A question I got asked this week gives me an opportunity to blog about one of my favourite subjects – TV. A friend of mine asked why he couldn’t watch local sports teams online via one of the OTT streaming services he’d subscribed to. He didn’t expect them to be free – he was quite prepared to pay for the privilege – and couldn’t understand why somebody wasn’t taking advantage of a growing number of people cutting the cord and relying on OTT services for their ‘TV’ instead.
The reason that blackouts exist is essentially economic. In the main, the broadcast [and streaming] rights are owned by the respective leagues, not the individual clubs – and are sold as a package, not on a team-by-team basis. The latest NFL broadcast rights deal, signed at the end of last year to start in 2014, was a 5 network, 9 year, $28 billion [yes, you read that correctly] deal – making it the most valuable US property in television. The new deal is a 63% increase on the current contract and it gives the networks and their affiliates the exclusive rights to broadcast live games via their channels, and sell them to PayTV providers in other territories, in return for re-transmission fees.
They key is that the rights are for TV broadcast – not streaming. The major sports leagues have, to my knowledge, all retained the streaming rights and offer their own streaming services, but they blackout home team matches in local metro areas. Why do they do this? Advertising Revenues.
Local spot advertising is a vital part of the US television business. According to figures I saw at a conference a year or so ago, it accounted for 50 percent of the US television industry revenues – about $5bn per year in the late 2000s. This is the size of the entire TV advertising market in, for example, Europe.
While spot advertising revenues are falling, globally they were more than $15 billion in 2011. The fact remains that, mostly niche, standalone streaming services [OTT] simply cannot even hope to reach either the revenues or audience numbers that traditional broadcast and Pay TV networks do for major league sports. As a result, they are unable to command the same advertising revenues – nor will they any time soon. This makes bidding for broadcast rights for major league sports impossible.
This may change by the time that rights for the likes of the NFL come around again – but don’t hold your breath. While OTT is growing, there’s little evidence to suggest that it will ever achieve the critical mass required to make it worth the leagues selling the streaming rights. Without the broadcasters, Pay TV operators and advertisers we’d very quickly see the end of sports TV as we know it.