Hot - Take #8 (SportsPro Madrid 2024 - Preview): 🧮 streaming profitability, 📈 reach versus revenue, as well as 🔢 technical issues and metrics.

As the #OTT #Streaming, and #Technology industry heads to #SPMadrid24 hosted by SportsPro in Madrid (Spain) on November 19-21, the OTT streaming landscape was living up to being called “dynamic” and “ever-changing” — it‘s both buzzword-bingo and true at the same time: This week in OTT, streaming turning into a profitable business line for legacy-media entertainment companies, Thursday Night Football on Amazon challenges the inherent trade-off between reach versus, and Netflix's technical issues and metrics as it enters live sports (entertainment) programming.

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🧮 Last week, as the earnings season kicked into high gears, it was all about legacy-media entertainment companies turning around streaming into profitable business lines (at least on paper, as per generally accepted accounting practices, I guess), with Paramount Global, The Walt Disney Company (Disney+ ESPN+ Hulu), and Warner Bros. Discovery all reporting small single-digit DTC profits margins for Paramount+ ($49M), Disney Streaming ($321M; Disney+ ESPN+ Hulu), and Max ($289M), respectively, in the last quarter:

• How the sausage is made: Some spreadsheet machination and favorable cost-allocations or other forms of financial engineering were required, as the cash flows and income statements of their collapsing-yet-profitable legacy linear cable and satellite TV businesses* partially absorb CAPEX and OPEX of the new business lines — regardless of substance or sustainability, the analyst and investment community appreciated the adjusted profitability in the form of upgraded ratings and stock prices immediately.

• Negative net present value: One break-even quarter (sustainable or not) doesn’t make up for the enormous multi-billion losses (investments) made to date, though, and the business shift from linear to streaming may never catch up on the pace of the ever-changing ways people are consuming and paying for content. To make streaming economics sustainable, more partnerships and consolidation will inevitably be ahead.

*In related breaking news, Comcast spins off cable/satellite pay-TV networks, whose stable cashflows, combined with some financial engineering, can still generate attractive returns for financial investors - it‘s would we called cash-cows back in the universities: steady income, limited growth prospects, stable market position.  

📈 In the meantime, Amazon made news when viewership (= avg. minute audience in the United States, which is materially different than any metrics reported by Netflix further down below) for its Thursday Night Football broadcast of the divisional rivalry Bengals 🆚 Ravens (13.7M) delivered for the first time a larger like-for-like audience in a same-week battle compared to one of the other NFL’s top rights-holding broadcasting partners, namely a subpar, inter-conference matchup between two underperforming, injury-riddled teams on ESPN Monday Night Football (12.2M, Dolphins 🆚 Rams):

• Evolution instead of revolution: Streaming has not all-of-a-sudden supplanted linear (over-the-air, cable, satellite) television as the main distribution system for big-time live sports, and avg. audiences on Prime Video still lag behind tune-in numbers from when Thursday Night Football was primarily served via over-the-air and satellite/cable networks (FOX/CBS, simulcasted on NFL Network).

• Reach and/or revenue: Less-distributed delivery systems always needed to pay a market-entry premium for top-of-the-pyramid sports rights, but over time the lack of reach diminished while the market price premium was sustained (see: ESPN Monday Night Football). History seems to repeat itself, since Prime Video’s NFL audience has been growing disproportionally season-over-season, as the consumer adoption curve accelerates (starting to reach the “late majority” and even “laggards” who overcome technology, cost, and discovery barriers inherent to the linear-to-streaming transition) — whether it at some point becomes the superior reach vehicle and more powerful monetization engine than the traditional pay-TV bundle remains to be determined.

🔢 Finally, last Friday’s Jake Paul Mike Tyson fight, exclusively and globally available only on Netflix, peaked at 65M concurrent live streams (for any given second?), originating from 60M households (representing unique subscribers, shared accounts, or a mix of both amidst the current password-sharing crackdown?) around the world — but experienced significant technical video sound and buffering issues along the way:

• Not all audiences are created equally: Apart from the methodology underpinning any viewership metrics, audiences not only differ in size but nature. Other live broadcasts that were considered among the most-streamed sporting events to date were available free-to-air (e.g. Disney Hotstar's coverage of the 2023 Cricket World Cup final) — Netflix being an SVOD streaming service, on the other hand, added another authentication layer (sign-up/in, with or without payment) and introduced many more potential breaking points (even though a not-fit-for-live-purpose content delivery network setup seems to have been the bottleneck in this particular instance).

• No testing environment for when it matters: Netflix went overboard in terms of testing, reportedly doing live events such as stand-up comedy specials for the primary purpose of developing, stress-testing, and breaking the company’s live-streaming infrastructure (including purposefully manipulating workflows to test fallbacks and switch-overs during lower-key broadcasts) — which fundamentally differs in terms of video processing/encoding and delivery. Nonetheless, Netflix followed the same fate as other live sports streamers before — DAZN (Italian Serie A in Italy), Prime Video (Thursday Night Football in the United States), and many others. The common denominator among them: Same or similar issues very rarely happened to them a second time, which should make the NFL feel comfortable and give even some sense of relief that something of a large-scale stress test has now happened (and failed). “Live streaming at scale” is a relative term, and means something different for each player in the market. Netflix operated at the upper limit of both volume and complexity, the two upcoming exclusive NFL Christmas Games on Netflix should be fine, but also speaks for the unprecedented reach and consumer market penetration of Netflix compared to everyone else but (free) YouTube.

Other bits, pieces, and comparisons: The Tom Brady roast on Netflix earlier this year delivered max. 1.8M concurrent streams. That half a dozen US states did not allow betting on the celebrity fight supports Netflix‘s position of being in the business of story-telling and sports entertainment rather than live sports broadcasting. The technical issues were also another reminder that transitioning from linear to streaming also means moving from one-to-many to one-to-one deliveries, resulting in very different end-consumer experiences depending on a multitude of factors (e.g. last-mile delivery setup). The unprecedented global reach and ease of access of Netflix (287.8M subscribers) has yet again shown what makes up total audience deliveries:

Content ✖️ Distribution = Audience, amplified/multiplied by marketing and promotion. Related: I have not been into WWE for a long time, but will check out Monday Night RAW and Premium Live Events again as soon as it hit Netflix starting early next year.

(Very) long story, (much) shorter: Heading to SportsPro this week, on-site as soon as 📆 Tuesday afternoon:📍Madrid, Spain. Shoot me a DM if you think it’s worth catching up. Drop by on Thursday afternoon for a meet-up among disruptors (see below).

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Meet-up among disruptors: On Thursday, Kings League’s Eduard J. Scott, ex-YouTube’s Nicola Moffat, and I — moderated by SportsPro CEO Nick Meachum — are scheduled for the main stage to touch on a broad range of topics around #sports #media #innovation and more:

• 👥 Overall interest in sports is still strong, but increasingly fragmented and heterogeneous as modern sports fans face an abundance of choice: delivering on consumer expectations has become an existential industry challenge.

• ⚔️ Fierce competition for consumers’ limited resources, time, and money, between and beyond sports: the empowerment of the end consumer might be the single most powerful disruptive force in the content marketplace.

• 🔄 Value exchange between sports and Big Tech: Value creation and capture might be one-sided or even erroneous, but changes seem ahead: conversion of engagement into monetization has faced significant friction as content consumption evolves.

• 💰 Dual-revenue stream model (consumer payments and advertising) might be stuck in the middle: both single-revenue (advertising, through maximum reach) and multi-revenue stream models might be alternatives.

• 📱 Technology as an enabler rather than a disruptor, especially for incumbent sports properties with established cost bases which may limit innovation: Reimagining live sports from long- to short-form watch experience might be one opportunity.

That and much more have been touched upon, available on the StreamTime Sports podcast next week. I guess, Nick Meachum will be to chase for all the details on date and time.

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