US households watched more television on streaming and other digital platforms than they did on cable and free-to-air (FTA) in July. In many ways it’s a significant milestone, but the return of the National Football League (NFL) next month will reestablish the primacy of linear broadcasting – at least for the autumn.
Sport’s ability to command huge live audiences remains unsurpassed – and ESPN and Fox’s decision to keep their most important sports programming away from streaming services is the main reason the cable bundle still exists.
Cable remains a more profitable enterprise for ESPN than streaming. But the amount Disney can extract from major distributors for each subscriber is flatlining and a smaller customer base means lower overall revenue. And the absence of a fully direct-to-consumer (DTC) version of ESPN means there is no way to fully monetise cord cutters interested in sport.
ESPN has dabbled with sports programming before but has never lent its name to a sportsbook (Image credit: ESPN)
Disney’s hybrid approach has worked so far, but the media giant knows the writing is on the wall and plans to combine its flagship network with ESPN+ as early as 2025. The company knows once it goes ‘all-in’ on streaming, the bundle will likely unravel, and it knows it only has one chance to get this transition right.
It’s why chief executive Bob Iger and other leading figures have reportedly been seeking ‘strategic partners’ for ESPN. A tech giant would aid distribution and deliver scale, while a major league could provide content and help provide a degree of insurance against skyrocketing sports rights values.
However, OTT is more than just scale and content. Media companies that largely squandered the favourable economics of cable and spent billions on content and customer acquisition are now having to balance the books in a saturating and competitive market.
Price increases, password-sharing clampdowns and cost cutting are all popular strategies. But keeping users engaged so they never want to leave and diversification of revenues are now priorities for many platforms.
The next phase in sport’s OTT journey will see leading players attempt to create all-in-one sports streaming platforms where live video is just one of multiple services, alongside betting, gaming, ecommerce, digital content, and Web 3.0.
The logic is two-fold. Changing consumption habits mean streaming platforms can no longer be a retransmission of a linear feed. Interactivity and tailored content formats are essential to attracting Gen Z. By offering multiple services – and combining the first and second-screen experience into a single app – sports platforms can keep users’ attention for longer and tie them into their ecosystem, driving engagement and revenue.
ESPN might be defending a significant legacy business, but its brand awareness and existing user base mean it is well-placed to translate its dominance from the analogue media world to the digital arena. Its vision is to become a digital hub for the sports industry, offering a platform that combines not just ESPN with ESPN+, but streaming links to third-party broadcasters and a home for local broadcasts amid ongoing chaos in the regional sports network (RSN) space. Discussions with major leagues could see their DTC platforms make an appearance, too.
Earlier this month, the company took its first step into the world of betting through a partnership with Penn Entertainment, which will rebrand its sportsbook as ‘ESPN Bet’. Although only a licensing agreement at present, it’s not too difficult to see a world in which betting is possible from within an ESPN app.
If ESPN needs any inspiration, it could do worse than look at DAZN. As a digitally-native company, DAZN has no legacy business to safeguard, but its original plan to disrupt the broadcasting world with affordable, flexible, device-agnostic live sport has proved unsustainable.
Its plan is to become the hub of a sports fan’s digital world, combining premium rights with new technologies. It is adding new social features, in-app betting, interactive prediction games, ticketing and merchandise – boosted by partnerships with hospitality firm Daimani and ecommerce giant Fanatics.
The hope is that a fan of Serie A will subscribe to DAZN to watch their team’s matches and continue to use the app to socialise, place a bet, buy a ticket to the next home game and purchase a new kit to wear.
The more time subscribers spend in DAZN’s ecosystem, the more the company will increase its average revenue per user (ARPU). It’s also keen on aggregation, too, as demonstrated by its deal with the NFL to become the global distributor for GamePass.
Even non-streaming services have platform ambitions. Fanatics itself is expanding its portfolio beyond its core merchandise business to include digital and physical collectibles, video content and, yes, betting. Its reported interest in RSNs from two years ago might have been a stretch, however.
Sport is increasingly a digital activity. We watch live events, access mobile tickets, check scores, and chat to our friends and family about key moments on devices and applications. ESPN, DAZN and others are no longer content with commanding our attention during broadcast hours – they want to be at the centre of our digital sporting lives.
The value of independent media in a DTC world
Sport and media have a symbiotic relationship. The latter uses sport to sell newspapers, subscriptions and advertising, while the former gains a vital platform for exposure that attracts and engages fans, helping to sell tickets, attract sponsors and increase the value of broadcast rights.
That’s not to say this has always been a harmonious union. Coaches frequently criticise television-enforced kickoff times, owners complain about unfavourable coverage, and some fans believe there are industry-wide conspiracies against their team. Journalists have been banned from stadiums, while some organisations attempt to control the narrative through in-house media operations.
RSNs are a curious example. Some are entirely owned by franchises, while others are independent, with teams at least partly responsible for production and staffing. Mid-Atlantic Sports Network (MASN) falls in the former category as it is joint-owned by MLB’s Baltimore Orioles and the Washington Nationals.
This helps to explain why one story has been kicking up a storm in the US. Lead commentator Kevin Brown was removed from MASN’s coverage of the Orioles because the franchise’s ownership allegedly objected to comments made about the team’s record against opponents Tampa Bay.
A “Free Kevin Brown” chant grows voice in the seventh inning at Camden Yards pic.twitter.com/1ghipT1k4O— Andy Kostka (@afkostka) August 9, 2023
Brown has since returned to the booth, claiming “recent media reports have mischaracterised my relationship with my adopted hometown Orioles”, but the incident highlights the perils of bypassing traditional media entirely.
In the streaming world, DTC is an effective way to deepen engagement and deliver services that wouldn’t otherwise be available. But if a major league is producing its own coverage, will it allow criticism from pundits about scheduling, rule changes or other issues? Can a team-owned station freely criticise owners and players? Brown’s alleged infraction was far less severe – to reiterate something that was both true and published in the pre-game notes.
Younger audiences demand authenticity, and that’s something independent media delivers. Orioles fans, who chanted Brown’s name at home games, suggest they agree.
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