My parents kept a stack of magazines on our oversized coffee table when I was a kid. The stack was similar to what you might see when you walked into the waiting room of a doctor’s office, neatly organized with 1970s weekly staples such as Newsweek, TV Guide and Sports Illustrated, as well as several of the Seven Sisters including Better Homes and Garden and Good Housekeeping. Reader’s Digest was always on top, primarily because its smaller size did not lend itself to be in the middle of the stack and maintain stack integrity.
I thought of that magazine stack when I read a Bloomberg piece earlier this month describing a family of four that spends $180 per month to have entertainment content delivered to their home. It dawned on me that each of those magazines on our coffee table represented similar subscription-based content, designed to entertain, inform, and educate the consumer, based on the consumer’s interest. These were periodicals which we had decided provided value and were worth paying to receive either weekly or monthly. At some point, we stopped getting so many magazines, along with both local daily newspapers. I assume the reason boiled down to a desire to not pay for content which was either no longer interesting or could not be consumed.
Today’s consumer wrestles with a similar dilemma – how much is too much subscription-based content? Those magazines have been replaced with Netflix, Hulu and other content subscription services. The newspapers replaced with smartphone apps. That cable television subscription is increasingly being jettisoned in favor of over-the-top (OTT) skinny bundles or stand-alone direct-to-consumer platforms. Records and cassettes have become Spotify and SiriusXM subscriptions.
This is not an environment in which college sports programming competes with one another (Big Ten Network v. SEC Network, for example). College sports competes with ALL entertainment programming for a coveted spot in that magazine stack. Consider the following recent announcement around digital platforms:
- B/R Live will live-stream Tiger Woods v. Phil Mickelson in November ($9.99 per month with different price levels, including $19.99 PPV)
- DraftKings wants to launch a live sports network (price TBA)
- La Liga TV brings second tier matches direct to consumer for about 3 Euros per month
- John Skipper and DAZN spent $365 million to stream Canelo Alvarez’s next 11 fights ($9.99 per month)
- NBC is launching companion apps to its roster of its RSNs (free with pay TV authentication)
- NBC Sports will stream 700 hours of winter sports on Snow Pass ($69.99 total)
- Even Apple is getting into the video content business at an unknown monthly fee
- The Big Ten and Big 12 conferences join their ACC, SEC and Pac-12 colleagues by partnering with SiriusXM to launch exclusive satellite radio sports channels (free with monthly satellite subscription)
Complicating, or perhaps simplifying, matters are disrupters such as Stadium and Eleven Sports which seek to fundamentally alter sports consumption. Startups such as Locast, PlutoTV, and Twitch all provide alternative means to obtain content, at greatly reduced prices when compared with the $180 per month that family of four was paying. And let’s not forget the original FANG companies lurking in the background with their own designs on gaining a position on the magazine stack.
It should be understood by now that sports is the only form of entertainment capable of turning this industry on its head. Former AOL executive Ted Leonsis, who knows a few things about this space as founder and CEO of Monumental Sports Network, an OTT platform out of Washington, D.C., wrote in Broadcasting & Cable in May 2017, “Professional and college sports teams still have the upper hand when it comes to negotiating media details and rights because they remain the only live programming that is still in high demand by consumers.” The question remains, at what point do college sports fans have their demand needs met and these deals cease being profitable?
It is against this evolving backdrop that my colleague Brett Hutchins of Monash University in Australia calls for increased scholarship in mobile media sport. Hutchins argues in his August 2018 Communication & Sport article that mobile media is creating an accelerated form of hypercommodification (rapidly increased economic value) of sport which is locking media sport into privately controlled market frameworks, at the expense of sports’ long-standing role in maintaining cultural citizenship.
Because of this leverage position, leagues and conferences are slicing their rights into digital and mobile rights in an effort to make their product more available to consumers than ever before. The NFL is evidence that this is working as its digital viewership was up 65 percent through four weeks after jettisoning its exclusive mobile deal with Verizon in favor of deals with CBS, FOX, ESPN and NBC. The list of speakers at November’s SportsPro’s OTT Summit in Madrid should put to rest any question as to how important this space has become globally.
In addition to potentially making sport less accessible to consumers, David Sussman, former general counsel to the New York Yankees and chief legal officer of NBC Universal’s Content Distribution Group, noted in a 2016 article in the Syracuse Law Review, the “proliferation of content offerings, channels, and platforms has transformed the [entertainment] Ecosystem from mass to niche programming.”
While this privatized and fragmented programming landscape may be good for consumer choice (I previously wrote about value of niche college sports programming), predicting consumer behavior is a difficult and an inexact science. Depending on how an individual views the situation, today’s consumer is paying more (or less) for subscription-based content. He or she consumes more (or less) entertainment, news, and sports.
So, where is the tipping point for today’s consumer at which too much content exists? We can partially answer that by looking at the world of behavioral economics. In 2008, Dan Ariely, a Duke economist, authored the first in what is now a series of easy-to-read books about the forces which influence consumer choices. That first book, Predictably Irrational: The Hidden Forces that Shape Our Decisions, provided some lenses to view the overabundant world of sport content (supply) and consumer choice (demand).
“Traditional economics assumes that prices of products in the market are determined by a balance between two forces: production at each price (supply) and the desires of those with purchasing power at each price (demand). The price at which these two forces meet determines the prices in the marketplace,” Ariely wrote on page 47 in his chapter titled “The Fallacy of Supply and Demand”.
In that chapter, Ariely discussed at length the idea of aribtrary coherence, the idea that although initial prices are “aribtrary,” once those prices are established in the consumer’s mind, they shape present and future prices. Think of an ESPN+ subscription at $4.99 per month, a figure that Peter Kafka of recode last February called a “tough sell.” At the time, prominent media analyst Rich Greenfield told CNN, “If they were including the core ESPN at a higher price, I think there would be a lot of demand. I honestly think it’s a very niche audience.” There is that word niche again.
But, when the service launched in April, ESPN proceeded with the $4.99 per month figure and the assumption consumers would be willing to pay that price. Last month, ESPN announced it had topped one million subscribers faster than any other streaming service, causing Kafka to walk back his comments (a little bit). Part of the appeal of ESPN+ may be its lower price point as most OTT services run around $9.99 per month or more.
ESPN+ may not be a good barometer for this ever-evolving space. It has brand recognition, content, live programming, and more. But what it doesn’t have is the most demanded content – the marquee games that air on ABC, ESPN and ESPN2. Will ESPN+ continue to grow? Tough to say. Ariely examined this phenomenon of initial “anchor pricing” in a series of social experiments, suggesting its success was contingent on whether a) consumers accept the first price for a new product, and b) the anchor price has a long-term effect on the willingness to pay for the product from then on. It appears point a) has been answered, but the verdict is not yet in on point b).
My guess is that ESPN+ will continue to add subscribers through college basketball season, but that growth will plateau after the first of the year. At that point I will think all of the fans demanding ESPN+ content will have decided whether or not the $4.99/month price point (likely on top of the consumer’s cable or satellite bill) is worthy of a spot in the magazine stack on the coffee table. The logic behind my conclusion appeared in my Twitter timeline earlier this month, on October 10, when Rich Greenfield, responding to a thread about AT&T possibly bundling its content from HBO, Time Warner, and Turner into a streaming service, stated, “content relative to cost.”
Content relative to cost. $4.99 per month seems a fair price for live streaming sports, particularly when contrasted with the many $9.99 per month OTT services which exist. ESPN+ is but one of literally dozens of subscription-based sports content offerings in the marketplace. American consumers have long been willing to pay for content provided there was value discerned from that content, but we can see through cord-cutting statistics that Americans have already begun making value proposition decisions about what content to put into their magazine stack. The challenge for college sports administrators will continue to be how they position their product in this hyper-competitive market.