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3/29/2016 Handicapping the Netflix of sports: Win, place, show, scratch ­ SportsBusiness Daily | SportsBusiness Journal | SportsBusiness Daily Global SBJ/March 28­April 3, 2016/Opinion Handicapping the Netflix of sports: Win, place, show, scratch Published March 28, 2016, Page 21 etflix has revolutionized the TV business, endangering many nonsports linear N networks. So far, sports has been relatively unaffected by the emergence of streaming, and therefore more valuable to multichannel video programming distributors. Netflix morphed its DVD­by­mail business into a subscription video­on­demand category killer, which largely lacks sports. But how long can this last? Who will emerge as the Netflix of sports? To develop a competitive business model with a critical mass of sporting events, a successful player must have deep pockets and at least one existing advantage to parlay to overcome significant barriers to entry: ■ Resistance by rights owners who prize the exposure, cachet and revenue of the existing model. ■ Conflicts with existing distributors, who largely foot the bill today. Below is a handicapping of those picks most likely to earn a spot in the winner’s circle, roughly in odds­order of being “in the money.” ■ To Win ESPN. The Worldwide Leader has achieved the trifecta: the biggest war chest, huge cache of major rights, and operational WatchESPN mobile and ESPN3 platforms. It has negotiated rights with the NBA for a future OTT service. ESPN is forward­looking and shrewd, and digital boss John Kosner has created state­of­the­art digital media platforms. Biggest risk: growing its digital business while protecting its $75 per subscriber per year in MVPD license fee revenue. MLB Advanced Media. Already streaming baseball and now the NHL, http://www.sportsbusinessdaily.com/Journal/Issues/2016/03/28/Opinion/Ed­Desser.aspx 1/4 3/29/2016 Handicapping the Netflix of sports: Win, place, show, scratch ­ SportsBusiness Daily | SportsBusiness Journal | SportsBusiness Daily Global BAM is well on its way. It has some of the best streaming tools (and the highest­grossing sports app), a solid ticketing business and an entrepreneurial bent that goes far beyond MLB. As a technology company, it is positioned to offer a consumer­facing streaming service that complements its existing properties, providing it can keep local and national rights holders contented. Posting upfront money to gain additional sports rights for its OTT service may be another matter. Amazon. This serial disrupter is beefing up its internal sports programming expertise in an apparent quest to dominate every possible low­margin business. Already using Prime subscription video to grow its huge retailing footprint, it is not afraid to place big bets to achieve long­term goals, Wall Street be damned. Just think about the cross­selling opportunities while Amazon transforms sports distribution forever. ■ To Place NeuLion. A trailblazer in streaming sports, this technology company has put together an end­to­end streaming system for sports. Recently outbid by BAM for NHL rights, it provides services for the NBA, UFC, Tennis Channel, Big Ten Network, Univision, MLS and many others. NeuLion has access to digital signals for the largest quantity of live sports programming outside of ESPN, but it is now a “white­label” service provider and has yet to make major investments in content to develop a consumer sports brand. Fox. Sports is in its DNA. While not known for advanced digital prowess, it can balance the demands of the existing network’s business with a new world order that would benefit from Fox’s innovation. Look for it to try to thread the needle to keep with the pack. Time Warner. It recently bought iStreamPlanet, a major streaming company that serves sports like the WWE, NHRA and Pac­12. Now separated from its sibling cable company, TW is free to approach the new space. Turner has been a digital transport leader, hosting NBA.com and PGATour.com digital operations. HBO has been an aggressive first mover with its OTT platform. ■ To Show Netflix. Who better? While it has disclaimed interest in sports, preferring content with a much longer shelf life (“long tail”), it might ultimately look to exploit its huge sub base, monthly subscription revenue stream and custom curation usage data to reinvent the sports consumption experience in the SVOD space it invented. Apple. Reports had Apple involved, and then uninvolved, with bidding for NFL digital rights. With $200 billion of cash, the world’s most valuable company can easily afford the ante and has a history of disrupting industries. But Apple appears primarily focused on selling highly profitable iPhones and other hardware (and fighting the Justice Department) these http://www.sportsbusinessdaily.com/Journal/Issues/2016/03/28/Opinion/Ed­Desser.aspx 2/4 3/29/2016 Handicapping the Netflix of sports: Win, place, show, scratch ­ SportsBusiness Daily | SportsBusiness Journal | SportsBusiness Daily Global days. YouTube/Google. Google’s mission is to organize the world’s information, but not necessarily to be a content owner. With ample financial resources, if it wanted to enter the sports space, it likely would have already happened. Nevertheless, YouTube recently launched YouTube Red, entering the arena with their first pay video service. Yahoo. It streamed the NFL London game last year and is in the running for Thursday night digital rights, but it will likely be too distracted by its perennial fights with activist investors and potential asset sales to stomach a rights buying binge. New entrant. We must leave open the possibility that a sports­oriented entity without a media distribution pedigree decides to jump in the race. Think Nike, IMG or Ticketmaster. Remember: Getty Oil was first to embrace the potential of ESPN. ■ Scratches CBS. The only broadcast network to launch its OTT service, it programs high­profile sports across multiple platforms but is constitutionally oriented toward general entertainment. NFL. While it has the strength to create a new platform on its own, that is much less attractive for the league than methodical, sparing allocation to a variety of major media partners that are all happy to pay top dollar, take on all risk and heavily promote to mass audiences for a slice of football gold. Sony, Microsoft, Samsung, Roku. All are active in the streaming space but primarily from a hardware (not content) standpoint. AT&T/DirecTV. While DirecTV began life focusing on sports as a differentiator, today it is focused on data delivery and connectivity via wire, fiber, cellular or satellite. NBC. Ownership by Comcast, the largest cable operator, will likely focus its innovation on TV Everywhere authentication and the NBCSN live app rather than redirecting consumers away from cable. Hulu. With partners Disney and Fox having their own sports vehicles, and NBC ranking just above, it’s hard to see Hulu’s parents greenlighting an expensive sports plan on their collective behalf. http://www.sportsbusinessdaily.com/Journal/Issues/2016/03/28/Opinion/Ed­Desser.aspx 3/4 3/29/2016 Handicapping the Netflix of sports: Win, place, show, scratch ­ SportsBusiness Daily | SportsBusiness Journal | SportsBusiness Daily Global All of this assumes that an OTT sports model emerges that can break free of the inertia of the current business. It must be financially competitive, providing the prestige and exposure of traditional broadcast/MVPD TV. This will take years to develop, if it can even be cobbled together at all. So stay tuned, and place your bets with care. Ed Desser is president of Desser Sports Media (www.desser.tv), specializing in sports media rights negotiations, strategic planning, rights and asset valuations, M&A, and expert witness services. He led the NBA’s media and digital efforts, launching its TV networks and distribution platforms, and has negotiated/advised on more than $40 billion in sports media rights and transactions. Related Topics: Return to top Opinion http://www.sportsbusinessdaily.com/Journal/Issues/2016/03/28/Opinion/Ed­Desser.aspx 4/4.

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