"How should smaller properties cope with the shrinking sports media pie?" John Kosner's latest SBJ column with Ed Desser

Original Article: Sports Business Journal, by John Kosner and Ed Desser, April 18th, 2022

By now, most are aware of cord-cutting, streaming growth, and the related tectonic changes hitting the sports media industry. Elite properties like the NFL, NBA, and “Power” college conferences will remain strong draws for the traditional sports TV players, as well as the new tech ones — earning continued exposure and rights fees. But in an era of diminishing pay TV revenue where bigger players, especially the NFL, are taking a far greater share of the shrinking pie, how do small and midsized sports compete in this new normal?

Let’s start by recapping the score:

• NBC has shut down NBCSN, reducing linear shelf space;

• The entire RSN business is in danger of collapse;

• The remaining national sports cable networks have been losing 1-2 million subscribers per year;

• Pay TV affiliate revenue increases are only barely keeping up, and most all of that goes to support the major sports; and

• Network broadcast prime-time adult entertainment audience ratings are disappearing: down 93% over the last four decades.

What to do?

I. Prepare.

Don’t leave your sports media negotiations to the exclusive negotiation period. Properties should be doing long-term scenario planning, considering options, looking at adjustments, and rethinking their business models. One can’t expect double-digit growth to continue uninterrupted without meticulous preparation. Know your agreement(s), when they end, and project what the world may look like at that time.

II. Be Flexible.

Just being on a national sports cable network is not the end all be all anymore. Reach is down. Not only are these networks’ average viewing much smaller but so is the effectiveness of any promotion from them that you’ve been promised. Paying a network for airtime, only to have them fail to deliver a sizable audience — or worse still, rely solely on you to do so — is wasteful. Consider all the alternatives.

Viewing is increasingly fragmented. Streaming is ascendant; it’s how more and more audiences expect to find most content. Emerging talent like Pat McAfee at FanDuel and properties like Barstool and Overtime have scored significant viewership and attention operating off the pay TV grid. But while there is no barrier to entry, streaming comes with significant fixed costs, and heavy reliance on the host property to market, sell, and produce. You can go it alone, or partner with a streaming partner to save some of those hassles — but if you’re on another’s platform you give up the benefit of direct business relationship with your fan base … a huge incentive to pursue direct-to-consumer (DTC) to begin with. Research is necessary to estimate buy rates, packaging options, and pricing. Unlike being on cable, streaming is hardly turnkey.

III. Think the Way the Potential Buyers of Your Sport (Networks and Fans) Do.

When we started working together at the NBA four decades ago, NBA Finals games aired on late-night tape delay. In fact, the NBA drew lower audiences than horse racing, boxing and bowling. Our NBA was certainly not today’s global juggernaut. Our league office colleagues and teams had to think differently — and we did. We started literally by itemizing our media “assets” and assessing how they were and should be utilized. Rick Welts, then the president of NBA Properties, created compelling decks (using actual slides!) that helped us create and then refine our narrative.

Ask yourself a bunch of questions:

• What is “the story” of your sport? Do you have a tight version of that ready to present in multiple forms of media?

• How well do you understand your community of fans? Are you able to marshal them?

• Are you willing to take chances (“do anything”) to distinguish your product? If so, how and how much?

• Are you investing in storytelling, including and especially from your athletes, to get audiences outside your core to care? It’s now part of lore that F1 commissioned “Formula 1: Drive to Survive” on Netflix and now its ratings have exploded on ESPN. The truth is it’s easier for small properties to take fans behind the curtain — there’s less to lose.

• Do you have a real-time data feed available for your events — key to data and betting company deals and fan fantasy and wagering?

• Do you have your own updated “assets” list?

It’s all less risky than you might think. Failure to take chances probably places you further behind the juggernauts, and the new sports audiences relish (and now expect) customization, curation and behind-the-scenes access (live and on demand). Accommodate their preferences!

IV. In This Quest, Technology is Your Friend.

You don’t need an army to appear to have one. Sophisticated sports artificial intelligence startups can create and instantly distribute personalized sports video highlights to all leading social media networks simultaneously. Others can identify your social media audiences and your super users who spike awareness for your sport. Need to add real-time interactivity to your app? There are partners for that. Best of all, these startup companies compete themselves and are hungry to build businesses like yours to be able to tell their success stories too.

In this world of Goliaths and infinite choice, nothing comes easy for small to midsize sports properties. Nonetheless, these exercises we are suggesting can be both exhilarating and lucrative. Start this necessary work today!

Ed Desser is an industry expert witness and president of Desser Media Inc. (www.desser.tv). John Kosner is president of Kosner Media (www.kosnermedia.com), a digital media expert and sports startup investor. Together they developed league strategy and ran the NBA’s electronic media operation in the ’80s and ’90s

"The End of All or Nothing" in Sports Media, John Kosner's latest SBJ column with Ed Desser

Original Article: Sports Business Journal, by John Kosner and Ed Desser, February 21st, 2022

For the four decades of the cable sports era, the choice for fans has been simple: Buy cable/satellite and get everything. Every major national or local sports event, on all widely distributed channels, plus every major entertainment, music, and news network. In short and until recently, substantially all programming — an all-you-can-eat buffet (except movie channels) — at a set per-home price. Or, should you decline to buy pay TV, you get nearly nothing (just broadcast if you were enterprising enough to put up an antenna). Netflix now is obviously an outlier, but virtually all of the sports events you would be likely to watch were part of “the bundle.”

This ultra-simple way of buying and consuming live sports is already coming to an end. This fall, you’ll need Amazon Prime to see most Thursday night NFL games. You must have ESPN+ if you’re a UFC fan. As our friends at “The Marchand and Ourand Sports Media Podcast” pointed out, tennis fans had to pay twice (ESPN and ESPN+) to watch all of the Australian Open matches. That’s the new fan playbook, and it’s more expensive. Soon it’s rumored that Apple TV+ may be required to watch Wednesday night MLB games previously on ESPN. If you want RSNs, forget about Hulu or YouTube TV, and if you are a big sports viewer, ignore Dish altogether. The great unbundling is underway, and it is truly the end of “all or nothing.” That won’t happen all at once, but the change is coming this decade. And that’s before more seismic effects wrought by everyone from FanDuel to Discord to Fanatics.

How should sports properties navigate this transition? We have four main observations:

1. The future of distribution is fragmented — and soon to be further split among linear TV, streaming (and PPV of various durations), betting, social media, chat, and 3D interactive platforms. Ten years ago, you could reach substantially your entire audience through a single deal with one sports media company. That is no longer true, especially for younger viewers (see No. 4). Traditional “exclusivity” in media deals needs to be fundamentally reconceived — establishing greater value in more narrow grants than just cable or broadcast, first half or second half of the season or by language, geography, or night of the week, which were all that was needed pre-internet, in a simpler time when distribution channels and business models were far more limited. Thus:  

2. New licensable products and formats are crucial. The single vanilla live game broadcast production (another all-or-nothing relic) is not nearly enough anymore either. Multicasts will proliferate: The ManningCast and the Nickelodeon NFL Kidscast are just the start but expect more of these targeting multiple demographics/languages from rights holders, not just rights buyers. There will be video highlights in multiple forms and lengths, increasingly personalized and curated “FAST” (Free Advertising Supported Television) channels, imaginative “re-watches,” immersive 3D interactive experiences (Sport@Roblox), betting, 4/8K, merch, and NFTs. To do that: 

3. A sports property needs to become its own executive producer — in terms of audience segmentation, game presentation, formatting storytelling, strategic scheduling, and investment. Much is rightly made of the NFL’s recent blockbuster 11-year, $113 billion TV rights deals. Behind the scenes, the NFL earned the agreements by consistently increasing the value of its product for fans and media partners — pioneering the Red Zone, extending the regular season, expanding the playoffs (Super Wild Card Weekend), moving the Super Bowl and NFL draft back, creating the Rookie Combine, defining a window for free agency and making its training camps an event. The NBA and its players have achieved leading global reach on multiple social media platforms, and have invested in and accelerated interesting tech startups. The lesson for all: You can’t just rely on the network “professionals” anymore. “Who is our executive producer?” our former boss NBA Commissioner David Stern used to challenge us (Ed was the NBA’s first back in 1982). The NBA just filled that position again, naming our former colleague Gregg Winik, whose assignment is imperative because …

4. Younger sports fans are much different. The iPhone debuted in 2007, and it changed almost everything about experiencing sports. Now, fans have in their pockets: the live game broadcast (soon, multiple versions thereof); every score, 24/7 breaking news; unlimited social media feeds, alerts, stats; the ability to transact, bet and buy instantaneously, anywhere. On Jan. 31, the NBA put “CrunchTime,” its version of RedZone, exclusively on its own app, commercial-free. In 2027, this iPhone generation will turn 20, just entering their buying-power years. Are you ready for that?   

The end of “all or nothing” is thus quite daunting. Sports are no longer the default source of intergenerational bonding. We can’t assume our kids just want to “go out and play” and automatically share the Little League, pickup basketball, or touch football matches that were the experience of older fans and fed traditional sports fandom, parenthood, and viewership. We also don’t know when we will finally have COVID under control and what its long-term impact is on sports. However, unbundling and new tech breakthroughs also bring opportunity (plus, of course, the promise of multiple new bundles to come). Sports properties like the NFL and NBA that go on offense now will likely be rewarded.

Ed Desser is an industry expert witness and president of Desser Media Inc. (www.desser.tv), which has advised on over $30 billion in sports/media transactions. John Kosner is president of Kosner Media (www.kosnermedia.com), a digital media expert and sports investor. Together they developed league strategy and ran the NBA’s electronic media operation in the 1980s and ’90s.

The Adrenaline Economy

Original Article: Medium, by John Kosner and J Moses, May 18th, 2021

Last month, we watched the Academy Awards and were not surprised by the historically low TV viewership.

Were you?

Oscar’s 9.85 million viewers (down from 43.7M in 2014)?

No Mojo.

Today, we live in the Adrenaline Economy. Fans want action, involvement, real-time engagement. Entertainment options providing that electrical current are thriving; those that don’t are falling behind. Many, like the once mighty TV, music and movie awards programs, are suffering mightily.

The pandemic is a driving force here and has changed culture. During COVID, Taylor Swift recorded and released three albums. She engaged her fans, including 157 Million on Instagram alone. As entrepreneur and former Ticketmaster CEO Nathan Hubbard said in a podcast interview with Ben Thompson:

“Nora [Princiotti from The Ringer] and I did a song draft, 10 songs, she gave her first pick and we went back and forth and we drafted, we have hundreds and hundreds and hundreds and hundreds of people tweeting at us, texting us, DM-ing us, their individual drafts. People are dressing up and doing song draft parties. This fan base is just electric …”

Taylor’s all in. So is her audience. Taylor’s got adrenaline.

TikTok has adrenaline and, as a result, an astonishing 689M worldwide monthly users; making it “The World’s Fastest Growing Game.”

r/WallStreetBets, Crypto, Tinder, NFT’s, wagering — adrenaline! Financial platforms are now trading at a fraction of a second — co-locating at the exchanges and limited only by computing processing speeds. At the May 1 Berkshire Hathaway shareholder meeting, Warren Buffett lamented the rise of Robinhood, dubbing it “a very significant part of the casino aspect” of investing today. Guess what? The casino aspect is the point.

The games business is built on adrenaline. According to Grin Gaming founder Nick Bucheleres, the future of entertainment revolves around it. Free to play. Virtual goods. Creator Economy. Mobile. Global. Last year, people spent over a trillion hours watching and interacting with other people playing games! Valve’s Steam platform (including CS:GO and Dota 2) regularly exceeds 25M concurrent users.

And just wait until 5G hits. Our children will be able to play “World of Warcraft” on the subway — with no download or WiFi necessary. And they will have “wherever you are” geolocation — enabling them to integrate the people and things in the subway into their Roblox and Minecraft worlds in real-time! That’s adrenaline.

Sports, paradoxically, lacks adrenaline. Over Easter weekend, UCLA lost to undefeated, top-ranked Gonzaga in a thrilling Final Four overtime game, one of the best college basketball games we’ve ever seen. Yet, the Bruins’ epic loss drew just 14.9M viewers, the lowest ever for the prime time NCAA national semifinal on broadcast TV. Watching a thrilling game was once a amazingly exciting communal activity; now for many, it’s passive viewing.

Today, we have more people, in more households, with more money, better technology, and more screens than any time in history — yet the most popular sporting events and live awards show telecasts are attracting fewer and fewer viewers than ever before.

Why?

This is the fourth in a series of 2021 pieces about why games are ascendant in culture, especially among young people, and what those of us in Sports, Media, Investment … all of us in business … can learn from games. In our third installment, published on NCAA Basketball Selection Sunday, March 14, 2021, we noted that the massive virtual goods business in games worth $79B annually is coming to sports, finally, with the advent of “NFTs,” non-fungible tokens. Today, we look at what’s driving the younger generation’s move to interactive entertainment and how games are leading the way.

We are in the midst of a content revolution. The two of us grew up in an era of media scarcity, but now abundance rules. We all enjoy an ever-expanding menu of entertainment options — free and more and more of them are made and distributed by us. Besides TikTok and Instagram, there’s YouTube, Twitch, Snap, Twitter, Reddit, Discord, DraftKings and FanDuel to name just ten, free platforms commanding sports fans’ attention. These are places where the actual activity and energy of sports fans is the point.

On the pay side, most everyone subscribes to Netflix and Amazon Prime. They offer an awesome array of content to scroll through, select and watch on demand but these are not adrenaline choices. The Switch, Xbox Series X, and PlayStation 5 are — and they all sold out not coincidentally.

Games are what’s now and next. While TV networks blamed Nielsen for the ratings slump, the same research authority revealed that 55% of all Americans played games during COVID. In addition:

• Twitch set a new record with over 2.1 Billion hours watched in April (29% year over year growth);

• YouTube Gaming had its biggest year in 2020–100 B watch-time hours across 40 million active gaming channels. Per Pew Research, 95% of U.S. 18- to 29-year-olds use YouTube;

Games generate adrenaline, here’s how:

• Choice. We can watch, play and pay for what we want, when we want it, wherever we want, and on whichever device we choose. The experience is always LIVE to us.

• Persona. In games, we can be ourselves or we can adopt an avatar; and, coming soon, there are a host of new virtual identities we can assume.

• The Audience Both Creates Content … Running the gamut from producing videos, podcasts, live shows, essays, comments, memes, tips, song drafts … redefining engagement … and actually…

• Impacts … Games, TikTok, etc. in real-time. Our behavior matters!

• Purpose. As Marcus Ticotin, a longtime games executive and now CEO of Abandon Entertainment and college classmate of John’s, says, “we have a goal, an activity, when we play.”

• Place. Games take us to other worlds and situations and it’s all …

• Global. Content is produced — and viewers can access it — from everywhere making the addressable and relevant audiences much, much bigger and dynamic.

Now, contrast all of those developments with watching sporting events and live awards shows on traditional linear TV. Our experience is plainly inferior. For one thing, we have little to no choice. We pay handsomely to see the games on traditional pay TV channels. And, for the sports industry, beware what you wish for. It has been so successful in building its moat (generating outsize broadcasting and related rights payments) that Sports has essentially isolated itself on its own island and it’s hard to get there. Sports is not available for the most part on the platforms that most young people use. That’s a problem, says Yannick Manual Ramcke, the OTT lead at OneFootball in Berlin, because “if it’s not happening on the platforms where you are, you don’t know about it and you don’t care.”

And the viewing experience hasn’t changed much since we were teenagers. Compared to playing games, live sports is full of dead spots — one-sided basketball games can get boring fast, not to mention the pace of baseball and football, especially with all the commercial breaks. There’s no swipe left or right. Do younger people appreciate the nuanced beauty that crops up unpredictably in big-time sports? Or has it in fact become too complex, lumbering and time-consuming to scale?

Meanwhile, in sports viewing, we cannot create or share content.

Yes, on a second screen, we can follow and be heard (to a certain extent) on Twitter but we can’t distribute NFL highlights on TikTok, we can’t access live games on Instagram or Snap. We can’t simulate the game experience of watching and playing together in real-time anywhere.

Because sports broadcasts are largely not personalized, they don’t recognize or reward the persona we bring as fans. They do take us to another place; but, once there, we serve little purpose other than as people watching passively. We don’t impact anything.

To change the current viewership declines, Sports leagues and organizations must get their games and highlights in front of far more people. More personalization would help. They need to update the playbook and rethink and rework their rights agreements. Networks need to make their broadcasts available to more devices in more geographies. We need an end to blackouts and video latency and an emphasis on the urgency and exciting communal serendipity of live events.

Most of all, we love the action and sports needs to give it to us. Compare watching this year’s Kentucky Derby (audience down 12% from its last May date in 2019) with digital, virtual horse racing [No drug testing necessary!]. Fans on TikTok must be able to create and share content that includes real-time league highlights. Fans can also lead behavior — as baseball fans are doing now @wallstreetbets-style with No Runs First Inning.

A ray of light arrives tonight with the NBA Play-In Tournament — a brilliant addition by the League (sorry, LeBron!) that has simultaneously expanded and shrunk the Playoff lineup simultaneously, adding drama while eliminating “tanking” talk. Adrenaline. And more: Sports and the NBA are actually leading the current NFT explosion.

It is illustrative to both of us that our teenage sons are happy to come watch a few minutes of any live sporting event with us but they then quickly retreat into their bedrooms to play games with their friends — leaving our traditional media “pipe” for their “metaverse” — the topic of our next column.

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John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy, and an investor and advisor in sports tech startups. He was the senior digital executive at ESPN for 20 years. J Moses has been in and around the Sports, Games, and Tech businesses for over 40 years. He has been a Director at T2 since 2007, and is currently an Executive Producer on a scripted Esports show for the CW (www.optinstudios.com). Both John and J are admirers of Roone Arledge of ABC Sports.

Key questions teams should ask now about their RSN deal

Original Article: Sports Business Journal, by John Kosner and Ed Desser, 4/5/2021

“How much more are my rights worth?”

For the last 30-plus years that’s the first question teams had about their next local media deal. But now, with the NFL’s $100 billion-plus agreements speeding pay TV’s decline and (with an assist from COVID-19) Americans’ move to streaming, change is upon us. “Power” RSN teams retain solid options, but for the majority of pro franchises, there is no one-size-fits-all solution. The pressing questions facing teams right now:

1. Can they expect to get an increase in rights from their current RSN partner? That depends upon the leverage the team has in its market, and when and where its last deal landed. If under-market, the team should still expect some improvement, though not nearly as much a reset as in the past. If already at or above market, don’t expect much, if any, growth. Supporting value: There is little else in media quite like the home team in the home market (check out “How to make your media rights more valuable”; SBJ 4/23/18).

2. Since streaming is all the rage, should a team abandon RSN distribution now to establish a new position? Probably not. RSNs still provide favorable economics and broader coverage — at least for now. Streaming has certain benefits, but is less likely to produce superior results for most teams near-term.

3. With the traditional cable audience aging, how can a team reach and galvanize interest among young viewers? This was a big challenge even before sports media started to change dramatically in the last decade. Heavy use of social media, creation of non-live game products to attract younger fans (highlight sharing, partial games, experience-orientation, access to players and behind the scenes, esports, fantasy and betting) all play a role. However, teams need to explore some availability of their live product on platforms where young fans are. This cuts to the heart of traditional RSN exclusivity grants, which support lucrative rights payments.

4. Can a team retain streaming rights and sell linear rights to an RSN like the NFL did previously with Fox and Amazon on Thursdays? Perhaps, but expect the RSN to demand a steep discount for the loss of exclusivity, and don’t anticipate replacing lost rights fees with direct-to-consumer subscriptions alone. It might be better for the team to partner with its RSN to develop a differentiated companion streaming product which addresses both sides’ interests. But the RSN will have to justify such an approach with its MVPD distributors, contend with MFNs and, of course, the execution of the streaming app matters (see “Sports DTC squeeze play”; SBJ 1/13/2020).

5. Are long-term deals (10-plus years) still preferable? Probably not. With much greater uncertainty in cable distribution, new opportunities developing, and added risk that highly leveraged RSNs may not always be able to meet their financial obligations, shorter deals seem prudent.

6. Are Apple, Netflix, Amazon and YouTube poised to be big bidders, filling in the potential void of retrenching RSNs? Unlikely. Netflix has focused on long-tail “evergreen” programming — content they can produce and show for many years globally — unlike live sports, which principally matters when they’re played. Apple has not yet shown interest in acquiring sports, focused rather on entertainment and its “services” business. Amazon has just made an $11 billion bet on NFL, but that’s a national deal, and its emphasis has been international with major brands such as the Premier League. YouTube’s audience is growing significantly without live sports, though it has dabbled with some regional MLS rights (see “Netflix of sports”; SBJ 1/18/21).

7. How does a team know if it’s a good DTC candidate? Market size is critical in forming the denominator for any revenue projection. Relative popularity is next most important. If just tens of thousands of fans watch a team’s games when they are available via RSNs (without game-specific incremental cost), what portion will choose to pay for a team subscription? Also, smaller audiences will influence ad and promotional value. However, a highly popular franchise in a single-team market could have a true opportunity. Further, if a team’s current deal is well below market, it may have to consider DTC in order to achieve a material fair market value reset in today’s environment. DTC is also another way (along with fans threatening to switch carriers) to address coverage gaps resulting from certain MVPDs (e.g., Dish, YouTube TV) not carrying particular RSNs. However, a team that doesn’t deliver large audiences, or in a midsize market, may be better of being packaged with other teams on an RSN or local broadcast station.

8. How can leagues assist regional rights transactions? A league could marry its own national network (NBA TV, MLB Network) and/or out-of-market streaming services (NBA League Pass, MLB.TV) with local team rights in individual markets. The league’s network could serve as an optional backstop if a team can’t get the local deal it desires, by packaging its innermarket game rights with the league network to derive value and exposure through a combined sale (while raising attribution/allocation issues). Will this become part of the new NHL/ESPN deal? Alternatively, leagues could revert to selling primarily national TV packages, as the NFL has done for decades. How a team exploits its media rights is both its biggest business challenge and opportunity. Time to plan wisely!

Ed Desser is president of Desser Media Inc. (www.desser.tv), which has advised on over $30 billion in sports/media transactions. John Kosner is president of Kosner Media (www.kosnermedia.com), a digital media expert and sports investor. Together they developed league strategy and ran the NBA’s electronic media operation in the ’80s and ’90s.

Is Gonzaga an NFT?

Original Article: Medium, by John Kosner and J Moses, March 14th, 2021

Is Gonzaga an NFT?

Not yet, but soon.

Gonzaga is the undefeated #1 seed in men’s college basketball as tonight millions of us fill out our March Madness brackets.  A year from now, we will probably use blockchain technology for our brackets – opening up prizes, experiences and recognition not possible today; the winning one would become March 13, 2022’s biggest “NFT.” 

Perhaps you live under a rock … or your eyes glaze over when confronted with the latest complicated and speculative idea.  What is an NFT and what is all the excitement about?

An NFT is a “non-fungible token.”  As Mason Nystrom and Ty Young of Messari write in their excellent explainer, “NFT’s are a [digital] file format that transfers data and value on a blockchain network like Ethereum … an NFT is simply a token (or piece of information) that is unique.”  An NFT is neither divisible nor interchangeable – you can’t exchange it 1-1 like you can Bitcoin, today’s leading cryptocurrency.  Today, among other things, you can buy NFTs that represent art work (Yes, a Beeple went for $69 million at Christie's this week) and in sports, NBA video highlights through Dapper Labs’ “NBA Top Shot” app (where one collector’s $175K investment is now worth $20 million). 

Virtual goods are coming to sports – finally.

This is the third in a series of essays about why gaming is ascendant in culture, especially among the young, and what those of us in Sports, Media, Investment … all of us in business … can learn from games.  In our second installment, published on Super Bowl Sunday, Feb. 7, 2021, we wrote that games naturally promote and benefit from super-engaged communities.  A direct result: a virtual goods business in games worth $79B  annually.  The business of those “goods” – including “skins” to dress up and “powers” to enhance your in-game persona – is actually growing 8% a year. But Sports gets about $0 from virtual goods. 

That is, until NFTs and blockchain – the most important new trend in sports fandom and, intriguingly, a potential threat to the games business which invented the virtual goods bonanza.

You can buy an NFT and own it forever and monetize it however and whenever you want.  That is possible because of blockchain – the new internet that allows everything to be catalogued.  David Pakman, a partner with VC firm Venrock and one of the earliest investors in Dapper Labs, notes that NBA Top Shot [here is an example owned by John’s friend Ryan] is “a digital collectible.  It has a provenance.  It has a set of rules encoded in software behind it.  It is written on a public blockchain.  It’s fully verifiable.  It runs across hundreds or thousands of computers around the internet.  On a network that anyone can join.” Because NFTs can be cataloged, they can be traced.  In there is the revolution.

Today, there are two types of virtual goods:  

1.  Powers & Skins

2.  Collectibles

1. Powers & Skins.  Virtual goods in games (the $79B business referenced above) is fully-integrated.  Think: Fortnite.  You can only use virtual goods in the game you’re playing.  They give you an edge in the game.  Favored by early adopters and super users, they power the super communities supporting games.

   This industry is pre-blockchain and there are downsides.  Virtual goods in games are virtual and you only really “own” them while you’re engaged in the individual game.  They are not interchangeable between games.  Control of these game virtual goods rests with the game’s publisher (like Epic Games) which means, per Pakman that you have “to trust them not to print more all of a sudden like Fortnite does all the time to ruin your scarce assets.” 

   With the explosion of NBA Top Shot, one might expect that any video game based upon league name and marks – such as EA’s Madden NFL or FIFA games – would begin to include NFTs. 

   That is not likely anytime soon. 

   A version of game virtual goods (“loot boxes”) is the subject of a class action suit against Apple in California, arguing that these are “gambling” and potentially “predatory practices enticing consumers, including children.”  To counter any gambling taint, game companies offering virtual goods take the following legal position currently: virtual goods can be consumed within the game only and nothing of value can be transferred or traded out of the game. 

   Worth noting also that NFTs are the nemesis of the game model because the player, not the publisher, actually owns them and thus they have a value outside of the game’s vertical walled garden.  The 80 (or rather, 79)/2 rule applies here.  Two percent of the super engaged gamers create the 79B virtual games marketplace.  We expect similar dynamics for sports.

2. Collectibles. Sports collectibles hasn’t really changed its physical roots since we were kids.  It’s still a robust business.  But prior to the blockchain, there was no way to enforce digital scarcity.

   For those of us over 40, remember when you saved up your money as a kid to buy Topps trading cards?   Put them in your bike spokes or traded them with your friends?  Then you put them in a cigar box and there they sat until you moved and your parents tossed them out?  In J’s case, heartbreakingly, movers lost his childhood memories box.  In that box was a Stan Musial baseball card in mint condition.  John would nag his father to go to New York Yankees’ Bat Day so he could get a Reggie Jackson bat.  The latter was the subject of great attention for 48 hours, then went into a closet and oblivion.  

   The new world of NFTs solves all of these problems and creates monumental new opportunities.   Yes, NFTs are virtual and you may think: who wants a virtual card, bat, highlight or ticket?  But let us explain why you might.  Remember, you were once reluctant to purchase a movie online when you could buy a physical jewel box version instead.  Collectibles are morphing from physical to digital because of the scarcity enabled by NFTs on the blockchain.  Your possession of the NFT with its digital certificate of authenticity means movers can’t lose it, you can’t spill water on it, etc.  The new owner of the New York Mets’ Steve Cohen recently purchased Collectors Universe.  How long until the Mets roll out a game ticket that’s an NFT and rewards their long-suffering fans?  Scan in the QR code at the gate and, after you attend 25 games, you get a tour of the clubhouse.  Fifty and perhaps you can meet the Owner himself!

And then there is the real game-changer: the subject of the collectible and its owner – say, the Honus Wagner estate or Zion Williamson and you – can now capture future value together.    

In the past, professional athletes would get paid for their rights to be represented in a trading card, typically through their league’s joint-player license with a third party like Topps or Upper Deck.  That’s it.  When their card value escalated, the players got bupkis.  But now, the players don’t just participate in the future value of their virtual good, they have incentive to do so.  Forever. 

As in games, this is where super-engaged communities (the subject of our last column) come in.  There is a connection between the original Bitcoin subreddits of the previous decade, wallstreetbets and the 2021 stock market “short squeeze” and where NFTs are headed.  Passionate communities will drive adoption and value of NFTs over time as individual investors stand to gain by connection to the creator.  It is one thing to subscribe to a notable’s YouTube account, another to be financially tied.

This is a crucial point as we look at the future of sports and the triple whammy of (1) the current decline of key revenue sources like pay TV through cord cutting, (2) the lessening interest of young audiences towards watching live games and sports in general and (3) escalating player salaries.  NBA Commissioner Adam Silver has made the point that 99% of a team’s fans will never attend a game.  Now through digital collectibles and unique products like Fan Tokens (pioneered by Socios, a European blockchain startup, now serving some of the top European football clubs like FC Barcelona, Juventus and Paris Saint Germain), sports can offer an interactive experience with previously impossible access to young fans globally.  Today, fans of certain teams can choose the music that their players enter to and the shoelaces they wear.  In time, that input will expand.  And, sports rights become more valuable to digital players!

Imagine if the bat that John forgot about included a limited-edition signature from the Yankee Hall of Famer?  If it constantly updated with new video highlights and metadata?  [Nike is already doing this with NBA replica uniforms]. If John could show it to friends on his phone and potentially sell shares of it through collectible marketplaces like Rally Road?   If, at the time, it could have facilitated some actual connection to Reggie Jackson?

Typically, collective bargaining agreements are among the most grueling processes and often feel like a zero-sum game for leagues and their players.  In the new world, however, the right collective bargaining agreement is the key to unlocking tremendous value for both.  Ultimately, those 100 “official” Zion dunk highlights on NBA Top Shot are most valuable with both the imprimatur of the league and its IP (the highlights, the marks, the brand) and Zion’s participation himself.  How long before a blockbuster deal like Dak Prescott’s 4-year, $160M contract with the Dallas Cowboys includes a club buyout of the player’s NFT rights?

Of course, it will be a long and pothole-filled road getting from here to NFT nirvana.  The user experience in acquiring many NFTs remains hopelessly difficult for normal people.  It’s not a coincidence that Dapper Labs, creator of NBA Top Shot, is actually a games company.  If you use Top Shot, there is no mention of NFTs, blockchain or crypto wallets and you can use your credit card.  Dapper is abstracting the experience just as Steve Jobs and Apple did with the complications of MP3s and digital music players when they launched the world-beating iPods 20 years ago.  Additionally, some of the blockchains being utilized today will not succeed.  For that and other reasons, the legal agreements here need work.  Today’s speculative boom is certainly tomorrow’s bust.  The energy, ecological, social-political, money-laundering and IP control issues now being raised are complicated to say the least.

Nonetheless, in time, we believe these problems will all be solved or dealt with.  NFTs are a breakthrough for sports – not just economically but because of the joy they will bring. 

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Originally, we would fill our NCAA brackets by pen and paper.  Then they moved online – and the faraway schools we selected, such as Gonzaga, were pre-NFT’s (digital assets that were ours).  We may be a ways off from sports’ virtual goods having powers – like a Gonzaga-killer that fans of the other 67 NCAA Tournament schools would be buying now – as that product would require a vertically-integrated engine similar to what we see in games.  But that’s coming too. 

Meanwhile ... look out! And, since you asked, yes, this column is also available as an NFT here: JohnKosner.Kred

John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy, and an investor and advisor in sports tech startups. He was the senior digital executive at ESPN for 20 years. J Moses has been in and around the Sports, Games, and Tech businesses for over 40 years. He has been a Director at T2 since 2007, and is currently an Executive Producer on a scripted Esports show for the CW (www.optinstudios.com). Both John and J are disciples of the legendary Roone Arledge of ABC Sports.

A Trillion Hours! Why Community Is The Game Behind The Games

Original Article: Medium, by John Kosner and J Moses, February 7th, 2021

Tonight, again, will be the Tale of Two Rooms.  

In our living rooms, we will watch the Super Bowl, while jury rigging together a Twitter/Zoom solution (laptop in front of the couch) so each of us can interact with our friends during the game.  Given latency issues for sports broadcasts offered by multiple distributors, we will not all be watching the same feed at the same time.  Some of us will see, say, Patrick Mahomes’ TD pass as much as 30-seconds in advance of others.  We will not be able to buy a champion’s hat as part of our hacked-together digital viewing party. 

Meanwhile, in their bedrooms, our 13-year-old sons will be playing video games on their big screens or laptops as part of a fully-integrated platform – maneuvering, plotting, yelling and screaming at each other in real-time.  A true modern community experience made possible by the game’s publisher.  To understand why gaming is ascendant in our culture, especially among the young, look no further.  

In our first piece published on Jan. 1, 2021, we wrote that the world’s fastest-growing game is … TikTok, and how gaming mechanics is building the most popular media property for young audiences.  This is part of our broader POV that there is much that Sports, Media, Investors … all of us in business … can learn from games.  

In part II of our series, we explore a key feature of the popularity of games: how they naturally promote and benefit from super-engaged communities.  

Super Bowl Sunday is perhaps the biggest community activity day in our country. John Ourand of Sports Business Journal estimates that tonight, CBS will get 95.1M TV-only viewers (before approximately 5MM out-of-home and streaming numbers are added).  

And yet, the shared “Watch Party” technology available to us right now is inferior.  The pay TV industry has not advanced “TV Everywhere.” As we see with Games, now is the perfect opportunity.  

The Games business is differentiated:

1. It engages its community in real time;

2. It enables its community to share in bits and bytes;

3. It mines its community to create stupendous value in virtual goods. 

Achieving these three should be possible for Sports and Entertainment too.  But both industries must figure out how to do them effectively. 

Games publishers are fully vertically-integrated from an ownership standpoint.  They own the code, the data and, in most cases, the customer singularly.  The result: an end-to-end experience that lets gamers pick and choose what they want, engage with each other as they want – all in real time all over the world. For gamers, it is easy to share clips, purchase virtual goods and interact with celebrity streamers.  

The resulting participant numbers in Games are mind-boggling as are the revenues. On an average day, concurrent usage for gamers at peak times is approaching 100MM globally. Per Newzoo, in 2020, Gamers (between community and streaming): 

• generated practically a trillion hours of activity!  One trillion hours.

• spent an estimated $79B on the purchase of virtual goods and other merchandise — a category that is growing 8% a year. 

That’s a stark contrast with Sports.  The sports broadcast (even the Super Bowl) remains (like the linear world in which we grew up) a “push” experience where we watch the game and then talk about it afterwards.   COVID has eliminated traditional “water cooler moments,” at least for the time being (few of us will be headed into an office tomorrow morning to chat up our colleagues).  Yes, through second-screen experiences like Twitter, Zoom, iMessage, Verizon Mobile, we can all talk about the games globally and watch and share highlights, memes, etc.

But it’s all actually and structurally limited, especially compared to games.  For Sports, it used to be that showing the game was community.  Now it is enabling fans not just to watch in real time but to do whatever they would like, in whatever-size group.  But leagues and rightsholders are not inclined to give their customers to third part social networks and messaging platforms.  You can find NFL clips of J’s favorite Steelers WR JuJu Smith-Shuster on YouTube ... but you are not permitted to share them. 

The limiter is the historical approach to granting rights. We appreciate the issues — both for rightsholders and licensees — many of whom have, or are negotiating currently, long-term agreements in a period of accelerating change especially with younger audiences.  But think about: $79B in virtual goods sales annually for Games. Sports gets about $0.  The total cost of U.S. sports rights this year is approximately 25B.  We think loosening the reins on sharing activity at the expense of traditional “exclusivities” is actually a win/win.  Using the Super Bowl as an example, the NFL could jumpstart a significant new revenue stream with virtual goods and live in-game activities for purchase; CBS would benefit from a much more engaged audience, probably larger at the younger end. 

Lessons to take away:

• Like game publishers, Rightsholders need to vastly improve their co-viewing and sharing experience.  That is the way to own and mine your customer.  To start, imagine tonight’s CBS viewing experience with a “+” button where you could easily add friends and then “share your screen” for the synched game telecast plus access to merch, prop betting and fantasy and other streamers.  For the Super Bowl, the NFL should offer this and more as its own “Super Viewing” experience — every bit as compelling as what gamers can do right now on Fortnite, Minecraft or World of War Craft (now a $3B business on its own – for Activision Blizzard!). Efforts are underway at Yahoo and startups like Teleparty and LiveLike. 

• The same opportunity exists for Entertainment. For Disney+, for example, a truly dynamic Watch Party experience for the next installment of “The Mandalorian” opens many new options to surprise and delight an already passionate audience. Once you figure out your community, you can mine it. 

• And there is an investment thesis here too (elucidated in “The Content Trap” by Bharat Anand) – pay attention to activities and businesses that breed connections. For example, as the sports industry prioritizes betting, don’t forget about fantasy sports. 

For sports fans, we believe true co-viewing is when not if.  Cable TV pioneer Ted Turner recognized the power of distribution and (community) with the advent of satellites he introduced WTBS, our first nationally-distributed “superstation” in 1976.  That caused lots of problems for rightsholders but we overcame them, before TBS became just another national cable network.   In 1982, legendary advertising Hall of Famer George Lois famously coined the phrase “I want my MTV” to get carriage on the burgeoning cable distributors shortly after ... and we got our MTV.   Forty years later, fans want community watching.  We all win by giving them what they want!

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John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy, and an investor and advisor in sports tech startups. He was the senior digital executive at ESPN for 20 years. J Moses has been in and around the Sports, Games, and Tech businesses for over 40 years. He has been a Director at T2 since 2007, and is currently an Executive Producer on a scripted Esports show for the CW (www.optinstudios.com). Both John and J are disciples of the legendary Roone Arledge of ABC Sports.

Netflix of Sports hasn’t arrived but…

Original Article: Sports Business Journal, by Ed Desser and John Kosner, January 18th, 2021

In the five years since Ed wrote “Handicapping the Netflix of sports” ( SBJ, 3/28/16 ), streaming has boomed: Disney+, HBO Max and Apple TV+ have joined Netflix and Amazon and “over-the-top” is now materially affecting traditional cable. As predicted for sports, BAM and Disney…

The Fourth Quarter of Sports Media, Part II with Ed Desser

Original Article: Sportico, by Ed Desser and John Kosner, January 15th, 2021

Last week, we wrote about electronic sports media heading into its “fourth quarter”—a new streaming epoch driven by developments in tech and entertainment. Today, we examine how the business will further evolve this decade.

We expect the incumbent sports networks to lock in historical advantages (existing rights, relationships, distribution, revenue and brand names) with expensive new NFL agreements, in time for a 17-game regular season.

However, sports will also start to make sense for entertainment streamers, because it offers compelling, day-to-day, original content that provides continuity to help businesses built around hit-driven binge viewing and shows to fit everyone’s filter bubble of taste. (Recall USA Network launched with entertainment—plus MLB, NBA and NHL). In fact, other than gaming and the occasional blockbuster movie, sports may be the last category with broad enough appeal to attract the remaining streaming holdouts. Sports is appointment viewing, an advertising magnet and a means of counter-programming against services with stronger libraries like Netflix. Managing churn is also likely to drive seasonal sports acquisitions (e.g., The Masters), particularly for non-football months.

To integrate sports successfully, entertainment streamers will have to upgrade their home-screen experiences originally designed for video-on-demand (VOD). They’ll also need to add live curated scheduling (as they do for shows/movies), and personalized real-time scores, stats and highlights, to serve sports fans.

The path to follow is fairly well worn. TNT grew quickly with just a half-season of NFL Sunday nights, NBA rights and the MGM library. Then Fox Broadcasting hit its stride with Married with Children, The Simpsons and Sunday afternoon NFL. The same process was reinvented over the past 20 years with HBO offering movies, boxing, The Sopranos and Game of Thrones to justify $15/month. Netflix did it, originally with movies and TV shows (delivered via mail!), and now on-demand streaming hits such as House of Cards and The Crown, a vast global library, and a content budget equivalent of everyone else’s combined. The profitable formula: Offer high-demand, exclusive, promotable content (such as sports) to attract new subscribers, multiply by a price increase, plus ad sales.

Major SVOD platforms are approaching critical mass distribution thresholds, thanks to U.S. broadband penetration that’s greater than conventional linear cable networks, enabling them to provide similar or superior exposure for sports. While Netflix and Apple have abstained thus far from live sports, focusing on long-tail evergreen content, will they reconsider? If these digital goliaths choose to invest, they will be able to pick off packages from traditional sports platforms while barely denting their earnings per share. They can justify outspending linear TV because of their scale, applications for data, and superior monetization capabilities. More commerce via Amazon, more engagement from Netflix, more services revenue for Apple. However, they don’t have to do any of this; they already possess billions of active customers.

And, as Lightshed’s Walt Piecyk points out, “The one thing you’re never going to disconnect is your cellphone.” That makes AT&T (177 MM subs), Verizon (120 MM), and T-Mobile (102 MM), potentially the “new bundle(s).” Do the carriers now move to acquire live rights themselves to motivate 5G upgrades and book sports subscriptions as their own “services” revenue?

Do players like Roku and Google’s Chromecast get into sports, with their combination of TV browsers and app stores, making them owners of exceptionally valuable home screens? Will retailers like Walmart and Target concede the combined retail/media field to Amazon alone?

The upshot: The bundle is melting, but there are more logical buyers of the resulting sports rights icebergs, with bigger balance sheets and loftier motivations.

This leads us to predict that the traditional bundle will morph into mini-bundles. Some sports including the NFL will remain mostly on conventional networks via multichannel video program distributors (MVPDs), while others will be streamed. Think ESPN+/Disney+/Hulu, which together account for more than 100 million U.S. subs, or perhaps Peacock, HBO Max and Paramount+ selling as a package.

Amazon already is its own 112-million-sub bundle, combining shipping, video, music and book content, and the Fire TV Stick, and it could use Twitch (the most popular free live-streaming service) as a modern alternative to national “broadcast” distribution with a much younger audience.

For rights holders to embrace streaming as a primary distribution platform, the magic “critical mass” number might be 50 million active subscribers. Here, growing direct-to-consumer services and mini-bundled subscriber bases begin to approach the shrinking pay TV universe size. And with the growing threat of piracy, rights holders will value partners like tech giants who can provide high-quality streaming.

Rather than buy a single pay TV bundle, future fans will likely subscribe to three or four streaming services that include sports, switching some of them out during off-seasons (especially football), making 12-month programming calendars critical. This is little different than those of us who still subscribe to a traditional MVPD, but also buy at least one streamer.

International streaming will also help justify the migration. Amazon, YouTube, Netflix and Apple all play well overseas, and Disney’s Star has significant penetration—and cricket rights—in Asia, potentially providing U.S.-based sports (think NFL, college, NASCAR) with wider worldwide exposure on prestige platforms than current small-dollar foreign syndication deals. It’s a backstop with a global backdrop.

Google’s YouTube is the biggest free video platform, and it’s still growing, while Facebook/Instagram has a huge user base. They can all easily play in sports that prioritize exposure, generating the bulk of their revenue from gate and sponsorship. They are also more focused on reaching younger viewers, which could birth new subscription models.

Thus, we do not anticipate one dominant sports player in the 2020s, but several: each platform with certain sports, with its own unique selling proposition, and major customization. Sports fans will no longer be forced to take all or none, as with cable, but rather will be able to select those of greatest interest.

This will present new challenges for sports owners. Leagues will struggle to replace the automatic inertia-viewing that linear networks historically provided. Meanwhile, services will compete to have their unique package of rights, much as networks have done in earlier quarters of the sports media game.

The new fourth-quarter world will call into question how rights are apportioned. Will league inner- (regional sports network) and outer- (national network) market rights continue to be sold separately? Will leagues choose to do several separate packages or combine rights to increase leverage across multiple services? Will digital companies choose to invest big bucks only if all rights (linear and digital worldwide) are available? Long underutilized, league libraries will become more attractive as the source for new sports documentaries and “inside access” shows to stream. Also look for ubiquitous use of world feeds for TV production.

For fans, who will no longer have automatic access to everything through a single subscription, progress will come at a cost. Gone are the days of TV Guide and newspaper listings; content discovery will be a curation sport unto itself. Leagues will align with the platforms able to pay them the most money while providing sufficient exposure (to grow their young fan base), an ominous development for legacy cable sports and broadcast networks that no longer deliver the massive promotion, huge audience and desirable demographics they once did.

It is unlikely to be cheaper in total for fans and may make some pine for the “good old days.” But ultimately the fourth quarter of sports media will bring true competition, with a greater diversity of offerings such as megacasts, group viewing, sub-second latency (true “live live”) betting, personalized highlights products—and better service for tomorrow’s sports fans.

We can’t wait!

Desser, a senior media executive at the NBA for 23 years, founded Desser Media, a sports media consultancy that provides valuation, negotiations and expert witness services. Kosner was the senior digital executive at ESPN for 20 years. In addition to managing Kosner Media, a digital and media consultancy, he is an investor and advisor in sports tech startups. Together, Desser and Kosner ran NBA Broadcasting in the 1980s and ’90s.

The Fourth Quarter of Sports Media, Part I

Original Article: John Wall Street, by Ed Desser and John Kosner, January 8th, 2021

The advent of electronic sports media’s “first quarter” started a century ago, first as radio game recreations from press reports in 1920, and then as live on-site play-by-play (boxing and Pirates-Phillies baseball) in 1921 on KDKA in Pittsburgh. In the second quarter, broadcast TV ascended, with live sports becoming national weekend daytime and local primetime TV staples in the 1960s and ’70s. The third quarter came via cable TV, adding huge programming volume and bringing to fruition in 1979 the previously unthinkable notion of a 24/7 sports network: ESPN.

Today, as platforms like Netflix, Disney+ and Amazon lead entertainment, and now have higher penetration of broadband than pay TV, we are entering the sports media’s “fourth quarter” and its impending inclusion into the new mainstream—emphasis on stream.

With the annual Consumer Electronics Show (CES) taking place virtually next week for the first time, we thought this would be the perfect opportunity to look out into the digital future and project what the next phase will look like. First, let’s recap the scores….

• ESPN+ is the highest-profile sports streamer today. Amazon has invested in top brands like NFL and EPL rights. New streaming entrants FloSports and DAZN bought up niche sports and boxing, respectively, while fuboTV offers a streaming package of multiple linear sports and entertainment networks. However, none has yet become a true aggregator (think cable TV for the past 40 years), and we do not believe any single entity or platform will—at least for the next decade. Instead, we see a confluence of factors leading to a multiverse of sports viewing options for the remainder of the 2020s.

• In entertainment, AT&T launched HBO Max, Comcast unfurled Peacock, and Disney has built the first true Netflix challenger with Disney+ (after consolidating Hulu and Star from Fox). CBS was early with All Access, but streaming remains a relatively small side business for CBS and Viacom, and essentially nonexistent at Fox. Meanwhile, Netflix expanded its domination during COVID and now claims 195 million non-sports global subscribers. Netflix has not only redefined the streaming viewer experience; critically, it has done so at price points that for now undercut the rest of the entertainment industry. Otherwise, it’s hard to imagine that Disney+ would price itself at $7.99 (as of this March), especially with first-run Disney movie content. Or that HBO Max would be bringing blockbuster Warner Bros. movies direct to subscribers in 2021 at no extra charge. Or that each of these services would be subsidized and magnified through wireless carrier bundles (T-Mobile, Verizon and AT&T, respectively). The super low (to zero) prices for high-end entertainment fare create a significant challenge for high-priced sports content purchases by streamers going forward.

In sports, ESPN/ABC, Fox/FS1, Warner/Turner, CBS/CBSSN, and NBC and its cable channels still remain the kings of live major U.S. properties, holding the pay TV bundle together.

However, that bundle is fraying:

• Cord-cutting continues unabated. Another 5 million subs exited in 2020;

• More than one-third (37%) of the 121 million U.S. TV homes have cumulatively eschewed or abandoned traditional pay TV;

• Cord-shaving, or cutting back on service, has further eroded the penetration of expensive top sports networks, shrinking available audiences;

• Virtual MVPDs (like YouTube TV, fuboTV and Hulu Live) no longer pick up the slack;

• COVID-19 stopped sports cold last spring and posed formidable challenges upon their return—no crowds, scrambled schedules and huge additional expenses (though with some production-efficiency savings);

• According to Roku’s 2020 study, 28% of cord-cutter households ranked the loss of live televised sports as their top reason for cutting the cord;

• Entertainment streaming services filled the void with extended free trials and special events such as Hamilton on Disney+ on July 4;

• Perhaps most important, a generation of younger viewers who have grown up with smartphones (an entertainment ecosystem in their pocket) has accelerated the bundle’s decline by being “nevers”—new households that have never had linear pay TV.

Sports media’s third quarter is ending with a level of uncertainty we’ve never seen before. Besides the NFL, there are no sure things. Perhaps that is why we expect essentially one last “traditional” rights acquisition cycle, where the “surviving” sports TV networks reach for still-richer NFL agreements to maintain relevance and boost their own asset value, with consolidation likely to follow.

But in making bigger and bigger rights commitments, the leading networks will find themselves in a paradoxical trap. The digital platforms that command the most attention from young sports fans—YouTube, Instagram, Twitter, Snap and increasingly TikTok—pay practically nothing in rights fees. None carry live games, and all flaunt fairly comprehensive highlights on their platforms (both through league deals and user-generated content). Going forward, those paying the most (ESPN, Fox, Warners, NBC and CBS) will have the least financial flexibility to invest in new approaches necessary to attract young audiences, who are less likely to watch live three-hour game “marathons.”

For over three decades, the traditional pay-TV bundle powered non-gate revenue growth for pro and college teams on a scale never before experienced. But on Dec. 10, 2020, at a four-hour Investor Day presentation, the biggest beneficiary of traditional bundle economics, the Walt Disney Co., laid out an unequivocal path forward: streaming. Disney is effectively betting a world-renowned $325 billion company on it. We may look back at that date as the demarcation between the old and the new sports media worlds.

In Part II of this series, we will look at what we expect the fourth quarter of sports media to look like. How will the MVPD bundle morph? What moves are the linear stalwarts of the industry likely to take in their next acquisitions? Will a new bundle emerge, or will the business further disaggregate? How will sports fans navigate the new world’s options and alternatives? What benefits are in store for tomorrow’s fan in return? Look for those answers here next Friday.

Desser, a senior media executive at the NBA for 23 years, founded Desser Media, a sports media consultancy that provides valuation, negotiations and expert witness services. Kosner was the senior digital executive at ESPN for 20 years. In addition to managing Kosner Media, a digital and media consultancy, he is an investor and advisor in sports tech startups. Together, Desser and Kosner ran NBA Broadcasting in the 1980s and ’90s.

The World’s Fastest Growing Game

Original Article: Medium, by John Kosner and J Moses, January 1st, 2021

Both of us are big NFL fans and fathers of 13-year-old boys.  But on Sunday, when we watch our favorite teams – the Steelers and the Giants – play on CBS and Fox respectively, our boys will be in their bedrooms with mobile devices on their laps, connected to friends and playing Minecraft, Fortnite or TikTok while they track the NFL scores in real time on a gamecast app. 

Yes, playing TikTok.  It is the fastest growing game in the world, and our boys are part of an entire generation expecting game mechanics to power their preferred entertainment.

Considered by many the mobile YouTube, TikTok is the most intriguing and fastest growing media property in the world.  Because, it was designed to be something else.  TikTok is built on game mechanics.  It is a game featuring content (which can be any content, far broader than just funny dance videos).  TikTok rewards people for posting popular videos and watching them; in fact, it tells you how to do it.  And it’s all easy.  On TikTok, your video’s views are points.  TikTok’ers are rewarded with TikTok’s they love. Users create their own individualized experience. It is addictive.

Also, it is not social media as we have traditionally defined it.  Instead, it fits on a continuum as our social interactions become more digital and spread over more platforms especially messaging.  TikTok is not centered on your friends, but rather Chinese parent company ByteDance’s nonpareil algorithm. 

As Ben Thompson points out in his newsletter, Stratechery:

“The chances of your typical Facebook user having a network full of accomplished videographers is slim, and remember, when it comes to showing user-generated content, Facebook is constrained by who your friends are …

ByteDance’s 2016 launch of Douyin – the Chinese version of TikTok – revealed another, even more important benefit to relying purely on the algorithm: by expanding the library of available video from those made by your network to any video made by anyone on the service [emphasis: ours], Douyin/TikTok leverages the sheer scale of user-generated content to generate far more compelling content than professionals could ever generate, and relies on its algorithms to ensure that users are only seeing the cream of the crop.”

Now, it is true that you can follow celebrities and brands on Instagram, and the quality of their posts is often of higher quality.  Nonetheless, TikTok is designed to give you the most compelling video at any given time.  Turner Novak of early stage VC firm Gelt notes, “on TikTik, the best videos could instantly reach the entire user base.”

Last summer in Bloomberg Opinion, Tim Culpan described TikTok’s touted algorithm as its “secret sauce,” the mobile version of the “Colonel’s 11 secret herbs and spices.”  But it’s more than that.  Developed as well with ByteDance’s massively popular Chinese news site Toutiao, the TikTok algorithm generates personalization at unmatched scale. Per Novak: TikTok’s “hyper-personalized algorithm recommends content based on thousands of objects and tags analyzed in each individual video, along with an individual’s view history, re-watches, likes, comments, shares, and even post-view activity.”

That’s the very basis of connected game play too – whether it be Candy Crush or Fortnite – an algorithm.   Like the leading games, TikTok is not static.  Every single user has a unique experience every time and every keystroke builds the TikTok algorithm.  Minecraft, Fortnite and Roblox (and World of Warcraft Online for that matter) are each closed platforms – they give players the tools to tailor how they want to play.  By following the videographers they like most, TikTok gives viewers that same degree of customization.   Dynamic, constantly adjusting to new preferences and signals (such as our sons in their bedrooms connected with their friends), TikTok has produced mesmerizing effects in the U.S. and around the world. 

The game has changed the game.

Compare TikTok to Quibi:

• Both started in the U.S. in 2018;

• TikTok has game mechanics.  A bottoms-up approach built around a constantly expanding and dynamically curated user generated content selection;

• Quibi was the traditional, time-honored Hollywood media model. Top down.  Expensive, professionally produced, high quality content with stars on both sides of the camera.  No game mechanics. 

• Today: TikTok’s market cap is $60B (Parent ByteDance’s is 180B). Quibi is defunct.

Consider JuJu Smith-Schuster, the Steelers’ outstanding wide receiver and, perhaps, the most accomplished gamer and social media performer in sports.  Last month, Smith-Schuster found himself under fire because of his viral videos showing him dancing on the logos of Pittsburgh’s opponents.  As the Steelers lost three straight after an 11-0 start, he was accused, among other things, of having more posted TikToks than yards per game this season.  JuJu says he’s done with the dances (at least for now) but he and other star athletes recognize the power of TikTok.  The game has changed the games.

No doubt aided by its data collection and algorithm, TikTok management has also proven to be a quick study of the game business by identifying its audience, giving them what they want, and monetizing it:

• TikTok built out its audience – by knowing where to buy it.  Earlier this year, TikTok was Snap’s biggest advertiser.  It’s the top brand to run app install ads on Snapchat after having been the top app installer on Facebook in early 2019.  Per the Financial Times, TikTok has reached 1B users much faster than any other social media app;

• In the same way that another fast-growing digital media company, Twitch (Amazon) has broadened beyond its gamer roots into several other content categories plus “Just Chatting” and “IRL” (“in real life”) channels, TikTok has evolved from silly dance videos.  Per Tiffany Zhong of Zebra IQ, a Gen Z research company, TikTok is the biggest producer of short-form online video education (on a multitude of topics).  And critically for a young, impatient audience, she says, “its videos are no longer than they have to be.”  If a TikTok can tell a story in 21 seconds, it does so.  Novak: “Short-form video reduces the friction of both creation and consumption.  Most TikTok videos are produced by the creator alone, and many post multiple videos per day”;

• While many linear TV networks rue not taking a financial position in the licensing businesses of the young, unknown talent they helped popularize (many of whom are now more popular than their sponsor networks), TikTok has been quick to launch its Tiktok Creator Marketplace (TCM).  How big will this become?  Two weeks ago, Walmart hosted the first-ever shoppable livestream on TikTok.  That Walmart was aggressively pursuing TikTok as an owner last summer tells you everything about the audience.  

If you are a media company without the benefit of Bytedance’s visionary engineers and world-changing algorithm, what to do?

Make TikTok’s approach a central strategy, not an “extension” of what you do.

• Collect data and use it: When we watch the NFL games on Sunday, neither CBS nor Fox will get any data; their revenue is limited to retransmission consent and TV sponsorship advertising.  That’s a problem.  Creating systems, hiring data-focused executives (many of whom are young) moves companies to a place where they are using data to make decisions.  Once you start you never turn back   

• Give the audience what they want: Sports leagues and other content companies should be more aggressive in allowing these connected audiences on TikTok to follow games in progress, including by putting real-time highlights onto the platform.  Otherwise, its audience might not know the games are even happening!  Content discovery is a growing challenge; you need to be where your audience is;

• Monetize the audience: On Christmas Day, millions of people around the world watched Pixar’s “Soul” on Disney+.  Disney has used informed research and data about its addressable audience to establish itself as a retail streaming channel.  Now, its actual usage is powering how the service moves forward.  Disney+ has also levitated the company’s stock.

Perhaps most important, media companies must heed what makes gaming such a compelling format: we each have our own customized experience, every time is different, and we and our friends are active participants.

John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy, and an investor and advisor in sports tech startups.  He was the senior digital executive at ESPN for 20 years.  J Moses has been in and around the Sports, Games, and Tech businesses for over 40 years.  He has been a Director at T2 since 2007, and is currently an Executive Producer on a scripted Esports show for the CW (www.optinstudios.com).  Both John and J are disciples of the legendary Roone Arledge of ABC Sports.  

Sports Will Rise Again in 2021 - If There’s Change

Original Article: Sportico, by Ed Desser & John Kosner, December 1st, 2020

The Netflix documentary, The Social Dilemma, demonstrates how social media has profited exponentially by aligning the population at different extremes—utilizing content we ourselves create online to divide us further. Pre-COVID-19, these divisive efforts had considerable momentum; the virus has only accelerated them.

If ever there were a moment that our country (in fact, the world) needed the unifying power of sports, it’s right now. Every month we spend in isolation turns us inward and reinforces the thought that engaging with the people around us is dangerous. Sports can help us not only overcome the anxiety of gathering in a group but also return us to the interactions that help us heal and grow together as a society. But sports has never faced the obstacles it does now. The industry must get to work.

When we grew up, following our local team was practically a shared civic duty. Kids and adults alike engaged in highly topical “water cooler” discussions. It was an era of media (bandwidth) scarcity; we watched and listened to the games, read about them in the newspaper (remember those?), saw highlights on the 11 p.m. local news, discussed them at meals and as a shared family experience on our living room couches. Very little of that “shared world” experience still exists today. Instead, everyone carries an entertainment ecosystem in their pocket.

And yet, in 2020, nothing unifies Pittsburgh like the undefeated Steelers. Even when, because of COVID, we can’t gather together as much as we long to.

That said, sports needs to update its user experience dramatically. As leaders, we must:

• Reinvigorate sports’ place in the community. Tod Leiweke, one of the sports industry’s most accomplished executives, has made an impact in multiple leagues across North America, and the former Seahawks CEO is now back in Seattle with the NHL expansion Kraken. Back in 2010, when he was with the then-struggling Tampa Bay Lightning, Leiweke, his colleagues and team owner Jeff Vinik created a program that honored a local hero every game during the first timeout in the first period, including a $50,000 donation supporting the hero’s work. The Vinik family stepped up, providing $10 million in funding for the program, double what the staff originally requested. The program bound Tampa and the Lightning and is a powerful example of why our former boss, ex-NBA Commissioner David Stern, championed sports and community service—“doing well by doing good.” We need much more of this going forward.

• Prioritize getting young fans back into our stadiums and arenas. Rich Luker, founder of the original ESPN Sports Poll (now the Luker on Trends Poll), makes the point that if children attend a major or minor league baseball game prior to age 5, they will go to 58% more games per year, for the rest of their lives,than fans who do not attend their first game until age 14. He says the same logic applies to the other major leagues. Waiting is not an option. The Sports Poll 2020 is replete with examples of how our youngest fans, ages 12 to 17, spend their time not involved with sports. In its IPO S-1, the startup Roblox, essentially a YouTube for Gaming, lists not only more daily active users (31 million) than any sports site but also a uniquely engaged audience (averaging a stunning 2.67 hours daily on their platform).

• Revolutionize viewing of live game telecasts. Live events have traditionally commanded unmatched attention and escalating rights fees. They are the life blood of the industry. But, per the Sports Poll, live game viewing is no longer a priority for fans 12 to 34—simply unthinkable a generation ago. In fact, for the first time, sports is struggling to maintain relevance among young fans. Media companies and rightsholders must attack that directly. Using modern platforms like YouTubeTV, fuboTV and Twitch as examples, sports needs to embrace choice (announcers, themed feeds, packaging outside of the pay TV bundles, communal viewing, shorter formats) and make itself available on multiple devices. Sports should lead in innovation for large screen TV viewing (the recent quad screen viewing from the Masters on its own and the ESPN app is a recent example). Betting is a tactic here to lure adult fans,but not the all-in winning strategy to incubate grassroots fandom.

• Bring sports to where its new fans are. Essentially, sports must drastically improve availability and ease of discovery. Before, just being on the right TV network was sufficient: Sports event audiences were funneled to the next live event via inertia. Among other things, access today to live games needs to be a click away or, in the case of Snap and others, a swipe up. This fall, Snap is running a trade campaign for advertisers: “Millions of NBA fans are on Snapchat every day.” These NBA fans must be able to access NBA games there, too. Discovery should extend broadly: Fans should be able to find out about live games and be able to watch and participate with them via links from Twitch, the various social media networks, Apple and Amazon, but also game “metaverses” like Fortnite and Roblox. And thinking more broadly, Zoom and Discord, too. Wherever fans are. Today, top players have more social media followers than their leagues do; these athletes too must step up and promote links to live games from their social handles. “Rent” (user acquisition) costs and performance marketing strategies will rise to the fore. A new startup called Buzzer is an early example of a service tackling the issue. Naturally this will require rethinking and readjusting business models, so expect change to be slower than optimal from the new audience’s standpoint.

According to the Sports Poll, as recently as 2007, fans got their sports information from three leading sources—online, TV and newspapers, each with about a 25% share. Today, online has accelerated to 69%; TV has shrunk to 17%, and newspapers have practically disappeared (5%). In 2011, men 18 to 34 occasionally went to Google for sports information (5%); today, it’s their most used sports news utility (23%). Fans move to the best experience available, and quickly. Sports needs similar urgency across the board.

The new presidential administration offers true opportunity. President-elect Biden can push sports to unify a fractured country. Biden has promised an organized national response to COVID-19 and will oversee the rollout of the first vaccines. This will speed the reopening of outdoor and, potentially, indoor venues. The leading sports leagues are national operations and need streamlined practical solutions to operate universally across state lines and welcome back fans. Some U.S. venues have hosted numerous events, under structured conditions, with no indication of virus spread. A nationally coordinated effort to apply lessons learned from successful events would inform reopening discussions at local health departments around the country. Perhaps some of the lessons could improve the safety of all indoor public spaces.

In 1963, President Kennedy established the President’s Council on Physical Fitness. Wouldn’t it be powerful if Biden created a President’s Council on Community Gathering, centered around sports, with the sports industry taking the lead?

Over the past 50 years, changes in the environment have almost completely benefited sports and fueled their growth. No longer. Whether it’s the mere act of gathering together, how we watch the games from home, or the manner in which we get news about our favorite teams and athletes, it’s now changed utterly. The internet-led disruption of myriad other industries has finally hit sports. We must respond now.

Ed Desser is president of Desser Media, Inc. (www.desser.tv), a sports media consultancy. He was the senior media executive at the NBA for 23 years. John Kosner is president of Kosner Media (www.kosnermedia.com), a digital and media consultancy and an investor and advisor in sports tech startups. He was the senior digital executive at ESPN for 20 years. Together they ran NBA Broadcasting in the ’80s and ’90s.

The COVID-19 Halftime Report

Original Article: Sports Business Journal, by John Kosner and Ed Desser, October 26th, 2020

Sports will contiue to be larger than life as we navigate our way through 2020 and beyond. The Sports Glut hit this summer, but as we await COVID-19’s “Second (Sports) Wave,” we have reached one marjor conclusion: We predict more sports industry change will occur in this decade than in the previous five combined. Keep reading.

Sports’ Cruel Summer

Original Article: By John Kosner and Ed Desser for Sports Business Journal, August 5th, 2020

Back in March, the NBA led a series of “postponements” and the sports industry hunkered down with the hope that play could resume over the summer.  Sports has experienced a lost (NHL) season and shortened (NBA, NFL and MLB) ones before, but had never been entirely “on hiatus.”  Now, we’re mid-summer, and the re-starts have begun (motorsports, golf, MLB and, last week, the NBA and NHL, so far successfully in their respective bubbles).  Amidst the progress, however, the nationwide spike in COVID-19 infections is feeding a new crisis.  On July 23 in “Bloomberg” Opinion, Joe Nocera wrote under the headline, “Covid-19 Has the Power to Break the Sports World.” Back on May 1, ESPN published an economics study that found: “The sudden disappearance of sports will erase at least $12B in revenue and hundreds of thousands of jobs, an economic catastrophe that will more than double if the college football & NFL schedules are wiped out this fall by the coronavirus pandemic.”

The $ 11-figure scenario may be upon us this fall.  Here’s why:

1.     The precariousness of staging sports during COVID-19.  In the Wall Street Journal on July 16, Jack Swarbrick, the Athletic Director at Notre Dame, reported, “We’re mid-July and the trends are the wrong way … it’s the environment around us collapsing.” Notre Dame is arguably the most storied school in college football, the only one with its own broadcast TV agreement, and yet it’s already lost games with Stanford, Wisconsin and USC.  It may even (gasp) play in the ACC!

2.     Sports is in a period of profound uncertainty – and that uncertainty only goes one way.  Stanford University, with perhaps the nation’s leading intercollegiate men’s and women’s sports programs (and huge endowment), just unilaterally eliminated 11 sports. And this was two days before the Pac-12 joined the Big Ten in announcing a conference-only college football schedule.  Pro and college leagues, schools and organizations are subject to frequently changing Federal guidelines, individual state mandates and issues, and international decisions including managing quarantine orders. On July 18, Canada forbade the Blue Jays playing MLB games in Toronto this season, and in a Bills reversal, they will call Buffalo home.  

3.     Challenges abound. Among them: long-distance travel (a result of bigger and more consolidated college conference TV agreements), the vagaries and expenses of necessary testing (per the WSJ, the NFL’s 2020 COVID-19 testing plan could run approximately $75M), PPE and cleaning for both practice facilities, stadiums and arenas.  Keeping everyone safe is harder and harder; especially with all of the professional and collegiate teams in states where COVID-19 is on the rapid rise – such as Florida, Arizona, Texas and now California. Last week, Pac-12 and SEC student athletes challenged their conference leadership on the efficacy of return to play plans. Of all the sports, golf appears the best situated to “play through” as the sport already lends itself to distancing and revised plans still call for no spectators.

4.     The unprecedented nature of COVID-19 on Sports – the first existential crisis for the sports industrial complex. Even during World War II, when sports stars went to war and the U.S. rationed food, Major League Baseball continued to play (thanks to FDR, and women’s teams made famous in the movie “A League of their Own” picked up the slack), the World Series was played and fans attended. Today, sports is a multi-billion dollar enterprise built on long-term contracts and planning cycles. COVID-19 is upending, compressing and extending everything. 

5.     Perishable events and revenue. Yes, the strongest sports leagues like the NFL could conceivably power through COVID-19’s first and second waves (having the benefit of generating the majority of revenue from media – but facing the challenge of a sport that features heavy-breathing men piled on top of each other for significant, repeated periods of time), extending their season into the spring of 2021, if necessary.  But most other sports, including college this fall, are facing cancellations of perishable events – like the 2020 NCAA Basketball Championship. The financial implications are calamitous. Two sports – college football and men’s basketball -- finance almost all the other intercollegiate programs and both are in jeopardy;  the Tournament pays the NCAA’s annual operating expenses!

6.     The Ramifications of COVID-19 on Sports.  Today everything is interconnected.  The sports industry is not just owners, players, TV networks, TV distributors and facility owners, but all of the people who work behind the scenes and all of the businesses interconnected are impacted. What does State College, PA look and feel like without Penn State football? 

7.     A changed and limited sports fan experience. What does the betting industry look like without football season?  According to Sponsor United CEO Bob Lynch, there are approximately 450 advertising brands highly active in sports – the Super Bowl is its own phenomenon.  Anheuser-Busch can sell you beer at home as well as at the pub, but with bars closed or re-closing, videos have surfaced of proprietors and brewers dumping expired kegs down over-taxed sewers because they can’t serve them to customers;

8.     The Psychological impact of COVID-19 on Sports. What happens if the eagerly anticipated fall collision of virtually all major sports doesn’t fully happen?  Will MLB fans steeped on the game’s traditions and unique statistical history embrace the 60-game season and its expanded Playoffs*?  Will MLB’s already teetering non-Bubble plan last that long?  Not only is the sports hiatus unprecedented but also today’s fans have virtually unlimited internet entertainment to fill their time.  There is Netflix and an ever-expanding array of subscription VOD services (Peacock is the most recent addition).  Perhaps, most important, is the rise of free, user-generated powerhouses like TikTok, Snap and Instagram.  COVID-19 is a daunting adversary for sports, but the bigger, longer term threat is the free content algorithms driving social media platforms, especially among young fans.

Still, nothing matches Sports’ unique ability to command attention and galvanize communities.  Society misses sports desperately right now, and ratings are thus high. 

In the Cruel Summer of 2020, Sports faces both the immediate challenge of returning to play and then the even harder work necessary to restore itself to its historically dominant place in our culture amid upheaval in both the media business and society at large.

Ed Desser is President of Desser Media (www.desser.tv), a sports media consultancy.  He was the senior media executive at the NBA for 23 years.  John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy and an investor and advisor in sports tech startups.  He was the senior digital executive at ESPN for 20 years.  Together they ran broadcasting for the NBA in the 80’s and 90’s.

Prepared for Post-COVID Sports?

Original Article: Sports Business Journal, by Ed Desser and John Kosner, June 24th, 2020

“Crisis” derives from the Greek word “krisis,” which means “turning point in a disease.”  While all of us hope for medical breakthroughs signaling the end to the COVID-19 scourge, we have no assurances right now.  What we do have is time and with summer finally here, our recommendation is that all of us make the best use of that once in a career opportunity to put ourselves and our properties on firmer ground. From a rights/property holder perspective, we think you should focus on the following:

Phase One: Re-Think.

Have you put your most pressing problems into priority order? With revenues prospects down, how best to trim expenses?  What do your media and sponsorship agreements state in terms of Force Majeure, and compensation adjustment procedures? How best to maintain these vital relationships?  We are just beginning to understand the ramifications of COVID from a media rights perspective.  Anticipate some form of renegotiation (see SBJ 5/18/20 “Follow the Money”).

But your people are central to keeping things together.  Who are your most critical personnel, what are their key issues in this environment, and how do you keep them close and secure?  What are you doing to complement Zoom communication? Who are your most vital customers, including fans and media partners, and what are you doing (communications, engagement) for them during this time-out?  Are you using idle production capacity to help your media partners fill their huge un/under-programmed expanse of airtime? 

In the midst of your team’s extended “home stand,” we suggest planning and organizational opportunities.  Do some long term planning:  Think about reorganization/streamlining to focus on high-return future opportunities.  Three practical topics: 

1. What is the status of your media agreements?  What do you want these to be going forward – including whether or not you’re looking to expand your direct relationship with your fans? 

2. How are you set up across existing and emerging social media platforms?  Have you identified and connected with your sports’ key influencers?  These will be even more important post-COVID; and

3. Where are you with your betting strategy?  State-by-state betting legalization and mobile betting are likely now to accelerate as states need new revenue sources and fewer people will be going to casinos for the time being.

Phase Two: Re-opening. 

 Maybe you’re already open, maybe the time is coming soon.  In-venue issues are vexing and both league and local governmental requirements are subject to change.  Have you done the exercise to determine your capacity with 6-foot separation (e.g., killing every other row, and 1-2 of every 3 seats in occupied rows)?  How you can maintain distance in concourses?  One-way hallways or lane dividers?  Your requirements for fans to wear face masks or bandanas (a new licensing and/or sponsorship opportunity?!).  New security personnel or procedures?  Arena surface cleaning measures?  Are there new “doors” procedures you will need to implement, such as temperature checks at security screening locations, fan entrance and egress schedules, additional social spacing for fans waiting in entrance or concession lines, changes in concession and usher hygiene operations?

If – or once – you’re back, how can fans otherwise access your property (Linear TV, Streaming Video & Audio, Highlights, Social Media)?  Expect more changes in fan expectation here.  A unique COVID challenge is creating community around your team/sport if people can’t attend live? (we suggest tech to make “studio” sports more entertaining, improving your app, adding “Zoom Watch Parties”).  Can social distance be achieved in a TV Truck?  Another challenging issue is generating attention, audience, advertising, traffic, and sales when all othersports also come back at once … the scenario we expect to see by late summer.

Phase Three: Re-build.  

The “new normal” is hard to imagine at the moment.  Still, there are new processes that everyone is using now that you can implement going forward, such as (1) more work from home for employees and customers, (2) video conferencing for League and team events; and (3) use of newer technologies such as AI-tech for video highlights, live remote production, REMI and “Truck in the Cloud,” enhanced live viewing applications to both improve quality and lower costs, voice applications for “Hands-Free” experiences (“A new reality powered by AI,” SBJ, 4/13/2020).

Mostly though, we are encouraging you to think aggressively and creatively.  Are there businesses you should consider exiting (e.g., retail, restaurants) or transitioning to online-only (box office, elimination of paper tickets)?  Going forward, should your league consider a more unbalanced schedule and/or MLB-style (multi-games with a single opponent) home stands that cut down on travel and better protect player health?  Game presentation adjustments to align with the new environment.  And, of course, new sponsorship categories?  The “Heat Check” seems too obvious to us!  Official cleaning materials, gloves, N-95 masks, and disinfectants.  

We don’t know how much longer the current fan-less sports hiatus will last or how severe the results will be long-term.  Our training is to expect the difficult and prepare accordingly.  We do believe our outcomes will be better if we can take advantage of this summer to plan, reorganize and prepare to emerge energetically.  Sports fans, and all citizens need a return to a sense of normalcy which sports will provide again.  We hope soon.

Ed Desser is President of Desser Media (www.desser.tv), a sports media consultancy.  He was the senior media executive at the NBA for 23 years.  John Kosner is President of Kosner Media (www.kosnermedia.com), a digital and media consultancy and an investor and advisor in sports tech startups.  He was the senior digital executive at ESPN for 20 years.  Together they ran broadcasting for the NBA in the 80’s and 90’s.

Follow the Money: Unpacking Sports Media from the Coronavirus Shutdown

Original Article: Sports Business Journal, by John Kosner and Ed Desser, May 18th 2020

Everyone is talking about how and when sports will return. Few are addressing the pain to come: the great adjustment and renegotiation chain. For now, force majeure language in nearly all agreements forestalls this process. These provisions prevent either party from being in breach of the agreement...

The Coming Sports DTC Squeeze Play

Original Article: Sports Business Journal, by John Kosner and Ed Desser, January 13, 2020

Cable networks have provided material, growing rights fees and mass exposure for major sports properties for decades, collectively establishing sports’ supremacy within today’s programming bundle. However, MVPD subscriber counts continue falling, and despite rising per-subscriber fees to counteract the circulation decline, the available revenue won’t remain as robust as originally anticipated when the current slate of deals were consummated. Sports rights holders therefore will need to reconsider how best to deploy their content assets as the “squeeze play” ensues: The most powerful few rights holders take an even larger share of rights revenue in upcoming deals; while the media environment bifurcates and virtually everyone else finds that neither the money they hoped for, nor the full distribution they’re used to, remains.

Cable gained favor over traditional telecasts as it reached majority penetration decades ago, and the “dual revenue stream” enabled it to outbid broadcasters for live sports rights. But as cable’s penetration flags, and broadband coverage grows, rights holders are confronted with a new choice between revenue and reach. They must seriously consider hybrid approaches to reach both traditional viewers and engage younger “cable-never” fans. And not just cable, but also the opportunity of wide broadband reach, apps/sites favored by audiences under 30 (like Twitch and YouTube) and direct-to-consumer (DTC) offerings. Yes, today’s 65%-75% cable network penetration of TV homes is still acceptable to most sports properties when coupled with superior rights fees, but once that drifts closer to half or less over the coming decade, it will become necessary to re-slice the rights “salami.”

This has already begun to occur, as the NFL offers “Thursday Night Football” on broadcast (Fox), pay TV (NFLN) and streaming via Yahoo, Amazon Prime, and Twitch platforms. Baseball has added a package on YouTube (formerly on Facebook). We believe as national packages like the NHL, NFL and NBA come up in the next five years, two things will happen:

1. Recognizing that sports is the linchpin (tenuously) holding pay TV together, the “must-have” major pro leagues will strike especially aggressive rights fee increases from existing media companies.

2. The pro leagues will morph their offerings, continuing to offer “traditional” linear coverage, while adding co-branded or sport-branded apps, packages or platforms, which go beyond the historical one-way delivery mechanism, and create added engagement, social, and business integration to new audiences.  

But what will be left for remaining rights holders, after the powerful few make their next set of deals?   

The answers might come first locally. Here, we expect high-level team affinity, combined with the changing economics and ownership of RSNs in the Sinclair/Amazon era (Amazon just bought part of YES for a seat at this table), to accelerate adoption of new models. For example, imagine if a team sold its traditional rights to an RSN (or ironically a broadcaster), but then also launched (or partnered with its RSN to create) a new team-devoted premium OTT product which combines game feeds, additional cameras/angles/replays, with a live stats feed, integrated betting, social interaction with other under 30-something fans, a special team event, merchandise, and game tickets only for these new digital “fan club” subscribers across innovative forms of mobile (e.g., a tighter play-by-play shot), and direct home video distribution. Though the RSN might pay less (like MVPDs do for nonexclusive network affiliates that are also available free over-the-air via antenna), it is confronting falling subs and increasing price resistance from MVPDs, and therefore needs to find some economies like nonexclusive rights to remain relevant — though at the risk of loosening its negotiating leverage. At the same time, teams can attract, and better serve, new-age “never” fans who wouldn’t even consider becoming virtual MVPD subs.   

The new DTC offering is a differentiated product, which provides the team with a direct business relationship with the majority of fans that aren’t ticket or traditional cable buyers, helps them cement their relationship in a way that is impossible via a three-step intermediated RSN (team/network/distributor/fan). With growing wholesale network pricing, RSNs find attaining high penetration from MVPDs more challenging. As the penetration falls, these new combination opportunities will start to look more attractive to teams, while permitting RSNs to moderate rate growth. Of course, RSNs are loath to allow buy-arounds.  

This new world will provide significant business opportunity for streaming companies, app developers and performance marketers. Staring into this coming, grinding, fundamental change, rights holders would be wise to start thinking through their new models now. Just as they have had to confront digital ticketing, the secondary market, and demand for new types of in-venue congregating spaces, teams will now face churn and piracy. Making the new economic media models work will require ongoing marketing, new offers and tailored packaging. In this “new normal” of ADD fans, unlimited quality non-sports competition, and changing fan expectations, that’s the way to still thrive in a world where only the strong survive.

Ed Desser is president of consulting firm Desser Sports Media Inc. (www.desser.tv). John Kosner is president of Kosner Media LLC, a sports and digital consulting company (www.kosnermedia.com). Together they ran the NBA’s media operations in the ’80s and ’90s.

What to Anticipate in Sports Media’s Digital Transition Game

Original Article: Sports Business Journal, by John Kosner and Ed Desser, October 28th, 2019

Ten years ago, cord cutting was not a thing. Subs were still growing, Netflix was mostly DVDs by mail, Amazon was a retailer (there was no “TNF” streaming package), Disney was just Disney, Fox hadn’t launched FS1/FS2 or sold its RSNs, and Instagram didn’t exist. With this kind of industry change, what should we expect a decade from now?

Sports betting is not only legal in many states, but gambling via mobile devices is pervasive. The result: Betting volume and users have exploded. Placing a sports bet is as easy as ordering an Uber, integrated into apps that sports fans already use regularly. As a result, many have at least a $5-$10 wager on the day’s events.

Taking advantage of this new demand, sports media platforms (some now owned by tech companies) are distributing an ever-increasing number of events from all over the globe, in multiple languages and with increasing customization (choose your announcers, pick your statistical overlays from official league advanced data). The model is triple-revenue stream — either pay TV or DTC with advertising — plus a cut of “the action!”

Enabling this boom in coverage for all but the biggest events, sports networks have embraced autonomous live-game production, moved the “TV truck” into the cloud, crowdsourced announcers and rediscovered live international events and once-niche sports that can be scheduled outside of prime time, creating 24/7 availability.

Sports is now available to fans “Live Live,” via 6G and 1-gigabyte pipes in sub-second latency, dramatically improving today’s non-synchronous experience. Social media already enabled the “virtual” sports bar, but now we can watch a synchronized feed with our friends around the globe simultaneously, placing prop bets and participating in chats and polls.

You needn’t turn on your TV to experience all this. Just put on some AR (Augmented Reality) glasses. Transform a wall into the biggest of big screens. At an event, the glasses offer an unlimited selection of information and services— from the venue and worldwide for an immersive experience.

Indeed, all of us — fans, teams and players — are now content-producing platforms, placing bets, choosing our experiences, transacting in multiple ways. Everyone sports a digital avatar, themed by team, league, city or player affinity. Twitch and YouTube have transformed today’s player fan clubs by offering IRL (In Real Life) live feeds from virtually every elite athlete on Earth. Everything is available for a micropayment or a subscription, similar to video games today.

The impact of gaming will be felt everywhere. Fans will expect more frequent software upgrades similar to the meta changes in esports. Today’s offseason “competition committee” rules changes will be moth-balled, as major leagues adopt swifter in-season rules changes to address fan and player feedback. The biggest changes: faster games and an emphasis on real-time information, especially involving highlights.

Nearly all sports (except Olympics, NCAA Tournament) come to market re-thought and re-structured for a new world where rights holders will be anxious to grow revenue while simultaneously serving the now thirtysomething “Nevers” who still don’t buy traditional TV, giving rise to a hybrid (linear and streaming) model. Today’s pay TV bundle becomes even more sports-centric, with fewer households paying significantly higher fees for major league programming. Smaller sports have moved to OTT, combining direct access to small thriving communities, merchandise and events, likely on a platform designed and managed by a tech giant. What technology gives, it also takes away, as everyone struggles to find solutions to rampant digital piracy.

Rights grants for the biggest sports have become global, favoring the planet’s two most popular ones, international football (aka soccer) and basketball. We expect esports to grow, with its biggest events televised, but most of its distribution is not via TV. In the U.S., NFL and college football will remain major factors, in part because of their popularity with bettors.

Ironically, the busy, graphic-heavy scroll of today’s sports TV networks will become pristine, fully immersive viewer experiences. No more crawls, pop-up “toast” or “elevators,” and burn-ins. Tomorrow’s TV experience transforms the viewer to “being there.” If in need of scores or stats, fans can easily add them locally or via a second (or third) screen, without cluttering and distracting from the vivid 16K viewing experience.  

Unlimited bandwidth will facilitate virtual channels, replacing traditional linear ones. The experience will be more like a multiplex theater: No longer will an event be truncated or joined in progress. Every event will be shown complete and integrated with its related pregame or postgame show. Overtime won’t abridge the next live event. Fans will be better served, provided personalized curated viewing and funneled to the next event just like an auto-start video clip.

Not quite nirvana, but close: Tomorrow’s sports experience will be vastly improved, integrated, enriched and customized in these ways and many more. The changes are already starting, and we can’t wait!  

Ed Desser is president of sports consulting firm Desser Media Inc. (www.desser.tv). John Kosner is president of Kosner Media LLC, a sports and digital consulting company. Together they ran the NBA’s media operations in the 1980s and ’90s.

John Kosner & Ed Desser in SBJ: “Stream a Little Dream: Declining sports rights? We think not.

Original Article: Sports Business Journal, by Ed Desser and John Kosner, January 14, 2019

From the beginning of sports media, new technology has enabled consumption. Early live sports TV consisted primarily of weekend events on the three national broadcast networks and club/school events on local stations and syndication. Then, widespread cable and its dual revenue stream opened the floodgates, introducing multiple 24/7 national sports networks and RSNs, delivering thousands of additional games and ballooning sports revenue (and player salaries).

In the last two decades, digital technology multiplied sports channels and ushered in multi-game subscriptions like Sunday Ticket and League Pass. Meanwhile, the internet made worldwide scores, news and highlights instantly accessible, mobile untethered viewing, and social media-enabled “virtual” sports bars.

Today, streaming technology is changing the sports media paradigm again, like cable did four decades ago. The incumbent networks (e.g., ESPN, Fox) remain well-positioned, but the digital tech titans have entered the field of play, so far focused on shorter-term rights, experimentation and non-exclusive grants (e.g., YouTube has regional rights to some MLS teams and virtual MVPD cousin YouTubeTV has become a major sponsor of the World Series and NBA Finals). Amazon bought EPL and “Thursday Night Football” rights, and Facebook has daytime MLB games. Among legacy players, ESPN+ has daily MLB and NHL games, MLS Direct Kick, and UFC. Turner’s B/R Live includes Champions League, 65 NCAA Championships and, intriguingly, partial NBA League Pass games.

While the techs have the money, recognize the importance and therefore have an interest in live sports, they are not yet willing to spend massive amounts of it for major exclusive rights packages. There are at least five reasons:

1. Most live sports viewing exists on linear TV and none of the tech giants possess that asset yet (though Amazon has shown an interest in buying some Fox RSNs).

2. The traditional incumbents continue to have substantial budgets to continue buying these rights based upon broad distribution, high subscriber fees and large advertising income.

3. They have the motivation to do so: Existing sports networks are dependent on exclusive sports rights because their very identities remain directly tied to sports TV. In addition, as broadcast networks get priced out of the top entertainment programming by Netflix, Amazon, Apple, HBO, etc., sports is even more important as must-have programming to stay in skinny bundles.

4. In an offense/defense strategy, linear players are expanding their own streaming and direct-to-consumer capabilities to better serve fans and attempt to keep the tech goliaths at bay.

5. The techs view sports acquisitions more as R&D expenditures than their primary business. There is not a proven digital business model that generates the kinds of live sports revenue (and viewership) that legacy linear media still can.

Therefore, as NFL, NHL, AAC, NASCAR and NHRA rights are soon negotiated, the traditional networks will continue to provide substantial payments, and wide distribution, the twin media goals of most sports enterprises. The question remains: Will today’s tech dabbling prove to be just an appetizer, or will they stay on the sidelines when the big bidding begins? We expect to see the following:

• Traditional linear players will keep most of the major packages, generally at higher prices (the rollout of legalized sports gambling will provide new rationale), but with some significant modifications, such as leagues carving out streaming rights, or creating a new package of events which are excluded from TV.

• The rich will get richer and those properties in the middle (e.g., NASCAR) will get squeezed.

• New digital packages, like MLB on Facebook and NFL “TNF,” will be created/expanded specifically for streamers. Unlike cable, which largely replaced broadcast as the primary platform for live sports, digital packages will expand and supplement, not replace, TV over the next contract cycle.

• Amazon, YouTube, Facebook and Twitter will expand their sports programming offerings, including through acquisition of events they can distribute worldwide, such as tennis, volleyball and esports.

• New entrants will also take their piece of the programming pie, such as FloSports buying up Olympic sports and DAZN taking more boxing.

• More sports will super-serve their biggest fans through targeted niche streaming offerings like NHRA All-Access and PBA Xtra Frame. NBA League Pass is a truly global, robust offering customized for different territories.

• Most sports fans will continue to demand a wide selection of major sports, so expect them to retain the TV “bundle.” Most would not be satisfied just getting certain sports/matches, as Amazon Prime or Netflix subscribers can be satisfied with a single SVOD package featuring a wide range of entertainment programming, nor would it be cost-effective to buy multiple packages. Pay attention to sports-focused Virtual MVPDs like YouTubeTV and FuboTV and sports-specific bundles.

• Smaller sports properties, which don’t generate meaningful rights revenue, will transition their events to streaming platforms, developing direct customer relationships, reducing TV production costs, and improving programming hours, scheduling, and net revenue, but sacrificing viewership potential.

• Tech players will consider buying traditional linear sports media platforms (e.g., New Fox, Fox RSNs, CBS) to gain entry to the major league sports club.

For almost 50 years, critics have predicted the end of the sports TV rights bubble. We’re still waiting.

Ed Desser is president of sports consulting firm Desser Media Inc. (www.desser.tv). John Kosner is president of Kosner Media LLC, a new sports and digital consulting company. Together they ran the NBA’s media operations in the 1980s and ’90s.

John Kosner, Ed Desser in Sports Business Journal: “Making your Media Rights More Valuable”

Original Article: Sports Business Journal, by Ed Desser and John Kosner, April 23, 2018

NBA Commissioner David Stern (our boss for 23/8 years) often said that no one is going to treat you as well as you treat yourself. The NBA had to be the best property it could possibly be, not rely solely on its media partners to grow audience and value. That attitude helped propel the league’s ascension to its current place in the sports hierarchy.

Naturally, everyone wants a bigger media deal, but with the cross-currents of changing media consumption patterns and pay TV subscriber declines, this isn’t automatic. A sports enterprise must organize itself to continually grow, well in advance of rights negotiations, in order to capture more rights value. Here are some tips to consider designed to build product value in today’s multimedia marketplace:

DATA

• Make yourself smarter. Understand how the market sees you, warts and all. Talk with media, advertising and business contacts outside your “bubble.” “Google” yourself to see what the uninitiated see in search results. Track the sentiment on your property on Twitter. Review the published research on sports properties and audiences.

• Systematically Gather Data (beyond TV ratings) which provide insight into the underlying popularity and growth of your product, such as stream views, unique visitors daily & monthly, “likes.” These digital metrics demonstrate the value of your property, and provide network partners with added evidence of the prudence of investing in you. Also quantify the stats for your sport’s collective players, coaches, personalities, teams on Facebook, Instagram, Twitter and YouTube . The reach can be staggering. Use that data to inform your own decision-making.

• Develop a database of fans by collecting e-mails for a newsletter and social media “likes/followers/subscribers” to indicate the strength of your property, and leverage to increase participation and audience.

STAFFING

• Dedicate staff to your media relationship. David often said, someone that understands the partners’ business needs should be “losing sleep” thinking of ways to service and improve the relationship (we did). Organize to get your people invested in the success of the partnership.

• Annual or quarterly meetings with your media partner(s) can provide a useful forum to surface issues before they become problems, and to work together to increase the value of your property and relationships. Senior and operational staff from each should participate. Immediate post-season meetings are ideal review/preview opportunities.

ADVERTISING/MARKETING

• Promotion is not just the province of networks. Properties can use their own assets to drive viewership, which increases popularity, ratings and media value for networks and distributors. This also better serves your fans; ultimately higher viewership translates into bigger rights fees.

• Harness controlled inventory in local game telecasts, in-venue videoboards, websites, apps, radio and podcasts, to build TV audience and enjoyment. Getting current fans to watch more is the lowest-hanging fruit.

• Advertising your major events, using well-targeted paid media, can increase consumption and lead to greater ultimate media value ROI.

BUSINESS DEVELOPMENT

• Sponsor development enlarges the pool of advertisers to buy into your sport, an implicit signal of value of association to fans, other sponsors and networks’ willingness to invest. The more sponsors you have, with budgets earmarked to support your media relationship, the greater the network will value your rights.

CONTENT

• Strategic Scheduling of event telecasts beyond the usual pattern can grow value. Look for alternate dates and times, consider stunts, and search for attractive lead-in windows.

• Program Development of new concepts and shows help to promote the core event and familiarize the casual audience with your athletes. Roone Aldridge made famous the “up close and personal” approach of sports storytelling (people care about people), which will never go out of style. Also utilize the greats of the game and celebrities to help tell your story.

• A Content Factory operated by your property can efficiently generate an ongoing stream of highlights and feature material for a streaming platform, website, social media posts, and for network partner telecasts with tight production budgets (more open than ever to making use of high quality programming provided by the subject entity), as MLS has provided to ESPN/Fox/Univision.

EVENTS

• Improving the event experience better serves existing fans, and indirectly improves the atmospherics of game telecasts. The bigger and better the event feel, the more exciting on TV.

• Quality Control matters. Don’t wait for your media partner to complain about lighting, PA or game presentation. Objectively look at how your events appear on TV, and proactively improve wherever you can, without being asked. Not only will this improve the product, but also your media reputation. The NBA has done this by tightening the length of its games.

AUDIENCE DEVELOPMENT

• Think differently about Millennials, who have a unique interest, and want new ways to participate. Are there different kinds of highlights you can produce (such as vertical orientation) or new fantasy or video games that would especially appeal to them, as the next generation of fans? The NBA uses a special tighter camera just for live action and highlights viewed on phones.

• Social Media Participation by your teams, athletes, coaches, broadcast talent, and administrators on a sustained basis is essential. No longer are publishing of media guides or post-event press conferences sufficient. New efforts aimed at providing wide access to new areas are necessary.

• Serve new audiences through aggressive outreach and a dedicated strategy. Ratings falling are the new normal, . Fans have more options, so you can’t assume that they will continue showing up in the future without catering/outreach. You must expand the base (e.g., younger fans, women, ethnic audiences, etc.) just to stay even. For example, the NHRA permits kids under 10 to attend events for free with an adult. Never underestimate the appeal of getting your youngest fans onto the playing surface, meeting your athletes, getting them hooked early.

These are just examples of some of the ways you can grow the value of your media rights in anticipation of the next negotiation. Don’t wait until the exclusive negotiation period to engage with your partner(s) and focus on your future business. Making the commitment now will pay dividends.

Ed Desser is President of Desser Media (www.desser.tv), a sports media consultant, with 40 years of industry experience. For the past 20 years, John Kosner was the senior digital media executive at ESPN, and is now President of Kosner Media (@jkosner). The two worked together running the NBA’s media business during the 80’s and 90’s.