Joe Ovies

Sports networks hope you're down with OTT

Posted August 18

OTT, how can I explain it? I'll take it frame by frame. To have y'all all jumping, shouting, saying it. "O" is for "over," "T" is for "the," The last "T," well that's pretty simple - "top."

Over-the-top content, delivered via an internet connection without a cable or satellite middleman, has generated a ton of industry buzz ever since Sling TV went online in 2015. Similar services from DirecTV, YouTube, Hulu, and Sony have since popped up, offering consumers skinny bundles of popular channels at prices slightly better than traditional packages available on Comcast or Spectrum.

Sports networks, overflowing with inventories of live events, now want a piece of the action.

  • Disney will launch an over-the-top ESPN service in 2018 with what Mickey Mouse describes as "a robust array of sports programming." ESPN's OTT product will live inside its WatchESPN app, and will include NHL, MLB, MLS, tennis and college sports. It also will bring BAMTech properties, in which Disney now has a majority stake, MLB.TV, NHL.TV and MLS Live under one umbrella. It's important to note ESPN's OTT service will exclude programming available on its linear networks. That means no NFL, NBA, major college football and basketball, or studio programming like SportsCenter. The name and price of the service remain a mystery.
  • NBC Sports launched a Premier League Pass OTT service, taking what had been available for free for several years on NBC Sports Extra and putting it behind a paywall for $50. While soccer fans will have access to more than 100 Premier League games, the OTT service will not carry matches that appear on NBC's television properties.
  • Turner Sports will launch an OTT service for the '18-'19 UEFA Champions League season. Turner hasn't priced the service, but it will feature the hundreds of matches not broadcast on its cable properties, such as TNT or TruTV.
  • CBS plans to launch an OTT sports network by the end of the year, but details are scant. CBS recently added its digital news network to its "All Access" subscription app, so expect a similar strategy for the sports network.
  • Soccer Match Pass, a rebooted OTT service from FOX, will feature soccer and rugby.

Naturally, ESPN's upcoming OTT service has garnered the most industry attention. The Worldwide Leader continues to bleed subscribers as more consumers attempt to shave their cable bills or ditch traditional pay television altogether for apps like Netflix. ESPN has compensated for the loss of subscription revenue the best way it can by rearranging its carriage agreements, charging upwards of $10 per subscriber for the combination of ESPN and ESPN2, Disney also is hoping to gain traction on OTT bundles from YouTube, Hulu, DirecTV Now, and others.

ESPN's standalone direct-to-consumer offering is highly unlikely to have an immediate impact on the bottom line. For the foreseeable future, ESPN will continue to generate the majority of its revenue from cable subscriptions and ads. However, looking at short-term gains would be an exercise in missing the point. The big picture relates to the idea that nobody – from investors to content creators – has any idea how any of us will be consuming media in the coming years. However, one can look at trends. The number of TVs in American homes dropped from 2.6 per household in 2009 to 2.3 in 2015. 4G LTE mobile networks will eventually give way to the faster 5G network, allowing mobile devices to experience broadband-like speeds away from a WiFi hotspot by 2020. In essence, life comes at you fast.

In the meantime, it makes sense for ESPN experiment with its own OTT option. It has an abundance of live rights, many without a proper home. Rather than treating these games as bonus coverage on ESPN3, the network can package them for hardcore sports fans willing to spend money on a reliable service. ESPN took a similar approach to the World Cup of Cricket in 2016, charging fans $100 to access games on an OTT service. ESPN chief Jon Skipper told CNBC 100,000 signed up to watch.

Would hardcore tennis fans pay a similar amount to watch Grand Slam matches? Would fans of smaller college conferences, who rarely see their favorite teams on any of ESPN's linear channels, pay a monthly subscription to watch on their Roku or Apple TV? It's the same play ESPN made with the SEC Network and the upcoming ACC Network, placing key games that appeal to a hardcore base on a more expensive cable tier. Only this time they're asking fans to pay for an online subscription similar to how they pay for separate programming on Netflix and Hulu.

These OTT plans also set the table for the upcoming rights fee bonanza coming up in the next decade. Leagues such as the NFL have flirted with Google, Apple, Amazon, and Facebook – tech companies flush with cash and looking for content – thus adding potential competition for broadcast companies, who rely heavily on live sports programming. By heavily investing in BAMTech and working on its streaming platforms now, Disney will be better suited to handle whatever comes next.

Who’s down with OTT? All the media homies.

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