The Problem With Internet Companies Getting Major Sports Rights

I have a much longer series of posts planned on the broader issues surrounding the current era of sports on television, but I wanted to make this particular point because I think it’s particularly important.

The NFL is reportedly still considering an expansion and splitting of its Thursday night package to sell to another partner, and is reportedly interested in potentially selling games to a tech company like Google or Netflix. This comes as the NBA, still in the process of negotiating its next TV package, has been speculated to potentially also sell games to a tech company. And that comes amidst years of speculation that tech companies like Google, Apple, Microsoft, Facebook, or Netflix, could be the best candidates to challenge ESPN and completely upend the sports TV wars.

But I’m still unconvinced that Internet companies are really the threat they’re made out to be. In my opinion, the speculation surrounding them is mostly superficial and based on only a few factors, without seriously considering the circumstances and what their entry into the market would actually mean, and I don’t believe they’re a realistic candidate to score sports rights, or that if they are that it would turn out to be a good idea, or that if it does that they would really be as revolutionary as they’re cracked up to be.

For one thing, I’m having a hard time seeing exactly how tech companies would distribute games and make money off them. I can’t imagine Google would simply slap games on YouTube, as that would mean they would need to collect money through advertising alone, when the great advantage of sports networks like ESPN is their dual revenue stream of advertising and subscriber fees. That means tech companies would need to restrict access to the games in some way, and most of the options don’t sound very promising. Would Apple restrict games to users of iOS devices and Apple TV, or Google restrict them to users of Android devices and Google TV? That seems like it would have the potential for disaster as people would be shut out for choosing the wrong product, especially if we’re talking about being the equivalent of a national television partner as opposed to getting a piece of the out-of-market package. A company like Netflix could distribute games to its subscribers, but that would be the equivalent of a premium channel at best. The best-case scenario probably involves Facebook or Google effectively blackmailing people into signing up for their services in order to view the games, but even then I’m not seeing how that would help them raise enough money to be competitive with sports networks.

And none of these approaches would avoid the other issues, certainly not the issue of being a middleman. The nature of TV is such that sports benefit from distributing their games through middlemen, which is why none of the sports leagues that own their own networks have abandoned their relationships with other partners; from its humble beginnings as the Outdoor Life Network, the entity now known as the NBC Sports Network has acquired more and more properties to obtain more distribution than any sport-specific network other than Golf Channel and, until this past August, Speed – and those two had a multiple-year head start on gaining distribution before the full effect of the sports TV wars set in. In theory at least, fans of any of its properties can drop in on coverage of any other property, thus broadening the exposure to that property. But the open nature of the Internet already provides exposure to anyone who wants to drop in, so I’m not sure what sports leagues would gain from selling games to Google when they could cut out the middleman and distribute games themselves. In this sense, Major League Baseball has already entered this territory; its service regularly offers one game for free each day to non-customers.

But none of that begins to approach the most fundamental issue, the basic distinction between the Internet and television, which I laid out before: the Internet is good at distributing many programs to a few people, but television is good at distributing a few programs to many people. The Internet effectively consists of one “channel” for each of its customers, meaning you have a channel that you can program yourself, allowing you to watch whatever you want whenever you want. But if many people want to watch the same thing all at once, i.e., some sort of live event (i.e., a live sporting event), they all have to watch it on their own individual “channels” – the server has to serve the event to each individual computer that asks for it. We saw the result with the massive issues NBC had with streaming of events at the London 2012 Olympics, and those didn’t reach more than a million or so people at a time. Things haven’t improved that much since then:

Perhaps the issues surrounding large-scale Internet streaming can be fixed with bigger pipes and more investment in servers and the like, but this structural issue will remain: why distribute the same event many times to each individual customer if you could find a way to distribute the event once and allow anyone, at least with the proper credentials, to hop on the stream with no additional strain on your end? On this front, it’s instructive to see how the mobile world, which (at least at the moment) already lives in the world where all television is over the Internet, is dealing with this issue, and it’s clear that they at least recognize it: AT&T has begun work on a network that will precisely allow them to push video out to many different devices at once. One thing strikes me about this project: it is a completely separate service that requires use of completely separate spectrum from AT&T’s normal 3G/4G network (indeed, spectrum that had most recently been used for a similar service). In other words, once you begin broadcasting the same signal for any device to hop on to, it is no longer the Internet, at least not as we know it. In this particular case, it becomes something fundamentally not that different from over-the-air broadcast television – indeed the spectrum in question may well have once been TV spectrum.

Once the distinction between and relative strengths of TV and the Internet are recognized, it’s clear that at least on a large scale, showing a single live event for everyone to view at once is something the Internet simply is not suited for. The great advantages of the Internet for viewing video are the ability to view it anywhere you want and to watch whatever you want whenever you want, but only the former applies to live events like sports, and even that goes away if the technology is developed to deliver content to many devices at once. Broadcast television is already halfway there, but is currently only reaching mobile devices through optional kludges attached to the existing broadcast standard, rather than having one standard suited to reaching all devices whether stationary or on the go. If the television industry recognizes its place in a future where Internet distribution of video reaches maturity – a place where its purpose becomes refocused specifically on the broadcasting of live events – adopts a standard that maximizes its investment in its existing infrastructure and reorganizes its business accordingly, it can survive and effectively compete in that future for years to come, even if that future is substantially different from what exists now.

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