The NCAA’s recent ruling that allows student-athletes to generate income from their likenesses is garnering a lot of attention. People are debating the longstanding question of whether these students should be able to profit from their role in a business that drives $995 million a year in licensing revenue.
While this is just the latest chapter in an ongoing saga in how the organization distributes the wealth it attracts, the current conversation is neglecting a bigger picture reality. As TV converges, the overall dynamics of the distribution of wealth in sports are changing.
College athletes, while still not being cut in on the cable revenues generated by their performances, can now avail themselves of the burgeoning opportunities in influencer marketing. That’s on top of well-worn channels like video games and traditional product endorsements. But it’s only a matter of time before questions related to shifting sports consumption habits and the massive revenues in play because of these shifts raise new questions in how these athletes are compensated.
Players are becoming media companies
If you think the video and TV landscape is already too complicated, consider that athletes are becoming media companies in their own right and are paying close attention to how the monetization model for leagues and content providers is evolving. Increasingly, we’re seeing changes in consumption habits figure into labor disputes in professional leagues.
In the NBA, the fateful 2016 salary cap surge that allowed the Warriors to sign Kevin Durant (and other teams to sign record contracts for exceedingly average players) was largely tied to the expansion of international streaming rights. It’s one of the reasons that Houston Rockets general manager Daryl Morey’s tweet in support of Hong Kong protesters was such a flashpoint for the future of the league’s lofty prospects for international expansion and for endorsement deals that already enrich many of the NBA’s top stars. The Warriors’ Klay Thompson, for example, is endorsed by a Chinese shoe company.
Meanwhile, Major League Baseball is facing all kinds of issues in the forthcoming negotiations with the MLB Players Association, including the prospect of awarding of regional streaming rights to local teams. Local TV rights still figure prominently, too. Remember when the L.A. Dodgers struck a deal with Time Warner that reset their franchise?
On top of all this, we’re increasingly seeing athletes—LeBron James, Tom Brady, Kobe Bryant, Stephen Curry—launch their own production companies as their interest in and understanding of the power of content to drive revenue deepens. As the sports rights model of the future begins to take shape and the growing financial opportunity becomes better understood, players are going to expect to be a part of the monetization equation when it comes to streaming rights.
Today’s uncertainty masks tomorrow’s opportunity
Many of the major sports rights contracts are coming up for renegotiation in the next few years, and there are more bidders in the mix than ever before. For example, Amazon’s Twitch is now a major player in the bids for sports rights. And Amazon isn’t alone. Twitter, Facebook, YouTube and others are throwing their hats in the ring and will, without a doubt, be a part of a fundamental transformation in how people consume sports content into the future.
At the center of ongoing sports rights negotiations are all the new monetization opportunities that come with changes in media consumption habits: more channels, more devices, more interactive media and more ways to engage. For example, March Madness alone will garner $1 billion per year in licensing and distribution revenue through a deal with CBS Sports and Turner that was recently extended through 2032. The deal extension covers live streaming on “all platforms, including those that may be invented over the course of this deal.”
Given such language within today’s multi-billion-dollar contracts, it’s worth asking what might be invented between now and 2032. Today’s video ecosystem is in a state of transformation, and the proliferation of channels all but ensures that something new will pop up that the deal, as envisioned today, doesn’t cover.
TV streaming rights are destined to become only one part—albeit, an important one—of the overall sports monetization equation, which will be inexorably cross-channel, multi-format and ever-changing. The current debate over whether and how student-athletes can be compensated is only one small talking point within this much larger conversation, one that extends beyond sports itself.
Sports in many ways function as a proxy for live appointment viewing in general, and such content is a critical part of every emerging content property, converged or otherwise. For example, Fox was able to sell all of its 2020 Super Bowl ad inventory in record time this year, underscoring how central live content remains for networks. As we are witnessing within sports, the convergence and expansion of the video landscape is changing the way all stakeholders in content are compensated and incentivized. Now is the time for athletes, brands and properties alike to put their game plans into action.