This Athletic Director U. includes discussion around BAMTech, Twitter, the Pac-12, Mountain West, the NFL, the ACC Digital Network all the main sports TV networks, TV ratings for the first weekend of college football, the College Football Playoff, current and former ESPN Presidents Skipper and Bodenheimer, new Syracuse AD Wildhack, notable sports media personality Bill Simmons, New Mexico, Utah State & Weber State, Uber, the Miami Dolphins and more. I hope you learn at least one single thing. Enjoy.
In my very first Athletic Director U. back in early June (‘The Importance of Bob Bowman, Major League Advanced Media & BAMTech’), I noted a high curiosity around the changing linear and digital TV landscape, and a personal interest in trying to understand the ecosystem better because of the large sums of money that underpin rights deals for college athletic conferences, and their members, around the nation. In most cases, articles and developments of interest are shared via D1.ticker and deeper digs are constructed under the ADU brand on Sunday nights. Today’s ADU is intended to review where we’ve been over the last three months, as well as weave together key movements in the last three months to (hopefully) help us keep our heads and hands around this incredibly important topic.
(Possibly the most important conversation in the last three months having to do with college sports on TV is the potential expansion of the Big 12 and the role market or national penetration may play in which schools, if any, get invited to join. Specifically, Houston’s pull in its own market, with some debating if the city has become an ‘SEC town,’ as well as BYU’s national network, in both its fanbase given the footprint of the LDS Church and BYUtv, are interesting, but won’t be covered in this piece. Why? Because it’s seemingly all a guess as to what metrics or factors will be considered to determine the expansion review’s result.)
BAMTech
Since the early June push on Bowman, MLB & BAMTech, the most significant news, of course, was Disney’s $1B investment in BAMTech for a 33% stake and rights to acquire a larger piece in the future. Such a move had been rumored for a number of months by the likes of SportsBusiness Journal’s Eric Fisher and comes with an ESPN OTT services that will not include content currently broadcast on any of the ESPN family of networks. Disney Chairman and CEO, Bob Iger, mentioned the inclusion of additional college sports programming and the possibility of the Worldwide Leader acquiring more rights in the space. Just two weeks later BAMTech scooped up a piece of Silver Chalice for an undisclosed amount in a deal that gets BAM closer to Campus Insiders and the new ACC Digital Network.
Further in the last three months, BAMTech became the backend infrastructure for Twitter and all its new sports streaming deals, including those with the Pac-12 and Mountain West conferences, the latter of which aired the first full football on the platform with Utah State-Weber State last Thursday night. Remember, this is all a play by Twitter to increase user engagement and leverage higher priced video ad inventory. Per Business Insider Intelligence just days ago: “Live streaming video will further accelerate streaming videos overall share of internet traffic. Streaming video accounts for over two-thirds of all internet traffic, and this share is expected to jump to 82% by 2020, according to Cisco’s June 2016 Visual Networking Index report. […] Advertisers will continue to invest heavily in online video, especially as live streaming video gains traction. Already in the US, digital video ad revenue reached $7.8 billion in 2015, up 55% from 2014, according to figures from the Internet Advertising Bureau.”
One subtopic here that should be really interesting to watch is how Twitter, networks, leagues and conferences report engagement or viewership data. SportsBusiness Journal’s John Ourand penned toward the middle of last week on the NFL, CBS and Twitter still discussing how to do so for the Thursday Night Football package of games. The hang-up, as described by CBS Sports Chair, Sean McManus, “We use six minutes of viewing to be counted in the reach, and they use something significantly shorter than that — sometimes as little as three seconds.” NFL EVP/Media Rolapp: “Ultimately, have we increased the reach and have we increased the average number of people that are watching the game at any given time?”
The opening weekend of college football has posted some strong ratings and we still have Notre Dame at Texas and Florida State-Ole Miss in Orlando to go at the time of this publication. Both Alabama-USC from Arlington and LSU-Wisconsin from Green Bay tied for the second largest oversight viewership marks in ESPN/ABC history for Kickoff Weekend Games. WatchESPN also continues to surge, “The first Saturday of the college football season, combined with US Open coverage, resulted in one of the largest days ever for ESPN streaming audiences with 249.1 million minutes viewed and 2.7 million unique users. This is good for third and fifth, respectively, for the product in any single day.” That’s an average of an impressive 92 minutes per unique viewer. As you may have guessed, BAMTech also handles the streaming operation for WatchESPN.
The Importance of TV Advertising Trends, Scarcity and Sports
In a nutshell, Stratechery’s Thompson argues advertisers who spend loads of cash on sports TV advertising have business models inexorably intertwined with the current cable bundle and linear TV given its reach. Both institutions, mega-brands and the traditional TV construct, may come tumbling down one day, but that day may not be anytime soon as one will boost the other up as long as possible since there are few other places to effectively spend ad dollars at scale. This year, some significant major ad dollars shifted back to TV from digital as mega-brands failed to see fully return on social media platforms. To top it off, there’s little to no scripted primetime programming doing major ratings that could pull ad dollars away from the live attraction and stickiness of sports on TV. These dynamics are exactly why all the debate around cord-cutting, skinny bundles, etc. needs healthy understanding of the advertising environment.
In the last three months, the attraction of sports on TV has continued, led by through-the-roof ad sales for the NFL. “So strong are NFL football telecasts in the minds of marketers, that each one of the networks has sold more inventory than last season, at higher prices, and that’s despite advertisers having spent some $1.2 billion on NBCUniversal’s 17 days of Summer Olympics coverage this month.” Broadcasting & Cable’s Consoli further reports how many mega-brands “diverted money from non-sports entertainment programming to keep their level of NFL spending equal to or greater than last season.” Again, there’s the lack of premier primetime programming coming into play. The NFL has produced these results in the face of FanDuel and DraftKings not spending a dollar yet when they had allocated $150M worth of budget at this point last year. Most importantly for us, all four broadcast networks have reported “strong” and “extremely well sold” inventory around college football.
The College Football Playoff’s decision to move its semifinal games off weekday New Year’s Eve dates in the future has received praise from ad buyers. Horizon Media Director of National Broadcast, Sports Media Schwartz, who buys for the likes of Capital One, “I’m glad the CFP decided to consider chasing the audience rather than being stubborn and trying to change tradition. From both an advertiser and agency perspective, this change is a good thing.” The sentiments of Magna Global VP of Sports Investments Collins should also be noted as he believes Saturday night New Year’s Eve games will still struggle to rate well as HUT levels (Houses Using TVs) are commonly low given the holiday.
The Cable Bundle and Thompson’s Aggregation Theory
Stratechery’s Thompson goes further on his position of the cable bundle being in much stronger shape than many realize because of mega-brands who spend big dollars on TV advertising and their inherent business models, the “clunky” user experience of most current OTT options and the differentiated content the cable bundle brings to the table all in one place. On ESPN, “For now, Iger and ESPN are emphasizing digital content as an addition to the bundled network, but in my estimation ESPN is far better positioned for a world where they must go over the top to consumers than people give them credit for. The afore-linked Wall Street Journal article said that in order to maintain current revenue levels, ESPN would need to charge $30/subscriber if the company abandoned the pay-TV bundle, which implies a customer base of ~20 million people. That’s a little over 20% of ESPN’s current pay-TV subscriber base, and if ESPN really does have all the sports that matter, I think it’s a very realistic target.”
A recent article in the Chicago Tribune caught my eye, equally because of how much more ESPN is making per subscriber per month ($7.21 wholesale) than the rest of the sports nets, but also because of these comments by former ESPN President, George Bodenheimer, who was in charge from 1998 to 2011. “(When I took over), I remember vividly when we were having some ratings issues. The thought in the industry was, ‘Well, gee, there’s nothing you can do. The audience is split with this new Internet product.’ We simply refused to accept that. We weren’t going to accept declining ratings. […] Networks will be around for a long time. There still is value in the product being aggregated. […] The companies that find the best ways to exploit new technologies will be the companies that succeed.”
Bodenheimer was also a point of conversation on The Bill Simmons podcast with notable author Jim Miller, most recently of ‘Powerhouse: The Untold Story of Hollywood’s Creative Artists Agency‘ from two-plus weeks ago. Key notes:
(45:03) Simmons calls current ESPN boss, John Skipper, the “best content executive the company has ever had.” Points to 30 for 30, ESPN.com, the foresight to back soccer, moved away from TV movies. Miller responds, “I think the problem was Skipper needed a Skipper when he became President.” Wonders why Skipper never delegated or replaced himself on the content front. But, the reality, per Miller, “You replace Bodenheimer, but do you really want to give up the stuff you like the most? […] You don’t want to give it up, because that’s your oxygen in some ways.”
(52:09) Miller notes how “things are going to be different in Bristol” with former EVP and new Syracuse Athletic Director, John Wildhack, now out of the mix. “It’ll be interesting to see how much disruption there is at ESPN now that there’s some different people looking over it all.”
(55:40) Simmons says he’s more bullish on ESPN’s future than some, even though he’s no longer affiliated with Bristol, “I still think they have just a massive lead.” Miller agrees, “They have a big moat. One of the things that Skipper did right from the beginning, he just loved the idea of live.” Simmons: “The previous regime was trying to add a MTV element to everything in case sports goes away. And Skipper was kind of like, ‘Our business is games and SportsCenter.’” Miller finishes here by pointing to the Big Ten being off the table and the dearth of sports rights up for grabs in the coming years.
(57:35) Simmons thinks Fox Sports 1 should have aimed at ESPN2 first on the back of live rights and opinionated programming, but errs in trying to go after ESPN right from the jump. Plenty of talk here on FS1’s strategy of pushing opinionated programming.
(1:00:07) “The subs is a huge deal though.” Simmons points back to 2013 when subscriber losses were starting to standout, says ESPN expected the situation to level off, which it hasn’t. “They had no idea they were going to lose 10% of subs in three years. I think people have over-reacted to this and under-reacted to this. ESPN is going to be fine, it’s not going away, but there’s no way to get these people back.” Riffs on the new ESPN OTT play via BAMTech and also the shiftiness of ratings clarity. Miller: “We’re straddling eras, because we still don’t know how to talk about ratings.”
(1:04:35) Miller hints he’s going to update his seminal ‘Those Guys Have All the Fun: Inside the World of ESPN’ as his next project. Simmons is unhappy and interested all at the same time.
(1:16:57) As the two talk about Miller’s Powerhouse book and main character, Michael Ovitz, Simmons, “You know the best one ever was Bodenheimer. Bodenheimer left, incredible exit. Has there ever been a better exit in the history of media?” Miller: “No, in the history of Western Civilization. […] The guy with the lowest profile in the world turns out to be the shark. He’s the smartest guy in the world. […] The most unbelievable timing.” Neither knows a single person who would say one bad word about Bodenheimer. Miller: “The guy was the Nostradamus of the sports world.”
Why Uber, Tesla & Apple May Be the Most Important Companies for Athletic Administrators to Track
This one was pretty simple. Automakers and retailers are some of the biggest sports TV advertisers and their business models are under threat from Uber, Tesla, Apple, Amazon and Facebook. And, per Thompson’s angles, if the likes of Ford, Nissan, Toyota, Mercedes-Benz, Lexus and Walmart are ever significantly compromised, so too will be the cable bundle and linear TV. In just a few short weeks since this ADU was published, some important developments have taken place, including the increase in options to get fans/supporters to games.
The Miami Dolphins and Uber announced a deal that not only includes a designated pick-up and drop-off area at the new Hard Rock Stadium, but also a new ‘Uber Tailgate’ area where fans arriving via the ride hailing service can buy their own traditional tailgate spot with nearly everything provided. Dolphins President/CEO Garfinkel: “As (Uber CEO Travis Kalanick) spoke about the future of transportation, I wanted to make sure that we were ahead of it, that we were thinking five years down the road in renovating this wonderful Hard Rock Stadium to think about the future of transportation, not just where it is today.”
New Mexico and its Learfield unit also inked with Uber on a three-year pact to create a specific area at University Stadium for arrival and departure for fans. Uber ambassadors will also be on-site to help with questions and to increase adoption. Lobos AD Krebs: “We are committed to giving our fans a great game day experience, and Uber will provide our fans with a convenient way to get to and from the game in a safe, quick manner.” Here’s betting all of you in markets where Uber or Lyft are in service will have an agreement in place by next year, if not the end of this one.
Inc.com’s Bercovici reviews why a number of journalists in the space, like Variety’s Bilton and Bloomberg’s Fox, believe Uber is in trouble, though there are differing reasons as to why. Bilton argues Uber is connecting riders with drivers, not cars, and when the autonomous driving revolution comes, it will actually be to the benefit of auto brands, not Uber. Bercovici disagrees: “Uber is already a service company. All it has to do to be competitive in the self-driving world is acquire a fleet of cars, or partner with someone willing to handle that side of things. (Perhaps Tesla, as Recode’s Johana Bhuiyan suggests.) Service companies throughout history have fared just fine while owning some physical infrastructure; it’s only in the past few years that that arrangement has come to seem like a weakness. In fact, by investing in its own fleet, Uber will have done exactly the thing Justin Fox knocks it for not doing now: spending its billions on something that represents a meaningful defensive moat to would-be competitors.”
And finally, Stratechery’s Thompson points to self-driving cars as a software problem, not one of hardware, which is where incumbent automakers operate best, “there is no evidence to suggest that Ford has the capability to leap ahead of Google or Uber. Moreover, while Ford’s relatively slim margins may make a ride-sharing service attractive, nearly every aspect of the company would need to transform itself from a product model to a service model, and that is even less likely than the company leading the way in self-driving technology. I think it is much more likely Ford will eventually partner with Google or Uber as an OEM.” Thompson ultimately gives the edge to Uber and Google with the future to come in what could be one of the biggest disruptions of our lifetime, including rights fees for sports and college athletics.