Evolving Sports' Online Playing Fields

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Live streaming of sporting events on the Internet is providing new opportunities for fans as well as networks, leagues, Internet providers and even advertisers. But the platform also faces some challenges, in terms of rights issues and differing business models.

“There is tremendous growth in live streaming sports,” said Jason Kint, senior vice president and GM of CBSSports.com. “It is not cannibalizing television audiences but providing dynamic opportunity across platforms.”

Added Tennis Channel CEO Ken Solomon: “Live streaming events over the Internet are part of the personalization of the sports experience. The technology of streaming allows you to become the programmer and follow what you want. That builds stronger fan bases among more people who will watch more—the more you see, the more you want to see--which is why live streaming sports will continue to get stronger and stronger.”

Executives at leagues and networks are virtually unanimous in their belief that live streaming of sports events is both a necessity and a huge opportunity, allowing them to show multiple events at once, more obscure sports, out-of-town teams and events during the weekday. (Live streaming to mobile, albeit in a linear format is coming down the pike quickly too.)

But clearing rights and creating deals with providers can be a challenge and some are still sorting out whether the ad-supported free access or the subscription model works best for them.

The pioneer was Major League Baseball, which debuted the first live full-game video stream (featuring the New York Yankees and Texas Rangers) in 2002. That year, MLB.com sold only a nine-game package but by the following year, its new MLB.TV made baseball the first sports league to stream an entire season live online. By 2006, fans could watch up to six games at once and the following year, MLB.TV was up over a million subscribers. Now, nearly every other sports entity, be it league or cable network, has followed baseball into the world of live streaming.

In hockey, live streaming was especially vital because more than 40 percent of its fans live outside their team’s local market, according to Andre Mika, the NHL’s senior vice-president of broadband and new media production; the league’s new service, NHL GameCenter Live is an upgrade over the previous, more modest, Center Ice Online.

The NBA has expanded its live streaming offerings from what was merely an extension of a television package to a full-fledged subscription for NBA League Pass Broadband (operated by Turner Sports) providing access to 40 online games each week.

“We’re bullish on this,” said Bryan Perez, SVP and GM of NBA Digital. “Consumer acceptance has been pretty rapid.”

Beyond the leagues, sports departments and networks are also joining in, led by CBSSports.com, which has had tremendous success with its men’s college basketball tournament—this year, consumers streamed 4,925,566 hours of “March Madness on Demand” video and audio, up 81% from last year—and has expanded into other sports. Kint points out that March Madness, with its numerous games per day, many on weekdays when people may still be at work, is ideal for the live streaming format.

That’s the motivation for Tennis Channel and Universal Sports as well.

“Tennis, as a bracketed tournament sport is particularly well suited to live streaming,” said Solomon. “It is played during the week, in different time zones, and there are often four to six tournaments per week.” Tennis Channel’s first Grand Slam experiment with live streaming was the 2007 French Open, which in a fortnight, features a dizzying array of men’s, women’s, doubles, mixed doubles and senior matches. “That’s too much to show on television,” Solomon said, adding that this year they provided 16 matches daily at the French and that page views up were 400 percent over the 2007.

Universal Sports, previously called World Championship Sports Network, came to live streaming because it couldn’t get cable distribution.

“We wanted to be multiplatform but most operators were putting us on sports tiers when we wanted to be as broad as possible,” said CEO Claude Ruibal, who adds that they chose live streaming because they had the rights for all the various sports that are played in the Olympics and “it was the path of least resistance.” Last year, they streamed over 2,000 hours live and frequently offer not only multiple feeds of a particular event but various events from around the world on a given weekend. Their streaming success caught the attention of NBC Universal, which invested as a partner this summer, providing extra promotion and marketing muscle for the streaming Web site (and also television distribution on digital bandwidth).

Of course, where there is sports, there is ESPN, which re-launched subscription service ESPN360.com last year with a new emphasis on live streaming events—in its first year, ESPN360 ran 3,000 live events, a number that should grow by 16 percent next year. (Distribution has grown 41% and unique viewers and total minutes were both up nearly 400%, according to the network.)

While the site features high-profile games from MLB, the NBA and college football and basketball, vice-president Damon Phillips says sixty percent of the material on ESPN360 is not found on the cable network, including “passion sports” with smaller but avid audiences such as NCAA wrestling, cricket, rugby, and lacrosse, not to mention polo or racquetball.

“There’s only so much you can put on the linear network but there are passionate fans out there for these sports,” Phillips said.

But while everyone believes in live streaming, not everyone is certain about what the best business model is. Bob Bowman, CEO of Major League Baseball Advanced Media, says MLB chose the subscription route because they offer a seemingly endless season of choices—3,000 games a year—and so they “mimicked the successful model of cable television.” (Most baseball is shown on basic cable, for which people pay.)

He praised CBS’s ability to maximize its value with March Madness by streaming it for free, saying that grabbing advertiser dollars for optimum number of eyeballs only works with something like the NCAA tournament.

“You can dominate the media space for a limited time,” Bowman said. (He adds that the notion of trying it for postseason baseball is intriguing but that the rights deals with Fox and Turner would make it very complicated. “CBS has plowed that ground, but baseball is not anywhere near that.”)

The NBA, NHL and NFL (with its DirecTV package) followed suit. (The NFL and NBC this year added a separate opportunity to see NBC’s Sunday Night Football games on the computer.)

Others are not sold on subscriptions. “It all depends on what goals we have,” said Solomon, explaining that Tennis Channel is looking less to earn quick bucks now and more at the long-term goal of rebuilding viewership and interest in the sport. “If you’re trying to bring people back in the tent, why put a gate at the door—we’d rather get them in than have sponsors pay for banners around the tent.” Solomon does add that Tennis Channel has a demographic advantage in this regard—its television audience has a mean income of $82,000, which makes it easier to target advertisers.

Universal Sports plays the game with a similar approach—in August, it switched from the subscription model to a free model. “If it’s subscription you’ll get everyone who loves bobsledding but othere people who might love it will answer no,” Ruibal said, “We hope to get people in exploring” and then to build up its advertiser base, especially as the 2010 Olympics approaches (especially with the extra push from NBC).

CBSSports.com made the switch from subscription to ad-supported free programming for March Madness and its biggest college football games but it still sees the need for subscriptions in other arenas, Kint said. It runs College Sports TV’s XXLSports.com, and last year bought up the high school sports Web site MaxPreps.com.

Kint points out that the 215 universities offering spots like college hockey or water polo and the high school teams are “too targeted” for advertisers so those are run on subscriptions. “You have to recognize that one business model won’t work for everything,” he said.

Still others aren’t convinced that either business model works. Turner Sports is an innovator in live streaming enhancements such as in-car cameras for NASCAR.com, which it manages. But president David Levy says he hasn’t found a compelling business plan for streaming the entirety of, say, its NBA Thursday games or MLB’s postseason games, though he doesn’t rule it out for the future.

Other holdouts like Golf Channel and Comcast’s Versus Network refused to comment for this story.

For the games that do draw big numbers, advertisers are starting to come around.

“Advertisers want to be where the eyeballs are,” ESPN’s Phillips said.

“They’re still figuring out online, but they know they have to figure out how they should be there,” said Ruibal, adding that Olympic sponsors are ardently seeking ways to extend their connection to fans of the sport beyond the fortnight on which they have spent a fortune.”

Kint adds that some advertisers eagerly embrace Internet advertising as a way to appear cutting edge. Both Kint and Solomon stress that their ad dollars are not “value added”—they are sold separately (and sometimes produced distinctly for this medium), in many cases to those who advertise on television, but in other instances to some who only can afford to advertise on live streaming Internet events.

March Madness climbed from $4 million in online ad sales in 2006 to $10 million in 2007 and $23 million this year, according to Kint. Though Mika says it seems possible that subscriptions—getting dollars directly from hard-core fans, who may not be able to afford tickets to games now-- will fare better in this cratering economy than ad dollars, he and Bowman agree that it is too soon to tell for sure.

ESPN takes the idea one step further, viewing ESPN360.com as an online TV network, according to Phillips. It not only seeks its own advertisers, it has its own autonomous production, programming and operations departments. The goal is not just to reach fans and entice advertisers, he added, but to provide value to ESPN’s cable and telco affiliates.

Working with Internet and cable affiliates and providers, along with obtaining rights permissions, is the most complicated part of the equation for most involved. Bowman says that the early fears from cable operators about live streaming cannibalizing TV viewership is gone but that genuine issues of sharing the events remain.

“Some operators say, ‘Why pay a license fee for content when it is being made freely available online,’” Ruibal said. “It’s an educational process.”

And while every rights deal requires negotiation, Solomon says all rights holders are “looking to maximize their digital rights now.”

CBSSports.com, meanwhile, has been pushing out in a different direction, bringing its content to wherever it can find the fans—viewers can watch its games on its Web site but also through ESPN, Facebook, Yahoo Sports and others. “I think this will happen more as the switching costs get lower,” Kint said, adding that this need for open access over guarded information reflects the overall Internet philosophy of CBS Corp.

Solomon says Tennis Channel is following suit, speaking with various distribution partners even as it lines up rights deals for various tournaments. “We’ve been doing a diagnostic, now we’re ready to move,” he said. “And now we are answering phone calls instead of having to beg people for a meeting. We’re in that magic moment.”

Meanwhile, everyone continues refining and enhancing the product. Bowman said baseball’s stream now can be watched on a 20-inch monitor without degradation but by next year, it will hold up for a 60-inch monitor. “The quality gets exponentially better,” he said.

ESPN360 is launching its 2.0 version, with cleaner navigation options and features like fast forward and rewind buttons for recorded games. Adding unique statistics and extra windows that can be opened has become de rigeur. Phillips, Bowman and the other executives all emphasize that interactivity is a new focal point—sites now offer fans a chance to chat with each other while watching online, while Turner Sports has allowed fans to choose which players to follow with the “player cam” during the NBA All-Star Game.

“What we put around the game is what makes it interesting,” NBA Digital’s Perez said. But what really may enhance growth in the future may be the sharpening of the various business models. Companies, Perez added, are “still in the experimental stage.” He foresees possibilities that include a hybrid of advertising and subscription, various price levels based on how many bells and whistles a fan wants or based, a la Netflix, on how much product per month a consumer wants.

“In this non-linear format everything is possible and there is so much flexibility,” Perez said. “You will see a lot of people evolving their pricing models. We are evaluating and learning every day.”

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