10/29/09

SportsoverIP:dynamicsandperspec4ves

EmmanuelBlain

CharlesFine

10/29/09

Outline

•Framework–HistoryofsportsbroadcasAng

•Problem:WhathappenswhenyougooverIP?

•AnAtrustconsideraAons

•SystemDynamicsmodel

•ApplicaAon:BigleaguesandSmallleagues

10/29/09

$10M/year (43%ofUSpop)

(28.7MAckets,$12.5avg)

SI:1.3Mreaders/week

Thedeliverymodelforsports‐1970

10/29/09

$10M/year (43%ofUSpop)

(28.7MAckets,$12.5avg)

SI:1.3Mreaders/week

Thedeliverymodelforsports–MLB1970

Salaries:($29.3K/player,19% ofteamrevenue)

Over the Air TV:~100% share Total TV Revenue =$10M

10/29/09

(45%)

(55%)

$136M/year

SI:2.4Mreaders/week

(43%ofUSpop)

(46.8MAckets,$10.5avg)

Thedeliverymodelforsports–MLB1985

Salaries:($371K/player,49% ofteamrevenue)

Over the Air TV: 45%Cable TV & DBS: 55%

Total TV Revenue =$136M

10/29/09

(10%)

(90%)

SI:3.1Mreaders/week

(0.3%)

250Mreaders/week

(43%ofUSpop)

(75MAckets,$19.17avg)

($3.6/subscriber)

Thedeliverymodelforsports–MLB2005

($85.7avgfor4)

Salaries:($2.9M/player,55% ofteamrevenue)

Over the Air TV: 10%Cable TV & DBS: 90%WebTV:~.3% Total TV Revenue =$670M

10/29/09

(10%)

(90%)

3.1Mreaders/week

(0.3%)

250Mreaders/week

($71.36avg)

($3.6/subscriber)

Thedeliverymodelforsports–NFL2005

($107.56avgfor4)

$100M/team

Salaries:(59% ofteamrevenue)

Over the Air TV: 10%Cable TV & DBS: 90%WebTV:~.3% Total TV Revenue =$3B

10/29/09

Thena4onalTVchannelslandscape–OTAchannels

TelevisionNetwork Founded%ofU.S.households

reached

PBS 1969 ~99.00

ABC 1948 96.75

NBC 1946 97.17

CBS 1948 96.98

FOX 1986 96.18

10/29/09

Thena4onalTVchannelslandscape–moreandmorecablechannels

Name Owner NotesCBSCollegeSportsNetwork CBSCorporaAon formerlyCSTVESPN

Disney/HearstCorpora4on

ESPN2

ESPNPlusAservicethatsyndicatescollegesportstolocalbroadcastandregionalcablesta4ons.

ESPNClassicformerlyClassicSportsNetwork;some4mesusedasanoverflowforESPNandESPN2

ESPNews 24hoursportsnewsESPNU collegesportsESPNDeportes SpanishLanguagesportsnetworkFoxCollegeSports

NewsCorporaAonFoxSportsenEspañol formerlyFoxSportsAméricasFuelTVMLBNetwork MajorLeagueBaseball launchedJanuary1,2009NBATV Na4onalBasketballAssocia4on formerlyNBA.comTVNFLNetwork Na4onalFootballLeague launchedNovember4,2003NHLNetwork Na4onalHockeyLeague launchedOctober1,2007OutdoorChannel OutdoorChannelHoldingsInc.TheSportsmanChannel TheSportsmanChannelLLCVersus Comcast formerlyOutdoorLifeNetwork/OLN

10/29/09

OTAisreallyinadifficultsitua4on

•CablechannelsnowhaveacompeAAveadvantage:‐Dualrevenuestream(ads+subscripAons)‐Morethan60%penetraAonintheU.S.‐EasiertoaggregateRegionalSportsNetworksthatsAllbenefitfromhighraAngs‐Leaguesofficialchannelsareownedbyleagues:$0broadcas4ngrights!

•Moreandmoredealsarecutwiththesechannels(e.g.NFL)

10/29/09

Nowgoingonline…MLBexample•MLB.comisthe#1onlineportalforbaseball(wellaheadofESPN.com)

•MLB.TVrebroadcastsgamesonacomputerviaInternetsince2002.Theblackoutandout‐of‐the‐marketpoliciessAllstands,but4me‐shiaingispossible.

•NowstreamingtoiPhonesaswellPlace‐shiaing

10/29/09

Threemain“disrupAve”architectures:

#1:Contentisking‐‐SportsoverIPusingMLB.TV:MLBtakescontroloveralmostthewholevaluechain,fromcontentcreaAontoaggregaAon/distribuAonISPas“dumbpipe”

#2:Broadcasterisking‐‐SportsoverIPusingFancast/Versus:ISPusesanin‐houseplamormtogathercontentandcustomersCustomerspayforcable,getcontentonlineforfree

#3:Rebroadcas4ngSportsoverIPusingjusAn.tv(pirate):JusAn.tvistheappandaccessproviderISPas“dumbpipe”

ScenarioClassifica4on

10/29/09

Parallelwithdigitalmusic:

#1Contentisking‐‐SportsoverIPusingMLB.TV:MadonnacontracAnghertourpromoterforherCDreleases

#2Broadcasterisking‐‐SportsoverIPusingFancast/Hulu:Warnerusingonlineplamorms(iTunes)tosellmp3s

#3SportsoverIPusingjus4n.tv(pirate):Napster,KaZaa

IsthesamesequencegoingtohappenforSports?Willthosethreemodelscompetewitheachother?Isonegoingtoprevail?

ScenarioClassifica4on

10/29/09

SpoIPandAn4trust

OverviewoftheregulaAonforCable:

•1960s:theFCCdidnotwanttoregulatecable

•Firstregulatorymove:CableCommunica4onsPolicyActof1984(deregulaAonwithconstraintonmargins)

•Re‐regulaAon:CableActof1992(regulaAonofbasicratesforcableproviders)

•Finally,deregulaAon:Telecommunica4onsActof1996«effecAvecompeAAonwillkeeppricesdown»

10/29/09

Whereisthevaluegoing?

SpoIPandAn4trust

10/29/09

OverviewoftheregulaAonforSportsBroadcasAng:

•SportsBroadcas4ngAct(SBA)of1961(league=singleenAty,allowedtoactasamonopoly)

•…andthat’sit.

•IsthisreallysAlladequatetoday?

Update:AmericanNeedlevs.NFL

SpoIPandAn4trust

10/29/09

Marketpowerfortheleagues…

SpoIPandAn4trust

10/29/09

Lessons:

•RegulaAonisbroken(SportsBroadcasAngActisnotrelevant)

•Regulatorsarewatchingbroadcasters,want«effecAvecompeAAon.»

•Back‐and‐forthregulatorymovesmakelong‐termprojecAonsdifficultWhatwillbedoneaboutWebbroadcasAng?

•Fornow:•Cableproviders&broadcasterswillhavetorespectnetneutrality•LeaguesmayhavetocompletelydisintegratecontentproducAonanddistribuAon(e.g.MLB&MLBAM)tocomplywithAnAtrust

SpoIPandAn4trust

10/29/09

SDmodel:Methodology

•UseofSystemDynamicstomodelthemarketforSportsviewingandtheinteracAonsbetweenfans,leagues,broadcastersandpolicymakers.

•CompeAAvemodelbetween:‐CableTV(e.g.ESPN)‐WebTV(e.g.MLB.TV)‐PirateWebTV(e.g.jusAn.tv)

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

DemandFor Live

Performances

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+ Content Attractiveness

+

+ ++

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+ Content Attractiveness

+

+ ++

-

- -

(Local Sports

Blackouts)

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+ Content Attractiveness

+

+ ++

-

- -

(Local Sports

Blackouts)

- -

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+ Content Attractiveness

+

+ ++

-

- -

(Local Sports

Blackouts)

- -

BroadbandDemand

+

+

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+ Content Attractiveness

+

+ ++

-

- -

- -

BroadbandDemand

+

+

InternetInnovation

++

10/29/09

PotentialFans

CasualFans

(Video)

RabidFans(Live)

FanCreation

Rate

Rabid FanCreation

Rate

LeaguePopularity

+ ++

+

DemandFor VideoContent

+++

+ + +LicensedInternet

Un-LicensedInternet

Cable /Paid TV

TeamRevenue

+

+

StadiumPrices andAttendance

++

DemandFor Live

Performances+ Content Attractiveness

+

+ ++

-

- -

- - BroadbandDemand

+

+

InternetInnovation

+

+

+ +

10/29/09

MLBaverage4cketprice

10/29/09

MLBplayers’salary

10/29/09

MLBrevenuesfromtradi4onalTV

10/29/09

Applica4on:Smallleaguesvs.Bigleagues

ExampleofsmallleagueoverIP:Sail.TV

•Createdin2006intheUK

•FreeWebTV,totallyad‐supported.

•User‐generatedcontentcanbeuploaded

•contentisavailableon‐demand(forfreefornow)

•Featuredthe32ndAmerica’sCup

•Verysmallshareofonlinetraffic.

10/29/09

Ourbet

Bigleagues Smallleagues

Contentisking

Broadcasterisking

10/29/09

Bigleagues

10/29/09

Smallleagues

10/29/09

Conclusions

•SpoIPisslowlydisrupAngtradiAonalSportsBroadcasAng•Leaguesmovingdownthevaluechain•Cablecosmovingupthevaluechain?•Piracythreat

•ThelegislaAonneedstobefixed•SportsBroadcasAngActirrelevantnowadays•DoesWebbroadcasAngneedtoberegulated?How?

•DifferentchallengesandopportuniAesforsmallandbigleagues

10/29/09

Thankyou!

Anyques4ons?