Come Together: Sports Network Heads Sound Off on State of the Business
Sports industry professionals in New York City had a rare treat earlier this week when Mark Lazarus, NBC Sports Group, chairman, Sean McManus, CBS Sports, chairman, Eric Shanks, Fox Sports, president, COO and executive producer, and John Skipper, ESPN, president, shared a stage at The Paley Center for Media to discuss some of the top issues and challenges facing the industry. Over the course of the hour-long conversation (moderated by Richard Deitsch, Sports Illustrated, senior editor) it became pretty clear that collectively the four networks are very much on the same page when it comes to their goals and the future for sports content creation and distribution.
Here’s a quick recap of some of the top themes:
The current state of TV rights deals is just fine and while someone like Google could get involved in the rights business it doesn’t make sense.
With rights deals getting richer and richer (and also longer and longer) it might seem that they are getting out of hand and McManus thought back to paying $500 million for the rights to the AFC in the late 1990s.
“It was an insane amount of money at the time but from a practical standpoint it worked for us,” he said. “And as the numbers get bigger people are always surprised but if the numbers didn’t work for the corporations then we would not keep doing the deals.”
The lengths of the deals, for example, give ample opportunity for the investment to be recouped in the form of affiliate and ad sales, carriage fees, and more.
For the past five years there is the constant rumbling that the likes of a Google or Facebook would step into the sports rights market.
“Google are buyers of our content and there is nothing stopping them if they wanted to get into the sports rights business,” said Shanks. “But if you want to make a true business out of sports rights you need to make a commitment to more than just one or two things.”
Added Skipper: “I can’t see them creating more value out of sports rights than we can and I can’t see how it is an advantage for them or their business.”
The NFL’s decision to sell the rights to one of the games being played in London next season to a non-TV platform will be an interesting test case, said McManus.
“But the NFL wants mass distribution of products and that is part of the reason they have been so successful,” he said.
Millennials are important but monetizing them is a daunting challenge.
Skipper said that ESPN doesn’t spend a whole lot of time targeting millennials although programming that skews towards younger, male viewers is important. “That’s why this weekend on ESPN you’ll see things like soccer, the NBA, lacrosse, and women’s college softball,” he said. “But in terms of the presentation we don’t do anything differently.”
Shanks added that while Fox definitely wants to offer programming that gets millennials into the sports viewing funnel expectations should be tempered if one expects to see financial payback, especially from those who are 18-24 years old.
“They are much more like teenagers in their consumption habits than those who are 25 plus and also household formation is happening later in life,” he said.
McManus concurred on the issue of the lack of disposable income among millennials and added that the other issue is finding out what is the best way to reach them.
“Video is exploding [on tablets and phones] and the question is how do you get paid for that video?,” he asked. “We all realize the content we have is first class and will draw the viewers. The question is how will the audience change in terms of how they are consuming the product. And while the traditional model of 30-second spots still works to a large extent it’s not the future. It’s the past and the present.”
Another large issue, added Shanks, is that new media puts much more value on the time of millennials than their money.
“So sports that are attractive to them, when time is of the essence, are things like soccer that is over in two hours or UFC that is over in 15 minutes. And baseball is focused on improving the pace of play,” he said. “The sports that request the time of millennials will work the hardest to attract them.”
Lazarus said the key is to get millennials into the funnel and build brand loyalty over time and also pay attention to research rather than thinking back to one’s own life and expectations at the age of 24.
“They’re not the same as we were when we were that age,” he said. “They have different behaviors.”
In an age of media disruption the gravitational pull of live sports content will remain strong and attractive to viewers, advertisers, and OTT platforms.
“We are dealing with existential issues,” said Skipper. “The change in the way consumers view video and how we change and adapt to that. And then migration of advertising to digital media and how we navigate with new ad measurement and ad serving systems so that we can capture our share of advertising as it moves to new platforms.”
Lazarus was the first to introduce the phrase “disruption” into the conversation as the main challenge today is to find the right balance between core products and innovating fast enough so that sports content is part of the disruptive landscape in a way that complements the core products.
Over-the-Top (OTT) services are getting a lot of attention from consumers and analysts and Lazarus said that the launch of NBC Sports on Apple TV and Roku points to the kind of innovation and need to be available on all platforms that will be important in the future.
“We may be a Luddite owned by a cable company but that doesn’t hamstring us from innovating,” he added.
McManus said that live content of all forms continues to be increase in value so the question is how to best monetize new platform opportunities.
“Sometimes something will fall into your lap as someone wants to pay a lot of money for a signal but others need to be creative,” he explained. “The ones who win will be those who are most creative and monetize the product.”
Shanks was reflective for a moment, looking back to 2008 when the likes of Netflix, Amazon, and others began the OTT era that signaled the “end of the world” for old media.
“Since then the combined market cap of our four companies has tripled,” he said. “So people want our content and sports is a product people watch as 95% of all U.S. homes watched sports for 200 hours last year. So OTT bundles will have sports in them and use sports to be a first-mover advantage.”
Skipper was bullish as well: “Sports over indexes on any of these new platforms.”
Social media is still much more about promotion than bucks and Twitter’s Periscope is not a threat…yet.
McManus pointed to a single moment that crystalized for him that social media could have a positive impact on ratings. It was during the 2013 NCAA Men’s Basketball tournament and Louisville Cardinal Kevin Ware suffered a gruesome leg fracture.
“Within seven minutes we saw a 20% spike in viewership and it was trending at #1 on Twitter,” he said. “Monetizing social media is difficult but it is beneficial for adding to what we are doing.”
Shanks added that while it can be monetized it takes hard work to get value for the number of impressions a sports network can generate.
“We don’t think we’re getting fare value for the impressions we deliver but we want to embrace it everyway possible so we create customized content for Facebook, Snapchat, and more. It keeps us front and center on the devices where people are consuming content and video is much more prevalent in social media. And that helps us because we are much bigger creators of video content than the written word.”
Twitter’s Periscope app is probably the most buzz worthy thing in the social media world right now as the app allows a user to turn it on, activate their camera and microphone, and instantly broadcast a live feed to friends and strangers alike. It recently made headlines in sports during the PPV boxing fight between Floyd Mayweather and Manny Pacquiao as fans were pointing their phones toward their TV sets and streaming the live fight illegally via Periscope.
“It’s more of an annoyance and it got a lot of attention during the fight but it is a terrible experience compared to watching it on TV and I don’t think it cut into the PPV revenues,” said McManus. “But we will pay attention to it and if it inhibits the rights we paid billions of dollars to get then we will pay attention to it.”
Skipper added that Periscope does raise a bigger issue with respect to the Internet.
“People are stealing [with it] and it would be nice if our friends in [Silicon] Valley would quit hiding behind the idea that they don’t have to be engaged in the protection of intellectual property,” he said. “Intellectual property is important to our economy and to our culture and should be protected.”