Besides, if future traditional media business models become radically different, they may no longer have the cash to launch nearly as many—if any—bids for media rights.

In the long run, I believe sport properties can outdo even the current ultra-lucrative media rights deals by selling their live game broadcast ad inventory directly to advertisers (probably at a cheaper rate for the advertisers) and reaping more profits by cutting out the networks as middle men.

Aside from long-term motives, another reason sport properties need to increase their existing digital broadcast ad inventory in the short run is to protect current advertisers.

Although sparse ad inventory means that current sponsors can own that landscape more easily, the downside is that sheer repetition of existing sponsors’ ads drastically heighten the ads’ wear-out effects.

So in addition to promoting their digital platforms to advertisers more, sport properties need to tell their current digital sponsors to come to the table with an arsenal of ads. Most of those brands have or can generate one quickly.

Subscribers Mean Revenue

The second front of potentially massive sport property revenue related to live game digital broadcast inventory involves direct receipt of subscriber fees.

Today, cable and satellite bills are skyrocketing, as sports networks are commanding larger and larger per-customer fees from providers. Like the media companies, analysts and stockholders will not allow providers to continue to steadily raise rates until they price themselves out of business, solely in the name of providing sport content to viewers.

The declining relevance of traditional media outlets has been further compounded by the rise of social media, which may give a buzz of news that is general and sensationalized, but still largely accurate.

And social media are free. That’s huge.

With every subscriber who cuts the cord and accesses digital platforms for entertainment because they feel cable and satellite are overpriced, out-of-date technologies, providers hemorrhage a little more cash. That’s an unsustainable business practice.

One reason traditional media outlets are in trouble today is that they let their cows out of the barn 20 years ago by giving away their content. Conditioned by that approach for years, consumers are now reluctant to directly pay traditional media outlets for their content.

On the other hand, consumer minds have not been conditioned against paying sport properties for content, which makes the market ripe for subscriber revenue. If anything, consumers will gladly throw money for content toward sport properties (example: DirecTV’s Sunday Ticket package).

I saw some possible evidence of this bias against paying media for their content when I recently posed this question to students in my Sport Properties & Sponsorships course:

How much would you pay per month for everything ESPN offers (including all networks on an on-demand device, complete online website access, and digital and/or print access to its magazine) EXCEPT getting ESPN’s services on your cable/satellite provider?

Many students said they’d not pay anything, and many gave a figure below $10/month. But some said they’d pay as much as $60 for it, which leads me to believe that deep down, although a strong bias exists against directly paying a media outlet for content, a propensity to pay for content still exists.
Therein lies the potential for sport properties to seize the day by fully and finally emerging as media businesses themselves, taking their digital live broadcasts completely in-house, and taking them exclusively and directly to viewers on sport property digital platforms as content marketers.

Going Forward With New Media

Yesteryear, such an approach wasn’t economically feasible for sport properties.

Nowadays, though, sport properties have the ability, either individually or collectively in leagues/conferences, to afford and absorb the huge initial investment, hire away the few broadcasters who are cultural icons, groom new ones to take the places of the others, hire away the forward-thinking media executives and producers who now package live sport content on traditional media, and generate massive amounts of revenue directly from advertisers.

Yes, pay-per-view television access effectively mothballed the sport of boxing, but that happened in an age when traditional media were alive and well. Clearly, that’s no longer the case, and new, portable viewing technology options exist today that weren’t imagined then.

And yes, current media deals for live game content in their current formats reap billions of dollars for sport properties.

But until sport properties become content marketers (ala Trump and Carson) and start producing and selling live game broadcasts directly to both advertisers and fans, they will never fully maximize the revenue potential this stream could bring.

And they’ll be leaving money on the table.

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