By Brad Hubbard | @bradhubbard
Consensus is that Steve Ballmer overpaid for the Los Angeles Clippers back in 2014. Considering that he is worth around $27 billion, spending $2 billion for an NBA franchise in the second largest TV market in the United States seems like a deal for someone in his position. Part of the reason that the NBA was more than happy to allow the former Microsoft CEO into the league was the fresh ideas he would bring. One of those is Ballmer’s push for the Clippers to have their own OTT channel which could open the floodgates for other teams, leagues and conferences.
Back in April the Sports Business Journal (SBJ) did an article about how Ballmer was cutting out the digital rights from the next regional TV package for the Clippers so they could start an Over The Top (OTT) channel where a user would authenticate with their regional TV subscription. This would not be a replacement of the live games but an addition to it.
Ballmer, like his time at Microsoft, is thinking logically but not necessarily radically. He is not refusing to see what is coming but he is unwilling to kill the cash cow and innovate into the next thing. Truth be told, the NBA may not be allowing him to go too far either.
Sound familiar? It should if you’ve read or listen to Harvard Business Professor Clayton Christensen and dove into his theory of disruptive innovation.
The fact is that sports rights are at their limit when it comes to rising costs and passing on those costs to the consumer. With the wage gap in the United States becoming such a major talking point this political season, it is becoming harder and harder for people to justify the monthly costs of a cable or satellite subscription to watch random games. The price may not be too high for just their local team though.
MLB.tv is doing something similar right now but it is designed for people outside of the TV foot print of the club. In other words, if you live in Seattle and don’t want to pay for cable then good luck trying to watch Mariners games online somewhere.
Several years ago when sports leagues begun creating their own TV channels like the NHL Network and the NFL Network, many people believed that it was only a matter of time before the league’s brought all of their games in house and cut out the traditional partners like NBC, CBS, FOX and ESPN. Well that hasn’t happened because of the billions that can be made by bidding out the rights to these partners. It appears now though that we are at a place where a league or conference can keep their digital rights and sell to a TV partner because that, in the end,is a win-win. It lowers the cost for the traditional TV partner but gives the league, team, or conference an avenue to grow revenue with their most valuable assets.
It’s one step back and possibly three steps forward type of scenario.
The Clippers are not going to walk away from a regional sports deal that pays them upwards of $50 million a year. Even Ballmer isn’t that crazy. However, retaining the digital rights can give him a lot more flexibility even if the Clippers are not going to be live streaming the actual games with their OTT channel. It’s a logical yet still a trailblazing move. Kind of wonder why the Dallas Mavericks owner Mark Cuban didn’t do this already.