#48 Tackling Audience Fragmentation: Cross-Platform Distribution or Non-Exclusive Licensees?
OTT 📱 vs. Linear TV 📺 is no Either/Or - Decision anymore.
Neither is Short- 📸 vs. Long-Form 🎥 Content.
Audience Fragmentation x Product-Market(Segment)-Fit: Audience fragmentation alone understates fundamental challenges for sports rights holders to not only reach, but successfully address, heterogeneous market segments and diverse consumption preferences.
Need for Cross-Platform Distribution: Carriage deals between rights holders have created frenemies and a lack of competition among broadcasters/streamers; lessening the negative impact of audience fragmentation—it is a suboptimal solution for everyone involved.
No-Exclusive but Single-Buyer-Rule: Exclusivity remains key amidst the increasing siloization of market segments—but only within one distribution system, and in form of platform-only exclusivity; not across linear, streaming, and mobile.
Role of Rights Owners: They must establish a broader set of rights-holding media partners, putting them in a position to generate positive returns on investment: platform-neutrality is protective as opposed to forward-thinking.
MONETIZATION FOLLOWS ENGAGEMENT / CONSUMPTION
Monetization follows consumer engagement and consumption: Not always true but it certainly applies in today's age of the great unbundling. In the past, traditional pay-TV (one of the most profitable business models ever) did not require the engagement of customers to monetize a given piece of content. For non-sports fans, super-expensive sports programming came automatically with traditional TV subscriptions (think: a basic ‘sports-channel’ instead of premium subscription tiers)—even if the customer was not interested in the programming. For sports enthusiasts, their much-desired channels were bundled with lesser watched ones predominantly via cable and satellite distribution; thus, content creators were paid regardless of viewership.
Built-in cross-subsidization among channel line-ups, combined with perfectly scalable (think: zero-marginal cost) and easily implementable (think: natural breaks due to the stop-and-go nature of sports) advertising, super-charged the media's ability to monetize and pay for differentiated content (or at least the exclusive rights to produce such differentiated content). Live sports programming had tremendous intrinsic value by dominating the pre-internet monoculture in video entertainment, and was de facto the most popular content—enabling a highly profitable, dual-revenue stream, monetization model of traditional pay-TV.
As long as there is one single, dominating distribution (which linear TV has been for decades), migration of consumers within that system follows almost perfectly: Content is king, and has moved audiences and their disposable income. The drawing-power of unique (sports) content has always been leveraged to drive adoption of new technologies: Starting with establishing TV as a mass medium (1930s), the transition from black-and-white to color-TV (1950s), or pay-TV (1980s in North America, 1990s in Europe) thereafter.
Nowadays, the role of content 🔄 audiences has been reversed: You fish where the fish are. (1) Entertainment has become abundant (think: low production cost, zero-marginal distribution costs), (2) the number of gatekeepers to audiences has expanded (think: distinct gatekeepers across cable/satellite TV, OTT, social media, mobile), (3) relevant distribution systems have increased, (4) end consumers have been empowered, and, as a result, (5) a single piece of content gets less needle/audience-moving than ever before. Consumer loyalty/inertia to one distribution system outweighs the drawing power of most content. If anything, exclusive sports content is still the go-to genre to drive adoption of new distribution systems; but its leverage has decreased in absolute terms, remaining resilient in relative terms, compared to other genres in the crowded content marketplace.
Small countercultures have always existed. Since monetization was not dependent on engagement, non-sports fans were monetized to the same extent as diehard sports fans though. In the digital age, underlying market dynamics have changed; engagement has become a prerequisite for creating monetization opportunities—but holds no long term guarantees.
Just as audiences have fragmented across several distribution systems, content presentation which best serves the needs of audiences (within each of those distribution systems) has become more heterogeneous, too. In other words, new technologies have enabled new business models, determining which type of content format has the best product-market(segment)-fit. Thinking must start with the end consumer, moving backward from that starting point—which is very different from how things have worked in traditional media with its "one-size-fits-all" approach.
The underlying idea is increased product and price differentiation: Different market segments demand different products that best capture the consumers' willingness to pay for content (think: more granularly capturing the demand curve). Native players of each distribution system are then best fitted to deliver such required tailor-made propositions.
Rights packaging, content creation, and distribution/monetization must evolve; changing consumption habits demand a competitive product proposition for consumers when vying for their mind & wallet—their most limited resources are their time and disposable income.
Looking at how digitization has impacted other industries, the retail space has shown that it cannot be an either/or decision, between old and new distribution systems (think: no perfect migration). Instead, the omni-channel approach has become best-practice to merge physical retail and digital e-commerce (i.e. old and new means to connect with end consumers) this allows the entire market as best placed as possible. Applying this approach to live sports programming, a platform-agnostic view has become increasingly prevalent. However; this approach only addresses audience fragmentation, and not any changing of video watching habits—as a result this leads to a lacking product-market(segment)-fit in newly reached distribution systems. Put differently, platform agnosticity represents cross-platform reach only; a true omni-channel approach would imply a tailored approach to each market segment (or channel) and a set of non-exclusive licensees of native players across different distribution systems:
Cross-Platform Distribution = Platform-agnostic Approach ➡️ Overcoming audience fragmentation 👍 , creating product-market(segment)-fit 👎 .
Non-Exclusive Licensees = Omni-channel Approach ➡️ Overcoming audience fragmentation 👍 , creating product-market(segment)-fit 👍 .
As a result, awarding any exploitation rights on a platform-neutral basis to a single buyer inevitably leads to an inefficient market—not fully capturing the demands of the total addressable market.
CHALLENGE: ABILITY TO ADDRESS ENTIRE MARKET
Reachability and Addressability are different abilities: Reacting to the unprecedented fluidity of consumers, by delivering content in the most convenient way possible (= reaching) provides an opportunity to cater to their needs with platform-native content presentation (= addressing).
New media adoption often outpaces monetization. The market's ability to monetize media engagement lags behind any migration of content and audiences, from an old to a new distribution system. In the audio content marketplace, radio (= old media) and podcast (= new media) have become a poster-child for this misalignment of time (= consumption) and money ( = advertising dollars): It shows that monetization follows, not leads or equals, engagement. [ FOOTNOTE 1️⃣]
Coming back to audiovisual sports content: Even though budgets start to be siphoned out of old media, most value—represented by B2B (i.e. advertising dollars) and B2C (i.e. consumer's disposable income) monies—is still captured in traditional pay-TV (i.e. distribution system = market). Live sports is the last bastion of pay-TV, the stickiest and best fit content genre for linear TV and it still encapsulates linear TV's core concepts of tune-in entertainment. It is paying big-bucks to sports rights owners and the best-monetized content format remains the full-game, long-form live broadcast of sports events (i.e. content format = product) as it is the best fit for serving the traditional pay-TV audience. This combination established the ideal product-market-fit for an established distribution system. However, changing media landscapes and consumption habits mean a one-size-fits-all approach to content presentation does not yield the best returns on investment in sports rights anymore: A platform-agnostic approach reaches splintered audiences, but does not automatically address them correctly. As watching sports on TV has become old-fashioned for some market segments, an unfit product presentation can become an even bigger obstacle for engaging with consumers than the cost barrier—which is often cited as the main reason for younger demographics disengaging with live sports, but this lacks real-world evidence: Other digital products in the media marketplace (think: music, on-demand video entertainment) have already proven consumers' willingness to pay for digital media—something which was long associated with being free. Instead, some customers have just better things to do with their leisure time than following sports in a traditional way.
Top-notch live sports programming has often been used to create immediate consumer take-up—either for a new distribution system (e.g. from linear free- to pay-TV) and/or a broadcaster entering a new market. As long as audiences migrate perfectly between distribution systems, fragmentation will implicitly remain limited. A fragmented content marketplace supports the co-existence of several distribution systems with increasingly mutually-exclusive audiences (= market segments) and heterogeneous consumption habits (= content formats). The ability to address and cater to each market segments individually is critical for rights holders, and even vital for rights owners if someone considers sport's ginormous reliance on exploiting media-related IP rights to support its entire ecosystem:
In the short-term, rights holders ignoring a significant portion of the addressable market by either (1) not reaching any given distribution system of material size in the first place (which is the necessary condition for any monetization) or, if reached, (2) not properly addressing them with a tailored approach to content presentation (which is the sufficient condition for any monetization) results in an almost insurmountable handicap when facing sky-high licensing fees. In the mid-to-long-term, a rights holder's diminished ability to monetize the rights owner's IP rights will trickle down to the latter. Thus, rights owners must proactively (1) diversify their set of rights-holding media partners, each having unique capabilities to reach/address different distribution systems, and (2) put them in the position to generate a positive return on investment (think: player access, flexible commercial partnership models). Against this background, platform-neutrality is backward- rather than forward-thinking.
Awarding rights on a platform-neutral basis is about protectionism—demanded by market incumbents and driven by fear of cannibalization of the existing business.
However, the siloization of market segments does not only mean that a cookie-cutter approach does not work any longer, but any cannibalization between those segments is of a fractional nature overall. Successfully addressing a previously ignored market segment is largely incremental, which is the reason why, for example, Formula One's experiment of co-exclusively live-streaming broadcasts on YouTube had a limited impact on traditional viewership. (see: 🏎 YouTube F1 stream attracts 1.7m views, 10/2020) Odds are that German or Dutch consumers in the distribution system of linear (free/pay) television were not even aware of the broadcast's free-of-charge availability elsewhere and would not have cared in the unlikely event that they were indeed aware of it: Most of the +/- 1.7M of digital viewership were probably incremental and casual in nature—with 68% being under-35 being a strong indicator for this assertion.
More generally, rights-holding broadcasters should not care if rights owners experiment digitally, i.e. experimenting with distribution systems that are not properly addressed by themselves. Instead, it provides a path towards co-exclusive licensees across different distribution systems if such experiments provide proof of concept. The intrinsic value of platform-specific rights packages would price-in the inherent co-exclusivity, but the total value across all non-exclusive packages would also be maximized if specialized players cater to any given market segment, instead of old media players trying to do new media things—or the other way around.
In any case, change must indeed be initiated by rights owners as short-term rights cycles and sky-high licensing fees do not allow much room for experimentation by temporary rights holders: To overcome complacency and the innovator's dilemma, rights owners will be forced to think much more proactively and, long-term. Fortunately, their short-term revenue generation is already ensured and guaranteed—assuming there is no global pandemic putting sports at large on hold—by wholesaling their (platform-neutral) broadcasting rights in the first place. For rights-owning leagues, it is about nurturing the fans of the future—or losing them forever. As always, monetization must and will follow at a later point. As an example, the NBA's approach to its owned and operated streaming service, the NBA League Pass, is certainly not revenue-maximizing: Consumers like flexibility but their offering (intentionally) lacks convenience/guidance and is more overwhelming or confusing than value-adding. It serves its purpose though: Gathering data on future product-market(segment)-fit by putting all imaginable options on the table for the consumers to choose from.
Temporary rights holders, on the other hand, can only care about short-term monetization and will focus their resources on those distribution systems that provide the highest potential and security for immediate monetization.
SOLUTION: CROSS-PLATFORM DISTRIBUTION OR NON-EXCLUSIVE RIGHTS HOLDERS?
The need for cross-platform distribution—which is a required but not sufficient condition for successfully addressing consumers splintered across different distribution systems—has created frenemies and lessened rights holders incentive to compete for exclusive rights. In cross-carriage agreements (e.g. BT Sports x Sky Sports in the U.K.) and distribution partnerships (e.g. DAZN x Teléfonica in Spain), everyone involved acts in their own best interest but to the detriment of rights owners (think: lack of competition) and consumers (think: lack of product-market(segment)-fit). Especially distribution partnerships become increasingly complex as content creation and distribution have become more and more intermingled through vertical integration (think: cable/satellite TV operators owning content and pipes) or the democratization of distribution via the Internet (think: over-the-top distribution). [ FOOTNOTE 2️⃣ ]
In the past, when content and distribution had mostly been separated—either by market forces or, more often, by law based on antitrust concerns—carriage agreements were straight-forward and one-directional. Rights-holding content creators were compensated with a fixed amount, on a ‘per-subscriber-basis’ (= carriage fee) based on the distributor's customer base across different subscription tiers. Nowadays, many technology-enabled factors add complexity to the relationship between content creators and distributors: Content creators have been able to (1) forward-integrate and literally go over-the-top (of traditional distributors) and/or (2) have an expanded set of interests (e.g. direct relationships with customers). Content distributors (3) start to backward-integrate into the content layer. All of those dimensions have been on display in the recent DAZN x Teléfonica deal in Spain (see: 🤝 MotoGP and F1 to air via new DAZN channels on Movistar+, 01/2021), including:
💰 Subscription revenue sharing, more performance-based (= affiliate fee) than guaranteed based on package-tiers (= carriage fee) as seen before.
🎞 Content sharing, both old-media (think: telecommunication service providers, e.g. Teléfonica) and new-media (think: CTV Operators, e.g. Amazon, Roku) distributors have their own consumer-facing content propositions, such as IMBd TV (Amazon) or The Roku Channel (Roku).
👶🏼 Customer ownership, with (customer) data being fundamental to any direct-to-consumer play, understanding the difference between being aggregated (think: commoditization of content providers) or using distributors as a platform (think: differentiation of content providers and their brand) to establish DTC relationships is key in negotiating distribution partnerships, thus having a viable path towards establishing customer agencies.
🤝 Ad revenue/inventory sharing, as digital advertising has not only become more addressable (think: from one-to-many to one-to-one-household communication) but can also be operated by both content creators and distributors nowadays—with CTV operators often having more data-rich and complete insights.
Both content creators (👶🏼 Customer Ownership) and distributors (🎞 Content Sharing | 🤝 Ad Revenue/Inventory Sharing) have entered each other's territory—while distribution does not longer guarantee carriage but has become an affiliate business with reduced friction for consumers (💰 Subscription Revenue Sharing). How the power between content creators and distributors has shifted on a net-basis is rather a case-by-case consideration than a universal ruling.
Ultimately, such a platform-agnostic approach is a quick-fix but it yields a sub-optimal solution: Reaching different market segments does not equal addressing them with proper product-market(segment)-fit. Being everywhere but indifferent to the inherent differences between distribution systems is a good start, but remaining indifferent to the content presentation is a problem. To be clear, in absence of proper product-market(segment)-fit, having at least the reach across all distribution endpoints (and a less competitive relationship with other market participants) is obviously the preferred option. Looking at the current segmentation of rights packages, exclusivity can mostly be found on the content-level (think: platform-neutral rights to specific games)—resulting in a sub-optimal outcome for both licensees (think: insufficient/incomplete value(-for-money) proposition to capture consumer's wallet share) and consumers (think: high frustration with fragmented content marketplace). However, not a splintered media landscape (i.e. several distribution systems) but content marketplace (i.e. incomplete value proposition by a single player in any given distribution system) is the root of the problem. Fortunately, the latter is easier to solve than the former—and this change must be driven by rights owners adjusting to changing market and consumer dynamics.
Exclusivity has been key for traditional pay-TV and will remain essential in a post-pay-TV-only media landscape. However, such need for exclusivity only applies within one distribution system, and not across linear TV (free-to-air and paid), digital or mobile streaming. In fact, introducing non-exclusivity of content has accelerated the secular decline of the business model which originally enabled unprecedented growth in rights fees.
Value propositions became less attractive/complete (= internal factors) while the (digital) content marketplace became hyper-competitive (= external factors)—everyone vying for the same consumers and limited resources. Ironically, besides antitrust concerns (think: No-Single-Buyer Rule), rights owners have been the driving force for this development of slicing and dicing rights packages—with the idea to further boost media rights revenues by accommodating a broader set of media partners, with exclusive content for each of them. Ultimately, increased content fragmentation only creates another incentive for consumers to ditch traditional pay-TV subscriptions—freeing up a significant portion of their disposable income for re-allocation across other entertainment offerings that have often provided better value-for-money. In other words, rights owners further eroded the consumer-facing value proposition of their main source of revenue. Even for those consumers who did not migrate to other distribution systems and what have been easily addressable, there is often no one-stop destination anymore that offers access to all games.
At least until DAZN and Sky Italia started to dictate their own terms for what games and platforms their bid would apply, the case of the current tender process for Serie A's domestic rights shows that the market's "invisible hand" tend to auto-correct those inefficient solutions—enabling full value propositions (i.e. all 380x games per season) for multiple players across different distribution systems (i.e. linear TV and digital streaming).
Conclusion I: A growing set of right owner's media partners has led to both (1) increasing consumer frustration and (2) decreasing profitability of rights holders—when exclusivity is done wrongly, i.e. on the content-level. The future should be an even broader set of rights-holding media partners though, with complementary abilities to reach and address different (siloed) market segments—by segmenting rights packages on the system-level. The market will automatically price-in the decreasing intrinsic value from linear TV at the top, digital streaming in the middle, and mobile (and all its sub-systems like social media) on the lower end when valuing platform-specific packages.
Conclusion II: The need for acquiring all-encompassing (think: platform-neutral, exclusive) and, therefore, super-expensive media rights to cater to the needs of incremental/niche market segments beyond linear (free/pay) TV and digital streaming would make innovation by short-form players (e.g. TikTok, Instagram) cost-prohibitive. More-dedicated short-form rights packages are called for to monetize the entirety of the addressable market. The new generation of consumers/fans engage differently: Interests and willingness to pay, in particular, are narrowed down to their favorite team(s), and the commercially so important casual sports fans will easily substitute sports with other forms of media entertainment. If done right, the sum of parts/packages can still reach, and potentially eclipse, the current level of rights fees for rights owners on the basis of (1) monetization of the incremental customer through more granular product-market(segment)-fit and (2) robust competition between rights holders for the many fluid consumers for which sports has become a nice-to-have and is rarely a must-have anymore. Innovation and competition will deliver the best products, variety, and prices for consumers—but must be enabled by rights owners.
Rights owners will have to consult the market with much more flexible tender structures going forward, putting a broader set of media partners in the position to make their IP rights a worthwhile investment.
CREATING INCREMENTAL PRODUCT-MARKET-FIT: SHORT-FORM VS. HIGHLIGHTS
When rights packaging on the platform/system-level (think: carving out mobile-only packages) is the first step towards re-thinking current distribution models, defining (and monetizing) new forms of content presentation based on the respective distribution platform/system is the follow-through. Short-form content, commonly associated with the traditional post-game clip as of today, is key to this end and can have significant pay-value for specific segments in the new-media landscape. Put differently, when (re-)assessing consumers' willingness to pay, differentiating between long-form (pay-value: ☑️ , focus on monetization) and short-form (pay-value: ❌ , focus on marketing) does not work anymore as consumption habits have evolved. Being live or non-live content—instead of being long-or short-form content—determines the content's pay value. Whether short- or long-form format best captures such willingness to pay depends on the market segment that someone intends to address. It must be live though.
Highlights in the traditional sense (i.e. non-live, short-form content) will continue to play a meaningful role in portfolio strategies going forward: Blog #47 - 🔠 Portfolio vs. 🌟 Featurization of Sports Programming. More specifically, those post-game clips will mostly retain their current role of being (1) top-of-funnel (on-platform, i.e. on mass-reach digital platforms such as YouTube) marketing to drive sign-ups for subscription or ad-supported streaming services and/or (2) an (off-platform, i.e. on owned & operated streaming services) retention tool for paid subscriptions of rights holders. Under those circumstances, the Highlights-Industrial-Complex was solely serving the TV-Industrial-Complex but not a stand-alone product. [ FOOTNOTE 3️⃣]
The fundamental challenge, though, is that—driven by shorter attention spans, changed consumption habits, the need for instant gratification, as well as an abundance of other entertainment options—non-live short-form content has become a valid substitute for live long-form content in the eye of some market segments. By them watching the post-game clip or randomly stumbling across the occasional clip on social media, sports reach those consumers but only somewhat (but not fully) addresses their needs, and (most importantly) does not monetize such audiences as a result. In a nutshell, there is a need for product innovation to sustain the current level of content monetization and, subsequently, sustain currently paid rights fees—which is the costly permission to create (specific) content in the first place. Alternatively, the monetizable audiences (think: monetizable vs. non-monetizable eyeballs) will remain in a secular decline. Fortunately, new-media players like House of Highlights have established a blueprint for creating new product-market(segment)-fit and how value for the incremental customer can be created. Professionalization/premiumization enabled by technology (think: automated clip production/distribution by artificial intelligence and voice recognition) of such value proposition will enable content creators to capture that value and a share of the consumer’s wallet. To this end, the objective remains to crack the code for figuring out how to get an elusive generation of new consumers interested in live sports in a way that is as monetizable as live linear sports broadcasts have been. [ FOOTNOTE 4️⃣]
As the balance of power shifts between permanent rights owners (= licensors) and temporary rights holders (= licensees), the commercial models underpinning their relationship will be a hot topic over the next few years: revenue sharing instead of fixed licensing fees, packaging along distribution systems and content formats instead of individual games, joint ventures instead of full risk transfer, bundling of services, or non-exclusivities are dimensions that will be put on the (negotiation) table. Simply extending the length of rights cycles, a current go-to-strategy for rights owners, will not do the trick—except for pulling forward demand.
Ultimately, any rights packaging must support innovation (think: not buying all-encompassing, platform-neutral rights to address/monetize a niche market segment)—but I believe the market's "invisible hand" will ensure just that:
Rights owners being unresponsive to these market dynamics would create market inefficiencies either way: On one hand, incumbent rights holders in old-media (e.g. ESPN, Sky Sports) are probably not best positioned to address and monetize these new (and incremental) market segments. Likewise, new-media players (e.g. House of Highlights, Overtime, TikTok) are very unlikely to generate a positive return on any investment in all-encompassing broadcasting rights, given their lack of experience and ability to address and monetize the traditional and most revenue-generating distribution systems in the first place. But even if rights owners do not act proactively, they will be forced to adapt to changing market dynamics—driven by the shift of power along the sports media value chain from leagues to broadcasters, which is an inevitability of the ultimate empowerment of the end consumers. Either way, reconsidering current rights packaging and an (incremental) co-existence, rather than (zero-sum) co-exclusivity, by media partners catering to different market segments and introducing product differentiation on the price- and content-level, is coming. It can already be observed occasionally and is initiated by both rights owners (e.g. 🏒NHL / ⚾MLB carving out short-form "live look-ins" for Twitter/DAZN) and rights holders (e.g. DAZN counter-proposing rights packaging to Italian Serie A):
The examples of the NHL (think: random free live look-ins via mass-reach digital platforms) and MLB (think: in-game, short-form highlight content via subscription-based digital streamer) also relate back to two common approaches to monetize near-live / in-game short-form content: top-of-funnel marketing (= indirect monetization) and paid offering with significant pay value (= direct monetization). Important: The closer the content is to realtime, capturing the most important moments, the more pay-value there will be.
CONCLUSION: CROSS-PLATFORM DISTRIBUTION AS QUICK FIX ONLY
The bottom-line is that watching live sports at home and in its full length remains the most important way of consuming sports—especially for high-income, older demographics. More specifically, in almost every country, watching traditional live TV remains more popular than digital streaming and presents the (overwhelming) majority of sports broadcasting. (see: 🧐The Rise of Sports Streaming - Where is it most popular?, 03/2021)
Nevertheless, there is an abundance of other, under-monetized ways in which consumers have started to engage with their favourite sports: highlights, news sites (e.g. live ticker), social media (e.g. Twitter), fantasy games (e.g. DraftKings, FanDuel), video games (e.g. NBA2K, FIFA), collectibles (e.g. NFTs, sports cards), and betting services (e.g. Barstool Sportsbook) all provide a rich ecosystem of sports content for fans, which in the best case scenario is incremental, and worst case it serves as a (near-)substitute for the traditional ways of following live sports. Cross-platform distribution is a quick fix to ensure reaching a more fragmented audience, i.e. where consumers spend their time. However, not correctly addressing those reached audiences will inevitably result in consumers lacking engagement, becoming unmonetized audiences. Content has become less relevant and less transferable: A platform-agnostic presentation will result in a product being a square peg in a round hole, and the required tailored approach will have limited economies of scale—in the already difficult-to-scale business of content. Because establishing multiple product-market(segment)-fit is an impossible task for one single rights holder as it requires specific skills and abilities for each distribution system (think: short vs. long-form content, authenticity, existing user/customer/communities bases), non-exclusivity and a broader set of rights-holding media partners seems to be the most obvious long-term solution.
The topic of cannibalization when diluting exclusivity is inevitable but differentiation in content presentation and distribution endpoints will address those concerns effectively. Audiences are increasingly loyal to distribution systems (think: less needle/audience-moving content) and the lack of perfect migration between them implies any distribution system will be supplemental/incremental to the distribution mix (think: reach and monetization). Should incumbent/old-media rights holders worry about TikTok being keen on exploring more live(!) sports streaming? (see: 📱 TikTok keen to “explore” more live sports streaming, 03/2021)
No, they should not: Those audiences have already left their distribution system (think: TV-Industrial-Complex) and been lost. The same live sports event in different distribution ecosystems—with content presentation native to those platforms—are not substitutes for consumers anymore. (Live) Sports must happen where they are and in the format they demand.
If protectionism (think: incumbent rights holders pushing for platform-neutrality) and conservatism (think: incumbent rights holders providing declining but proven revenues streams) prevails on behalf of rights owners, short-form media companies will be forced to create their own IP (think: becoming a rights owners, not being a rights-holding licensee on a temporary basis) to deliver content to their community (think: Highlights-Industrial-Complex) that they want. (see: 🏀 Overtime is starting a Basketball League for 16-to-18-year-olds that pays at least $100,000 a Year, 03/2021)
Competitive advantages along the sports media value (think: IP Layer > Content Layer > Distribution Layer) can originate from both ↔️ horizontal scale (i.e. dominating one layer, which becomes less common as audiences/interests fracture) and ↕️ vertical integration: Overtime has already the consumer-facing brand and distribution capabilities (think: 50M followers, 1.7BN video views per month) in place—even though the latter is currently limited to social media only. With the launch of "Overtime Elite," the venture-backed social media company will own both the supply and (a segment of the) demand side: vertical integration.
OTT 📱 vs. Linear TV 📺 is no Either/Or - Decision anymore. Neither is Short- 📸 vs. Long-Form 🎥 Content. The Broadcast will become a Multi-Cast across and tailored to several distribution systems to maximize reached and addressed audiences—and ultimately monetization. 💰
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1️⃣ As it relates to advertising dollars, in particular, shifting budgets between near-substitutive mediums (think: traditional radio vs. on-demand audio) lags changes in consumers' consumption habits—with the technical infrastructure that supports advertising often struggling to keep up with where audiences are moving and the subscale nature of any new medium as the biggest challenges. As a result, and despite mainstream adoption and a comparatively diverse user base (+/- 100M monthly active users in the U.S.), podcasting is still considered to be an under-monetized medium. Advertising revenue for traditional U.S. radio totaled +/- $12BN in 2020 while podcast advertising revenue was +/-$1.1BN during the same year. Time spent across traditional audio and digital audio (not only podcast) is about the same: ⏱ US Time Spent with Media 2021. Direct-to-consumer dollars are re-allocated faster by nature, but cutting the expensive traditional pay-TV subscription often serving as a prerequisite for freeing up the necessary disposable income for over-the-top subscription streaming services. [ ↩️ ]
2️⃣ The democratization of distribution, i.e. not relying on traditional cable/satellite TV distributors, exists only in theory. Practically, there is an argument that distribution (think: today's gatekeepers in the splintered digital media landscape) has become even more powerful as quality content has become abundant while audience/consumption habits more fragmented and heterogeneous: Blog #46 - Content is King 👑, Distribution is King-Kong 🦍? Incredibly powerful network effects and zero-cost marginal revenues/distribution have enabled dominant platforms to push back against the open nature of the Internet, forcing consumers and creators to use them as universal intermediaries. [ ↩️ ]
3️⃣ Rights holders are aware of the need for windowing content to non-subscribers to drive incremental sign-ups. Putting post-game clips on mass-reach digital platforms like YouTube has resulted in a seemingly mutually beneficial relationship: enormous, inexpensive reach (plus some incremental top-of-funnel ad-funded monetization) for rights holders while strengthening third-party digital platforms with an enriched value proposition. However, the return in the form of sign-ups is relative to the reached audiences, this has been questioned-- and a strategic pivot of taking such non-live, short-form content "off-platform" into the owned and operated service once such rights holders have reached critical size seems to be worth a try at least: seen as a more relevant reach with minimized friction to the ultimate sign-up. [ ↩️ ]
4️⃣ The NBA, and most specifically Commissioner Adam Silver, have been lauded for its laissez-faire approach when it comes to maximizing free distribution of near-live game action: "Highlights are marketing." It enabled the creation of institutions like House of Highlights, which has become a viable alternative to the long-form live broadcast. It allows a way to connect and engage with certain market segments and has resulted in claims that the NBA is more popular than ever—despite declining viewerships on linear TV. The problem in the long run: It is a non-monetizable relationship and content intended as "marketing" has become a substitute product. Undoubtedly, the NBA will need to put the genie back into the bottle, implementing proper monetization in the future: Not only creating value, but capturing it. [ ↩️ ]