The New Rule Book

NEW YORK With the National Football League now streaming, for free, Sunday Night Football -- arguably the most valuable intellectual property in U.S. sports -- a clear signal has gone out: live streaming, gaining ground for some five years, is officially a game changer."Streaming is one of the big waves of the future," said Andrew Zimbalist, sports economist and economics professor at Smith College. "And the quality of streaming is going to continue to go up, such that it's going to be almost indistinguishable from HDTV. So, there's tremendous potential." Currently, all the major U.S. sports team leagues -- including Major League Baseball, Major League Soccer, the National Basketball Association and the National Hockey League -- are implementing or revamping mechanisms in an effort to capitalize on the revenue stream, both in terms of advertising and the capturing of new viewers.But while live streaming seems like a slam dunk for league owners, the platform raises some pressing questions for them as well as advertisers and the channels that run the games. Perhaps the biggest one is how advertisers are going to portion out their ad dollars -- a question that won't be answered until they see whether the streaming cannibalizes exposure to their ads in the games carried on broadcast and cable TV. One possibility, of course, is that advertisers might forego TV buys in an effort to reach viewing audiences during the day.For the NFL, the impetus to create Sunday Night Football Extra -- which began streaming on NBC.com and NFL.com this month -- was driven in part by a desire to use the Sunday night games' untapped online assets (per contract agreements both the league and NBC could not exploit these resources on their own). The decision to partner with NBC came about because the network owns the rights to Sunday Night Football and its aggressive and successful streaming tactics with the Beijing Olympics, said Brian Rolapp, svp of digital media at the NFL. Rolapp said one of the league's intentions is to "adopt a [advertising] model for the medium." Currently, he noted, "we are extending the same [opportunities] for online game distribution as we have on television." Among the four advertisers supporting "Sunday Night Football Extra" are Sprint, Toyota, Gillette and Adobe. (Sponsors can also use the NFL logo offline to show their affiliation with the league.) MLS delivers live game streams -- full regular season matches and playoffs -- through MLSLive.tv, which is part of the league's Web site, an initiative it began in 2005. Initially free, it's been sold on a subscription basis, without advertising, since 2006. No games shown by its broadcast and cable partners -- ABC, ESPN2 and Fox Soccer Channel -- are included in the subscription package, since those rights are held in agreements with those networks. The league's intention next season is to provide the service again for free through an ad-supported network, possibly with one or more of its corporate partners."As Soccer United Marketing [the league's marketing arm] now represents the new women's league for their sponsorship sales and online advertising, that will give us two properties, MLS and WPS, [for which we] own the advertising rights to for live games. So, we're looking at how to get creative in putting together a significant sponsorship program," said Dan Courtemanche, svp of marketing and communications for MLS and SUM..This week, the NHL is revamping its live streaming effort through the relaunch of its video player on NHL.com. The league, which began live streaming last year, has an out-of-market subscription-based product, Game Center Live, which offers advertisers sponsorships on the site. (Out-of-market refers to matches that can only be seen by viewers outside of the local game coverage, honoring local broadcast agreements.) The NHL does not have current plans to run video ads, so viewers who pay for the service will have no interruptions. According to Larry Gelfand, evp of media sales at the league, "The goal is to raise TV viewership. The NHL believes hockey fans who log onto the site and pay the premium price for Game Center Live would be more likely to watch the games on Versus [a cable TV sports channel] on Monday and Tuesday nights as well as the TV broadcasts on Sundays." In this way, he added, TV advertisers would get increased impressions. In what would be a first, the NBA plans to stream live games in local markets on team sites in 2008-09 -- which would conflict with the broadcast rights of local TV partners. According to sources, the NBA has mandated each team to launch three separate digital services -- video streaming, interactive TV and video-on-demand -- to coincide with the start of its 2008-09 season in late October.One of the main sticking points for the local cable and satellite operators is that they would lose exclusivity over some of their highest-rated programming.At this juncture, it has yet to be determined whether the games will be streamed for free. The advertising component is also being worked out.MLB, in 2003, became the first U.S. sports team league to stream an entire season of games live when it launched MLB.tv on its site, MLB.com, where it continues to do so (without ad support). According to sources, it plans, like the NBA, to launch local online streaming for the 2009 season. Sources indicated that talks began with Comcast to test streaming with Chicago Cubs and White Sox games earlier this year, but became deadlocked when the league's Internet and interactive media arm, MLB Advanced Media and Comcast, could not settle over several disputes, including whose Web site the games would be streamed over. An MLB spokesman declined to comment. Live streaming has also proven profitable for non-Major League team sports and their broadcast partners, including CBS, ESPN and NBC.This year, CBSSports.com streamed, for free, the entire National College Athletic Association men's basketball tournament. (The site began streaming the tournament in 2003; in 2006, it began offering it for free.) According to Jason Kint, svp and general manager of CBSSports.com, ad revenue for NCAA March Madness on Demand, the site's live video production of the games has increased from $4 million in 2006, to $23 million in 2008 for the NCAA tournament. This year, NCAA March Madness on Demand had 4,759,306 total unique visitors for the tournament, a 164 percent increase from 2007. The advertising, which is sold separately from the TV broadcast on CBS, includes pre-roll and banner ads as well as sponsorships."There's an insatiable appetite for [online] video right now -- and live video, in particular, especially around high-quality events," said Kint.ESPN, through its site ESPN360.com, has launched a full time live sports streaming network, and has streamed 3,000 events in the past year (for a variety of sports), with 60 percent of that content exclusively shown on the site.The decision to emphasize live sporting events online was made last year, said David Preschlack, evp of affiliate sales and marketing for Disney and ESPN Media Networks. "We think there's an online appetite to view them, but we also think that content is going to be a driver as it relates to the high-speed data marketplace, much like content was the driver for the proliferation of cable television back in the late '70s."The site currently streams such events as MLB, golf, tennis and college football games. The service is accessed through affiliated Internet service providers such as AT&T and Verizon. It recently began inserting ads into the live streams.While neither NBC nor the NFL is disclosing impressions yet for Sunday Night Football Extra -- both expect to make figures public in the coming weeks -- Gary Zenkel, evp of strategic partnerships for NBC Sports and the Olympics, emphasized its recent success with the Beijing Olympics. In terms of traffic, NBCSports.com had 1.24 billion page views, 51.9 million unique viewers and 75 million video streams. The Olympics research showed that brands that advertised across platforms had "significantly" higher brand recall," said Zenkel. "What we're being told by some of this research -- and given the success of our television ratings and the enormous volume of content that was made available online -- is that the digital offering was a complement and was additive to the overall output and viewership of our broadcast coverage."But despite the rosy picture, for advertisers the potential cannibalization of the telecasts remains a pressing issue. Matt Pensinger, vp of consulting for Publicis Groupe-owned Relay Worldwide, a sports and events marketing company, said while the rights holders say they have data to support arguments that live streaming of sports games doesn't encroach on the TV audience -- in fact, it actually picks up new viewers -- "the question for all of us in the industry is, is that really true and [if so], can that continue to be validated over time?"If it can't," he continued, "and we start to learn ... that there is some cannibalization taking place, now you are really getting into some sensitivity with advertisers who may feel they have to fight a battle on multiple fronts to maintain their [initial TV] connection to their sponsorship programs." Sam Sussman, svp and sports activation director at Publicis-owned Starcom USA, believes the more pressing issue is how the next cycle of rights negotiations between the leagues and their broadcast and cable partners plays out as the networks seek to negotiate more than just on-air rights.According to Sussman, the last go-round saw the issue of multi-platform rights become more critical. The focus, he said, is whether the leagues want to maintain control over content or hand it over to their network partners. The NFL, for example, is employing that tactic by keeping control over much of its digital video rights, said Sussman. As the leagues continue to create their own cable networks, they are looking to build strong digital components to support them."It's obviously a benefit when you are launching a linear TV network," he said. "So, the question is, do the leagues want to maintain those rights, or do they want to include them as a part of the bid that the networks make?"

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The New Rule Book

Shahnaz Mahmud

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