Red Five
Heisman Trophy Winner
Interesting article from SI's Andy Staples on what the future of college sports TV deals might look like and who the major players will be. Talks a lot about the Big Ten and what Delany could have up his sleeve for the next round of negotiations in a few years.
Much, much more on this topic as well as random CFB nuggets at the link.
Commissioners and ADs look at tech giants as the white knights that could allow their leagues to keep growing revenues, but the question is whether a Google, an Apple, a Netflix or a Hulu would even want to get into the live sports business. If they did, it would be unwise to assume they would overpay simply because their market capitalizations dwarf those of the players in the marketplace now. The money could stay flat or drop even if the tech companies join the fray, but the leaders of college sports hope the competition for a limited resource might drive up the price. “Long-term, I’m very bullish on the value of premium sports rights,” Scott said. “I see more competitors. And frankly, competitors with bigger market cap than ESPN or Comcast or DirecTV. Some of these companies we’re talking about are huge by comparison. If they decide that sports is a vertical they want to get involved in in a big way, that’s good news for the Pac-12 or the NFL.”
Everyone in college sports is watching Amazon’s streaming deal with the NFL closely. A year after Twitter paid a reported $10 million to stream Thursday night NFL games that also were broadcast on television, Amazon is paying a reported $50 million for the same thing. The games will be available for streaming by Amazon Prime members, who pay $99 a year for expedited shipping as well as streaming access to a large library of movies, shows and music.
Why might Amazon want to stream sports? Because it can serve up ads during games. A fan watching a game on TV would have to note a product that interests him and then seek it out either on the Web or at a brick-and-mortar store. Amazon could place a link within the ad that allows the viewer to purchase the product immediately. That ability to cash in on an impulse buy could be valuable to Amazon and to the manufacturers of the products purchased.
We can further extrapolate that Amazon might want to buy exclusive sports rights to leverage fans into purchasing Prime memberships. Research has shown Prime members spend more money at Amazon than non-members. If Amazon were to buy the Big Ten’s Tier 1 rights—meaning you’d need a Prime membership to watch Michigan-Ohio State or Nebraska-Wisconsin—that could mean millions of additional members who might eventually spend thousands more a year. Fox’s new six-year deal with the Big Ten will pay the league an average of $440 million a year for those rights. If Amazon paid $500 million a year for the same thing and it netted two million new Prime members who then spent an average of $1,500 more per year on Amazon than when they were non-members, Amazon would do an additional $3 billion in sales. Amazon’s profit would be $2.5 billion minus its cost on the products purchased and the production costs of the games. Assuming a respectable markup on its retail offerings, Amazon could make money on that deal.
The key is the incentive for a tech company to jump into the sports rights marketplace. Why might Google do it? Because Google is a television distributor now. Last month, the company launched YouTube TV, a $35-a-month service that offers streaming access to the most popular broadcast and cable networks. By 2022, when the conferences begin exploring their next deals, Google will have very detailed user information that will tell it who watches what sports and in what numbers. If the company sees huge demand, it might pursue rights to leverage more users into buying its service. Google and Facebook also can profit from anything that causes users to spend more time on their services. Those companies can collect massive troves of user data that they can then use to sell ads that target the perfect audience for the product. Google and Facebook already do this with their Web sites and mobile apps. Access to your viewing patterns would only enhance their ability to sell these targeted ads. And if they could buy something that guarantees you’ll pay for that service monthly and use that service for three hours at a time on a regular basis, that might be more profitable for them.
Everyone in college sports is watching Amazon’s streaming deal with the NFL closely. A year after Twitter paid a reported $10 million to stream Thursday night NFL games that also were broadcast on television, Amazon is paying a reported $50 million for the same thing. The games will be available for streaming by Amazon Prime members, who pay $99 a year for expedited shipping as well as streaming access to a large library of movies, shows and music.
Why might Amazon want to stream sports? Because it can serve up ads during games. A fan watching a game on TV would have to note a product that interests him and then seek it out either on the Web or at a brick-and-mortar store. Amazon could place a link within the ad that allows the viewer to purchase the product immediately. That ability to cash in on an impulse buy could be valuable to Amazon and to the manufacturers of the products purchased.
We can further extrapolate that Amazon might want to buy exclusive sports rights to leverage fans into purchasing Prime memberships. Research has shown Prime members spend more money at Amazon than non-members. If Amazon were to buy the Big Ten’s Tier 1 rights—meaning you’d need a Prime membership to watch Michigan-Ohio State or Nebraska-Wisconsin—that could mean millions of additional members who might eventually spend thousands more a year. Fox’s new six-year deal with the Big Ten will pay the league an average of $440 million a year for those rights. If Amazon paid $500 million a year for the same thing and it netted two million new Prime members who then spent an average of $1,500 more per year on Amazon than when they were non-members, Amazon would do an additional $3 billion in sales. Amazon’s profit would be $2.5 billion minus its cost on the products purchased and the production costs of the games. Assuming a respectable markup on its retail offerings, Amazon could make money on that deal.
The key is the incentive for a tech company to jump into the sports rights marketplace. Why might Google do it? Because Google is a television distributor now. Last month, the company launched YouTube TV, a $35-a-month service that offers streaming access to the most popular broadcast and cable networks. By 2022, when the conferences begin exploring their next deals, Google will have very detailed user information that will tell it who watches what sports and in what numbers. If the company sees huge demand, it might pursue rights to leverage more users into buying its service. Google and Facebook also can profit from anything that causes users to spend more time on their services. Those companies can collect massive troves of user data that they can then use to sell ads that target the perfect audience for the product. Google and Facebook already do this with their Web sites and mobile apps. Access to your viewing patterns would only enhance their ability to sell these targeted ads. And if they could buy something that guarantees you’ll pay for that service monthly and use that service for three hours at a time on a regular basis, that might be more profitable for them.
Much, much more on this topic as well as random CFB nuggets at the link.
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