Sunday, September 10, 2006

The National Football League – not exactly embracing the Internet

Friday morning the National Football League distributed a media release announcing for the first time – the NFL would offer streaming video of their 2006 schedule, but not where you’d expect, everywhere except North America. The NFL’s first major foray into the world of live streaming video of their games on the Internet (a partnership with Yahoo), is limited to Europe, Asia, South America, Australia and Africa

The agreement marks the first time the NFL has made a full season of games available to fans via the Web. There was a limited NFL online trial in 1999, where 1 game per week was offered in Amsterdam and Singapore.

NFL spokesman Dan Masonson made it clear to SBN Friday the league has no plans to offer video streaming of their games in North America. The NFL’s new TV rights agreements (2006 is the year of the six-year contracts, worth $3.7 billion annually); do not include any of the rights holders having the right to stream any games on the Internet. Those rights were retained by the National Football League.

According to Masonson, “We (the National Football League) are not going to jeopardize anything our network partners do...as well as DirecTV which offers the exclusive Sunday Ticket package in North America.”

What makes the NFL’s thought process difficult to understand – Major League Baseball, the National Basketball Association, the National Hockey League, the PGA and the NCAA either currently are, or are in the planning stages of, offering video streaming of their games on the Internet.

What makes it even more interesting, the NFL’s network partners (Fox, CBS, NBC and ESPN) are each offering most of their network programming on the Internet.

Clearly the sports industry is embracing live video streaming of events on the Internet, and the NFL steadfast in their resolve to not even consider live video streaming of their games in North America. Is the NFL making a mistake?

Major League Baseball is the industry leaders when it comes to streaming their games on the Internet. 2006 is the fifth consecutive season MLB have offered live video streaming of their games at MLB.com, a program that began with the 2002 season. Arguably, MLB.com’s biggest success to date was the streaming of the NCAA men’s basketball tournament in March.

At least for Major League Baseball, MLB.com has evolved from an interesting concept, to a loss leader, to a profitable venture. A March Wall Street Journal report on the dollars and cents of the MLB.com said about 15% of the site's total revenue of $195 million last year came from managing Web sites and other partnerships like the one with CBS. An additional $68 million came from subscriptions to watch live video content on MLB.com, including the 2,400 baseball games it streamed in the 2005 season. The rest of its revenue comes from ticket sales and advertising. How good has MLB interactive become at what they do, good enough that they’ve been able to market their services to other sports leagues, properties and events.

Under the leadership of Bob Bowman, MLB’s interactive division has already signed up 25 clients, including CBS, Major League Soccer and the World Championship Sports Network. Entertainers Jimmy Buffett and LL Cool J, too, have hired MLB.com to promote albums and concerts by streaming video of interviews and live performances.

"They are one of the few operating in this space," says Larry Kramer, president of digital media for CBS. "And the important thing was they were in the off-season, so we knew they could also dedicate the time."

It’s easy to understand why Major League Baseball works as well as it does on the Internet. Teams play 162 games; displaced fans want to be able to follow their team on a nightly basis, irregardless of where they are.

"I really needed some way to see Yankees games," says Robert Auld, a transportation analyst with Henry Schein Inc., a New York medical-supply distributor. "I'm on the road a lot and I take my laptop with me just about everywhere I go. And with a hectic schedule, I figured my best option was subscribing to baseball's video service."

Which of course makes the NFL’s position regarding streaming video to the North American market that much more questionable. Following the rationale of Mr. Schein the Yankees fan, how is the NFL serving its traveling fans? If you’re a big fan of the Miami Dolphins, you’re away on a business trip (in Oklahoma City) and the local Fox and CBS affiliates have no interest in televising the Dolphins game that week against the Buffalo Bills, just how will that Dolphins fan see their team play?

The NBA launched NBA LEAGUE PASS Broadband, on January 23, 2006. The NBA offered an innovative plan, leveraging NBA LEAGUE PASS, the league's regular season digital cable and satellite television package. The NBA offered the broadband package as an added value component to their full season subscribers. The league launched NBA LEAGUE PASS Broadband which coincides with the start of the NBA LEAGUE PASS Half-Season package, offering the product for $109 for the remainder of the regular season.

"Working hand-in-hand with our NBA LEAGUE PASS cable and satellite providers, NBA LEAGUE PASS Broadband is another great way for subscribers to experience the excitement of live NBA games throughout the season," said Gregg Winik, Executive Vice President, NBA Entertainment. "As an added value, the new service is the perfect complement to any NBA LEAGUE PASS subscription and no longer requires subscribers to be at their television set to access their NBA LEAGUE PASS service."

The NBA regards the streaming video as an opportunity to leverage their ‘season ticket’ package. If the NFL used the NBA’s rationale, the NFL would package their DirecTV and internet video streaming as an opportunity to create growth. The NFL regards Internet streaming as a treat to their media partners, not as an opportunity to grow those partnerships.

As unimaginable as it may seem, professional sports version of The Little Sisters of the Poor, the National Hockey League are ‘looking’ at Internet streaming possibilities for the 2006-07 season.

"It's an opportunity we're looking at seriously,” Doug Perlman, the league's senior vice-president of television and media ventures, told The Globe and Mail’s William Houston.

Perlman understands before the NHL moves forward with any plan to video stream their games on the Internet, the NHL will have to reach an agreement with national and regional television rights holders as well as the distributors of the NHL Centre Ice pay-per-view package.

"You have to be mindful and respectful of our relationship with our partners," he said in The Globe and Mail report, "But against that backdrop, we're looking at how we can provide a streaming product that makes sense."

Internet video streaming still in its infancy requires the user to have broadband Internet.

According to a recent Globe and Mail report: in the United States, 69 per cent of households are on-line, with 60 per cent of those using a broadband (high-speed) service, which is required for live video streaming.

In Canada, 64 per cent of households have Internet access, with 80.6 per cent of those using high-speed, according to Canadian Radio-television and Telecommunications Commission figures.

The PGA leaped into offering broadband video streaming during last month’s PGA Championship. PGA.com buoyed by an agreement with TNT to air exclusive, live coverage of last weekend's PGA Championship online recorded record traffic on its site. Tiger Woods won the last of golf’s four major events on the 2006 PGA Tour.

The “Tiger Effect” helped the PGA blow the roof off their website, according to a report in Mediaweek. PGA.com recorded an 18 percent increase in total page views during the four days of tournament coverage over the previous year, 49.7 million vs. 42.2 million, and set a single-day record of 16.2 million page views on Friday, Aug. 18, the second day of the live Internet telecast of the competition. The tournament coverage also brought in 2 million unique viewers to the site.

PGA.com, using "Pipeline" technology originally developed for Turner's CNN in its airing of the TNT coverage, also registered nearly one million video streams during the weekend.

TNT also earned an increase for its broadcast coverage of the golf tournament, producing a 1.5 household rating for its 18 hours of TV coverage, up from a 1.4 last year. The cable network also showed increases among men 25-54, up 8 percent, and among persons 25-54, up six percent.

"PGA.com Pipeline's success, both from a traffic and performance standpoint, coupled with our strong television ratings, indicates that our online product not only didn't erode our television audience at all, but actually complemented it," said David Levy, Turner Sports president in the Mediaweek report.
The NFL has the technology, and understands video streaming can generate revenue, but not to their biggest audience – American football fans. The NFL’s online subscription service will charge fans a fee of $24.99 per week or $249.99 for the entire 17-week NFL regular season, and each game will also be available in archived format up to 24 hours after its conclusion.

"We are pleased to offer NFL fans around the world an innovative way to watch NFL games. The NFL is committed to taking advantage of new technologies to bring more value to our fans everywhere and Yahoo!'s proven leadership in technology makes them an ideal partner for a product like 'Game Pass'," said Brian Rolapp, the NFL's vice president of media strategy.

"We are proud to help the NFL deliver the world's most exciting sport to the millions of football fans outside the U.S.," said David Katz, head of sports and studios for Yahoo!. "The global reach and promotional strength of the Yahoo! network enables us to deliver this first-of-its-kind product to NFL fans around the world."

ESPN who are paying a king’s ransom to televise Monday Night Football ($1.1 billion a year) have streamed live video for select college football games for several seasons. This year, not only is ESPN melding their NCAA cable and Internet packages together, ESPN is offering college football fans who have ESPN Mobile (the company’s mobile phone service) an opportunity to watch up to 25 games a week.

"The addition of live college games to our content represents a key milestone in the way we’re using innovative technology to serve sports fans," said Manish Jha, senior vice president and general manager, Mobile ESPN. "Recognizing our fans aren't always in front of a TV or computer, we feel there is no better time to offer longer-form mobile video with a sport as popular as college football."

Major League Baseball, March Madness, the PGA Championships, the National Basketball Association, Major League Soccer, the National Hockey have all embraced streaming their events on the Internet. While the NFL is steadfast in their resolve they would jeopardize their multi-billion broadcast agreements and fully intend to respect that underlying principle for the next six years, here’s a safe bet. Within three to five years networks will be streaming their primetime programming on the Internet.

Is it possible that in six years when the current NFL network agreements expire, the only sports league that won’t be offering live streaming video of their games to Americans will be the NFL? The NFL’s business acumen has established the league not only as strongest economic force in the half trillion dollar sports industry. Does the NFL know something everyone else doesn’t understand, or is the NFL making a mistake in not offering streaming video on the Internet to their key supporters – North American football fans?

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The Wall Street Journal, Mediaweek and The Globe and Mail