Monday, July 28, 2008

The National Football League does an Internet about face

Monday the National Football League took what can be only regarded as a gigantic leap into the future, or at least when it comes to NFL and the Internet. The NFL and NBC announced an innovative plan to stream the leagues Sunday night football package on NBC live on the Internet. The announcement marks the first major move towards live Internet streaming from a sports league that had previously shunned the Internet. The NFL’s Internet steaming history was in start contrast to how its rivals viewed the Internet.

The NFL’s decision to steam NBC games (nationally televised games) includes a revenue sharing component. The NFL sees NBC’s 17 game schedule as a ‘test’. The league and this likely has Fox and CBS upset (who own regional NFL rights) have no plan to offer any of Fox’s, CBS’s or ESPN’s Monday Night Football games online.

On the eve of the 2006 season the National Football League distributed a media release announcing that for the first time ever – 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. With one notable exception, the same philosophy remained in place throughout the 2007 season as well.

On the eve of the 2007 season the NFL decided that those who purchased the DirecTV league package for $269 could pay an additional $99 and purchase what was billed as a “SuperFan package” Those who purchased the SuperFan package where had access to all of the leagues games on their computers through a special access code.

Head back in a time machine to the even of the 2006 season offers an interesting historical perspective on where the NFL was before Monday’s announcement. The 2006 agreement marked the first time the NFL 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 on the eve of the 2006 season the league has no plans at that time to offer video streaming of their games in North America. The NFL’s new TV rights agreements (2006 was the year of the six-year contracts, worth$3.7 billion annually); did 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 made the NFL’s thought process difficult to understand – Major League Baseball, the National Basketball Association, the National Hockey League, the PGA and the NCAA as far back as 2000 did, or were in the planning stages of, offering video streaming of their games on the Internet two years ago.

What made it even more interesting, the NFL’s network partners (Fox, CBS, NBC and ESPN) offered most of their network programming on the Internet as they are planning to do when the networks launch their fall programming in September.

Clearly the sports industry continues to embrace live video streaming of events on the Internet, and the NFL seemingly was steadfast in their resolve to not even consider live video streaming of their games in North America. Was the NFL making a mistake, before Monday’s announcement?

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 Wall Street Journal report in March 2006 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 were ‘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 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 the 2006 PGA Championship. PGA.com buoyed by an agreement with TNT aired exclusive, live coverage of the 2006 PGA Championship online recorded record traffic on its site. .

The “Tiger Effect” helped the PGA blow the roof off their website two years ago, 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, 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.

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 had the technology, and understands video streaming can generate revenue for some time, but not to their biggest audience – American football fans. The NFL’s online subscription service charged European and Asian fans a fee of $24.99 per week or $249.99 for the entire 17-week NFL regular season, and each game was also archived 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'," Brian Rolapp, the NFL's vice president of media strategy told SBN two years ago.

"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. ESPN has for a number of years melded together their college football coverage both online and through their national cable network.

"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."

Officials at Fox, CBS and ESPN were tightlipped Monday when the NFL and NBC made their online announcement, in start contrast from NBC and the NFL. NBC pays the NFL $600 million annually for the right to their 17 game package, less than ESPN’s $1.1 billion for Monday Night Football, Fox’s $712 million for NFC games, DirecTV’s $700 million NFL out of market package and CBS’ $622 million AFC package.

"This is an exciting step forward for us as we offer our fans a new way to consume NFL games," said STEVE BORNSTEIN, NFL Executive Vice President of Media. "We are combining NBC's outstanding Sunday Night Football telecast with extras that will enhance the fan enjoyment of the game."

"In the first two seasons of 'NBC Sunday Night Football,' we created a new destination to reach viewers and changed traditional primetime football viewing habits," said DICK EBERSOL, Chairman, NBC Universal Sports & Olympics. "Now, together with the NFL, we are adding the live streaming element where users can interact with the broadcast to enhance their experience."

The Wall Street Journal who first reported the NFL’s decision to work with NBC spoke with other NBC officials.

"I think the consumer of media is more and more interested in a greater sense of control over their media experience," said Gary Zenkel, NBC Sports' executive vice president of strategic partnerships. "Whether that translates to sports viewing or not, no one knows. But this is certainly an opportunity to experiment."

According to the Wall Street Journal report: the NFL approached NBC in recent months to hammer out a deal to stream its games, in part, it says, because NBC's nationwide broadcasts, which averaged 15.9 million viewers last season, make for a clean test of whether online availability will boost or shrink viewership.
"Does it cannibalize, or is it incremental?" Brian Rolapp, the NFL's senior vice president of media strategy and digital media told The Wall Street Journal. Mr. Rolapp wants to know: "Does it make sense to use it to go out and build new products and new businesses?"

Only time will tell but Monday was a step forward for the NFL when it came to sports biggest media player and the Internet.
For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The Wall Street Journal

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