Brad Hubbard Basketball, Innovation, Media

The Digital Middle Ground

By Brad Hubbard | @bradhubbard

BallmerConsensus 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.

REMOTESeveral 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.

 

Advertisement
Brad Hubbard Media

Big Ten – The Last Big Sports Deal

By Brad Hubbard | @bradhubbard

The Big Ten’s media rights are all locked up. They will begin in 2017 and according to John Ourand of SBJ it’s a deal that very much falls in favor of the Big Ten and not the networks. One thing is certain about this deal from the networks perspective, it is the last time you’ll probably see a massive price increase.

People have been pointing to the Big Ten’s media deal for a few years now. The Big Ten was the last one of the Power Five conferences to sign a new deal and many people believe that this deal was either not going to be the typical windfall or would only increase slightly. Well it looks like it will mean $20 million a year more to the conference teams so it’s safe to say that the concerns were almost valid.

The real interesting part of this is ESPN’s late entry. They were in, then left the bidding and then returned to win part of the contract. Some thought they wouldn’t bid or would try to leverage some kind of lower end deal. In the end, they ponied up like they always do even after a very low opening bid.

Another interesting thing is that there is no mention of the Big Ten hoarding it’s digital rights. I along with other cord cutters were hoping that the Big Ten would keep it’s digital rights and sell them as a stand alone package on Amazon or through it’s own site. There was no mention of this to this point and it shows that the Big Ten had to use all it’s leverage to squeeze as much as it possibly could from this deal.

This will be the last time the major networks shell out this kind of cash though. The consumer is at a breaking point and are starting to refuse anymore price increases to support these kinds of transactions. ESPN knows this which is probably why they had such a low opening bid.

While this deal is great for the Big Ten and its teams it is the last hurrah for deals such as this. Networks are not going to be ponying up huge amounts of cash in the future and it is time that the sports leagues and conferences look to splitting out their packages and doing what I call the Jeff Bezos, less money out of each user but having a wider user base.