Tag Archives: TV

Is Google or Apple the Future of Sports Television?

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Within the past few years we’ve seen à la carte options like NBA League Pass Broadband and MLB Extra Innings Broadband excel with games that would otherwise not be available to a person on TV because they are out of market. Will the NFL and its Sunday Game Day rights soon make the transition out of the hands of Directv and onto the internet courtesy of Apple or Google? I am here to say it is quite possible.

Directv pays $1 BILLION A YEAR for all out of market football games, calls it “Sunday Ticket”, and then willingly loses $375 million on it every year. It is projected that if the price of these rights rises above $1.5 billion, it will no longer be economically sound and beneficial for Directv to own these rights. Presently, Directv has Sunday Ticket because they believe it gives them a competitive advantage over rival cable companies and allows them to keep their subscribers despite their monthly bill slowly inching up. However, in the late 2010s (possibly 2016 or 2017 when the new 2014 deal is expired), what’s stopping Google from potentially buying up this football package from the NFL and transitioning this necessity for big fans to the wires of the web?? This option seems quite logical as fans could pay a one year fee (similar to NBA League Pass) and not be forced to pay the rising monthly bill TV providers like Directv require. I see potential for Google and Apple within the NFL, but not the NBA or MLB. This is because the NBA and MLB directly offer their out of market games to fans via the web. NBA and MLB do not go through a separate company. They are independent and sell it directly. If they came in, Google would be doing the same thing that is already going on – a one time fee for a bunch of games throughout the season. The NFL’s potential is unique to Google or Apple because the NFL exclusively uses Directv as its intermediary and there is room to snatch that partnership. With the number of cable subscribers going down, monthly bills going up, and the demand for an alternative option already beginning to be requested from NFL fans, Apple or Google could be the answer. I believe the NFL package through Google or Apple would generate more eyeballs because more people would be willing to pay $200 a year to get the games, rather than pay $100 a month to Directv just to have access to all the games.

If Google and Apple do, in fact, wish to test the waters of televising sports to the masses, content holders will see yet another spike in rights fees because more bidders are being added to the already bloody, red ocean. In the case of the NFL, I think a rise in rights fees is actually beneficial to the tech giants Google and Apple because it would potentially mean the price of Sunday Ticket exceeding $1.5 billion per year and effectively eliminating Directv out of the bidding.

In the near future, I do not foresee anything more for Google or Apple besides the out of market NFL package via the internet because of how many parties would have to be changed in order for a lasting Google or Apple takeover in sports to occur. TV networks and their corresponding exclusive contracts on playoffs, conferences, and times (like Sunday Night Football and TNT’s Thursday Night Basketball) would have to expire first. Also things like advertising and network and team sponsorships would have to be reconsidered. Plus, there is the argument on whether Baby Boomers and the older crowd of America would be up for a new entertainment method. Would people actually be willing to adapt to NFL on the internet? Despite this long term uncertainty, the near future can definitely include Google or Apple and their exceptional amount of cash on hand makes all of this speculation plausible.

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The Power of ESPN

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Google just announced an idea that could forever change the business model for advertising on the internet. In short, Google is toying with the thought of allowing web surfers to see their favorite websites ad-free in exchange for a $1-$3 monthly fee. This new service has been given the name Contributor. To begin, Contributor will launch on a number of popular sites, including Mashable, Imgur, wikiHow, The Onion, and Urban Dictionary.

HOW IT WORKS: If you are an avid reader/user of a participating site and  don’t want to see ads, you can sign up to pay a monthly amount between $1-3 through Contributor. Then, when you visit that site (or any of the other participating sites) you will be shown blurred-out boxes with a Thank You message from Google instead of the pesky, slow-to-load ads. From that $1-$3 monthly fee, Google will take a portion and the rest will be split among the participating sites.

There are some more technicalities behind Contributor (Like the fact that if a website’s ads are completely hosted by Google, users who pay the monthly fee will not see a single ad. However, Contributor will not block other ads/ad sources that the website might have), but for the most part, the above 2 paragraphs are the basics.

Now when I heard of this new phenomena, I instantaneously thought of its future implications in relation to ESPN.

Why you ask??

ESPN is probably the most powerful cable network there is and there ever will be. In the business of TV, there are per-subscriber fees. In order for a cable network like ESPN, TNT, or Discovery to be available to a cable company (Time Warner, Directv, etc.), the network and the cable company have to agree on this per-subscriber fee. A per-subscriber fee is basically the money networks make for selling their content to cable providers. For the sake of a simple argument and a simple example, lets say TNT has an agreement with Directv. That agreement says that every month, Directv has to pay $0.64 to TNT for every cable subscriber (customer) Directv has. Directv pays this because they know  they need to offer TNT to make their cable subscribers happy. To continue a simple discussion, lets say TNT agreed on a per-subscriber fee of $0.64 with every cable network in America. The Discovery Channel, on the other hand, demands only $0.24 cents from every cable company. Now we all know ESPN is a very popular network. If a cable company doesn’t offer ESPN, people will get VERY VERY upset VERY VERY quickly and seriously consider changing cable companies. ESPN knows they are in high demand, so they require cable companies to pay them somewhere close to $7.50 for every cable subscriber. This high fee gives cable companies access to ESPN and all of its corresponding channels (like ESPN 2, ESPN Classic, ESPN 3, ESPN News, etc.). In the grand scheme of cable networks, ESPN has the highest per-subscriber fee by a long shot.

Now if ESPN is able leverage itself so well against cable companies, what’s stopping it from leveraging itself against companies like Google and this new Contributor business? As I pondered this new digital advertising business model, I was able to just envision ESPN saying something along the lines of, “Hey Google, you know how you get $0.75 of that $2 monthly Contributor fee?? Well we want $0.75 of that too, and then the remaining $0.50 of that $2 fee can get split among the other, less popular 38 sites like wikiHow and The Onion. We both know that ESPN.com and all our affiliate sites are bringing in the most visitors, so we deserve rightful compensation.” There are rumors that your monthly Contributor fee will only be split among sites you actually visit, and not all the sites that are participating. Regardless however, the concept of per-subscriber fees could be making its way into the online, digital domain, and if that is the case, ESPN is sitting back and not complaining one bit.

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