In 2002, Major League Baseball ran an experiment of sorts. For 63 years, baseball had been beamed via cables into American homes, and fans could gather around the family television set to watch the national pastime. Now, for the first time, MLB was live-streaming a baseball game onto their computers. More than 30,000 people tuned in to watch the Rangers take on the Yankees that day.
Fourteen years later, more than 40,000 games have been live-streamed into offices, homes, classrooms — virtually anywhere that can accommodate a computer and an Internet connection. Did MLB officials have any idea back then what the future really held?
“I still don’t,” Bob Bowman, MLB’s president of business and media, says with a laugh. “Not to be flippant. We’ve been a consumer-driven business. Our consumers wanted it. We weren’t convinced it made a lot of economic sense. When we started it, nobody really knew what streaming would be.”
That hunger has grown, and sports teams, leagues and television executives are still trying to figure out the best way to feed the demand — or at least to understand it. A recent survey by CivicScience on behalf of SportsBusiness Journal found that one-third of respondents say they’re watching less sports than one year ago, and 15 percent say they have “cut the cord” — walked away from traditional cable service — in the past year. Network executives are still trying to process why sports ratings struggled so much over the past 12 months — from the NFL to the costly Summer Olympics to the NCAA men’s basketball championship game.
For perhaps the first time, even the smartest minds in television and sports concede they don’t really know what the future holds.
Will sports someday be completely free on every laptop, tablet, phone and wristwatch? Will fans be able to purchase games one at a time? Will networks pump their digital brakes to protect lucrative television advertising revenue? Or will the games and events fans love gravitate to new carriers, such as Facebook or YouTube?
The long-standing economic model has been favorable to cable networks such as ESPN, which has been able to pocket subscription fees and advertising revenue, but executives worry about how the current cratering of that model could impact consumers. While many say leagues can no longer rely solely on cable and broadcast partners to reach their fans, some suggest that consumers eventually could find themselves paying higher fees for a la carte or bundled offerings so that the networks can fulfill their lucrative rights deals.
“We simply have to adjust to where people are watching sports and serve it there” is how ESPN President John Skipper explains it. “I think the distinction of television and non-television is kind of a falsehood at this point. . . . If you watch a game on your phone, I don’t know if you think you’re watching television, but you’re watching a game on a screen, and that’s all we care about.”
All of the networks and leagues are actively exploring streaming options and experimenting with technology that might connect with tomorrow’s audience. Last year the NFL streamed a game on Yahoo, marking the first time fans could legally access a game online without authentication from a cable subscription. This season the NFL is streaming 10 games on Twitter that are also being broadcast on network television and simulcast on the NFL Network. The future could include smartphone apps, social media services and maybe even nontraditional broadcasters, such as Amazon.
“We all think the iceberg’s melting. The only question people have is what’s the temperature of the water?” Bowman said. “I think the water’s pretty cool. So I think this is a longer-term process. Others think it’s a little hotter, and it’s going to be more of a revolution. I think it’s more of an evolution.”
Sports teams, leagues and networks aren’t content to simply dip their toes into the digital waters; they need both feet firmly planted in both the digital and traditional television worlds. For now, not surprisingly, networks and leagues alike say the key is to maximize the audience on both traditional television and online, to maintain one audience as they grow another.
“It’s not that sports is changing. It’s that television is changing,” said Marc DeBevoise, the president of CBS Interactive. “We used to call television just what you get over the wire lines into your home. Now television is much broader.”
DeBevoise’s network puts most of its programming on a subscription service called CBS All Access. Earlier this month, CBS expanded its agreement with the NFL and began streaming games, making the NFL available to subscribers who eschew traditional cable packages and prefer to access video on computers, tablets or connected devices such as Apple TV, Roku, Xbox One and PlayStation 4. He says more than 60 percent of CBS All Access subscribers still opt to watch on a television, a figure that goes up to 75 percent for live events.
“We want to be on all screens, so we give people the option and the choice. . . . Frankly what we see is the best screen available will be what the person gravitates to. Typically the best screen available for sports is the largest one,” DeBevoise said.
Individual teams realize they can’t abandon their traditional broadcast partners, but they also have been bracing for the shift. Ted Leonsis owns five professional sports teams in the Washington region: the NBA’s Wizards, NHL’s Capitals, WNBA’s Mystics and two Arena Football League teams. He brokered a new broadcast agreement last month that acknowledged the continued relevance of cable television but also the unyielding rise of the online audience. His NBA and NHL teams still will be broadcast live on a regional sports network, Comcast SportsNet, but he will stream many other events online via his digital Monumental Sports Network, including his fledgling Arena League franchises, the Mystics and the NBA D-League team he is trying to lure to Washington.
A younger audience fundamentally consumes sports, news and information differently than older generations, and sports executives have been proactive in seeking them out. The photo-sharing service Snapchat, for example, has partnership deals with ESPN and all of the major U.S. sports leagues. Fans can follow each NFL game via user-generated content. Last year, more than 70 million unique users tuned into an NFL game this way, according to Snapchat’s numbers. And during last summer’s Rio de Janeiro Olympics, the app partnered with NBC and reached nearly 35 million Snapchat users, most of whom were under the age of 35.
While some online entities aim to be a second screen for sports fans, others have made efforts to become a primary landing spot. Last season Yahoo live-streamed the first NFL game, drawing 15.2 million unique viewers, and Amazon reportedly has been in discussions with Major League Baseball, the NBA, the NFL and others to someday broadcast games. (Amazon is run by Jeffrey P. Bezos, who owns The Washington Post.)
Twitter has the rights to broadcast 10 NFL games this season. Some weeks’ games have topped 3 million viewers with an average audience around 300,000.
“Twitter has always been a complement to television, and in the future we’ll continue to redefine the live sports experience by coupling great live sports content with real-time conversation and brand integration on Twitter and Periscope,” said Laura Froelich, Twitter’s global head of sports partnerships. “This will become increasingly important given the rising generation of cord-cutters and cord-nevers.”
One big key to the future is the platform, and Major League Baseball struck gold early with BAM Tech. The company provides the technology and video player for streaming games, was founded by Major League Baseball and is also used by the NHL, which has a 10 percent stake. Disney, the parent company of ESPN, agreed in August to invest $1 billion for a 33 percent ownership stake, signaling the company is eager to make big strides with a stand-alone, cable-free streaming service.
Last month, Skipper was part of a panel discussion at the University of Maryland called “The Future of Sports Television.” The sky is not falling on his industry, he told the audience. “Sports has never been more important in this culture. It’s ascendant. More people watch more games than they ever have.”
The cable industry’s recent struggles have brought a big spotlight on ESPN. The cable sports network has been losing more than 3 million subscribers annually, and there’s evidence those losses could be accelerating. ESPN lost more than 600,000 in October alone, according to Nielsen numbers. (ESPN has disputed the Nielsen findings, calling them a “historic anomaly” and “inconsistent with much more moderated trends observed by other respected third party analysts.”)
“We have a lot of things to navigate,” Skipper told the Maryland audience. “We’re not unaware of what’s going [on] in the marketplace, the different ways people get content and the wide variety of content available to people. We just have to continue to figure out how to thrive within that market.”
ESPN has been hesitant to roll out a wide-reaching over-the-top option, worried about giving viewers more reason to cut the cord. Its basic approach has been to open its arms wide and pile up offerings on all of its platforms. Subscription numbers might be shrinking — costing ESPN tens of millions of dollars — but ratings remain strong, and Skipper said he feels ESPN is adding and maximizing revenue streams.
He notes that 98 percent of ESPN consumption is watched live, compared with about half of prime-time network programming.
Many of the changes for cable networks revolves around the loss of subscribers, not viewers.
Skipper points out that five years ago, 15 of the top 100 rated shows on broadcast and cable television were sports. Last year, sports accounted for 93 of the top 100. And while ratings for some sports will always ebb and flow, the growth on digital platforms has consistently pointed upward. In September, Skipper said ESPN logged 105 million users who consumed 11 billion total minutes of sports on ESPN’s digital platforms.
Still, ESPN’s pocketbook has been hit harder than the others because it charges cable carriers more than the others. With bundles and over-the-top options, non-sports fans are no longer forced to pay for sports channels they never watch.
Skipper anticipates the menu looking quite different in the future. Sports fans won’t be flipping through options or tuning into Channel 206 on DirectTV, he says. It’ll feel more like a smartphone app.
“I think the future of video will look a lot like your phone where you’ll go to NBC or CBS or Big Ten or ESPN, where you’ll click [and] a menu will come up of all the sports you can get,” he says.
ESPN doesn’t live or die based on the ratings of any one game or even any one season — even if it’s the most popular sport in the country. As Skipper likes to say, ESPN is a volume company. With the NFL, he says, “I worry the least” and said a dip in a game’s ratings “is immaterial to us.”
To varying degrees, every league, team and network is facing the same conundrum: a shrinking cable audience and an expanding television universe. The respective rates of change are not always congruent, and the associated advertising rates are still lopsided. Networks are still on the hook for their rights fees even if they have to generate new revenue streams to foot the bill.
Despite some lagging ratings these past 12 months, they’re all confident the audience is still there. The elusive formula involves three components: content, distribution and price — and everyone is looking for the perfect combination.
“I don’t think any of us know what that holy grail looks like,” Bowman said. “I think you’ll see a lot of experimentation.”
While the games will always be available on screens — either on your wall or in your pocket — no one denies a shift is happening. Most agree that settling on a profitable solution feels urgent, even if the change doesn’t happen overnight.
“I think this moves slowly,” Bowman said. “It’ll be like watching your grandchild grow. It’ll look dramatic to the grandparents but not so much to the mother or father who sees it every day.”