The Future Of Sports and TV

The future of sport on TV isn't on TV

Markie Z Guest Bloggers - David Ramli and Max Mason

Tuning into sports is a near-ritualistic experience. You rush for the big screen, turn it on to a TV channel and get hit with the pre-game chatter of commentators and pitches from major advertisers.

But in the next few years a subtle shift will sneak into your living room. Rather than start with irrelevant noise, you'll hit a calm landing page on the TV or tablet computer tiled with apps for your favourite sporting codes.
This change means much more than a few seconds of added convenience. It represents one of the biggest waves to crash against the sports, broadcast and telecommunications industries for almost 100 years.
And not everyone will survive the hit intact.

Changing landscape

Optus this week surprised many Australians when it won the exclusive Australian broadcast rights to the Barclays English Premier League – outbidding incumbent sports giant Fox Sports with an offer thought to be well more than $US100 million.
This was the first time in Australian history that a phone and internet provider had bought exclusive sports broadcast rights. And to say it shocked the incumbent players is a dramatic understatement.
"I thought Optus' purchase of the Premier League was one of the more intriguing moves I'd seen in sports rights for quite a long time," ABC managing director Mark Scott tells Fairfax Media.
"I think it clearly brings in more tension around television broadcast rights and I think it all depends on what distribution strategy Optus develops for that content."
Network Ten chief digital officer Rebekah Horne worked with Optus chief executive Allen Lew back when he was spruiking pixelated sports matches on Nokia phones – a product ahead of its time in 2006. She says the latest deal underlines the disruption facing the traditional titans of broadcasting.
"We can't think about our competitors in a traditional sense any more," she says. "Anyone who is able to amass audience and distribute content is a potential competitor in the future.
"It will be interesting to see whether there is a broader play outside of Optus, or whether it's an Optus ring-fenced kind of offering."
But analysts warn that Optus' push is just the start of a fundamental change in the way we get all content. In June the right to broadcast a rare NFL match in London was won by search provider Yahoo!, which beat social media provider Twitter for the rights with a $US17 million bid – a move that attracted more than 15 million viewers.

Fear and opportunity driving change

The two main forces driving this convergence of media, telecommunications and television broadcast players are fear and opportunity.
Telecommunications companies such as Optus and Telstra fear becoming nothing more than the people who sell "dumb-pipe" internet connections. The $56 billion national broadband network aims to get high-speed broadband to everyone by 2020 and telcos must do more to avoid becoming commoditised like gas and electricity providers.
Television broadcasters have long been the gatekeepers for advertisers wanting to reach into Australia's living rooms. Their fear of being bypassed is rapidly being realised thanks to content players such as Netflix delivering movies and top-shelf TV shows on demand over the internet.
Sports codes are addicted to the large amounts of money that locking in TV broadcast rights with the likes of Fox Sports can offer, but they fear losing touch with audiences that want to go online.
The opportunity for everyone is clear; the chance to retain and grow customer numbers while gaining an intimate understanding of viewers using the content they want to watch.
In your future living room, as you watch the Hawthorn Hawks or Parramatta Eels cruise to yet another grand final victory on a smart TV, the content is tailored to your tastes – none of the commentators you despise get air time and replays show the angles that a computer algorithm has decided that you best respond to.
Even the ads that pop up will be tailored to your needs – offers for the holiday destinations you've been searching pop up and never again do they interrupt the key play in a live match.

Future in viewers' hands 

Sports codes are addicted to the large amounts of money that locking in broadcast rights can offer.
TV broadcasters are also using streaming to capture audiences once they leave their homes. Seven began live streaming last week and had more than 300,000 punters watching the Melbourne Cup on their mobile, tablet or desktop.
"It creates a new content moment, which we believe ... is additive to the TV experience because the bulk of those people were on the cellular network, out of home, on a device and importantly, nowhere near a television," Seven West Media chief digital officer Clive Dickens said.
Much of the shift away from the old model of delivering sports is being driven by the codes themselves, which have finally started to realise the true value of their content in a world where news, movies and TV shows can be packaged and streamed by global players with deep pockets.
The United States is seen as sport nirvana by many codes and fans alike. Major League Baseball Advanced Media lets fans worldwide buy digital passes to live matches – bypassing the traditional cable television stations.
The strategy has been so successful that in August the once-unthinkable occurred – America's National Hockey League partnered with the baseball streamer to launch new services with shared revenue. In Australia, this would be like the AFL taking control of the NRL's digital streaming rights.

Cricket seen as a leader 

Cricket Australia has maintained ultimate control over its streams. Photo: Getty Images
Cricket Australia is recognised as one of the leaders and is changing the way its fans watch matches. Where sports codes traditionally rely on TV stations and telcos to install the required technology, almost three years ago it chose to take control of all digital rights and hired Accenture to build the infrastructure required to stream games online – despite a concurrent deal with TV broadcaster Nine Entertainment.
"When we did the deal there was a little trepidation about what the impact would be on linear broadcasters by having a live stream across all of our platforms," Cricket Australia media, communications and marketing executive general manager Ben Amarfio says.
"But it's actually grown the pie – the ratings for cricket over the journey of this relationship have held up extremely well.
"We get up towards 1.4 million people watching international cricket for large periods of time all through the summer … so there's been no degradation and at the same time we've seen our live app downloaded onto over 2 million devices and a lot of video views."
Optus announced in October it had signed a partnership deal with Cricket Australia that included free live passes for its customers, sponsorship rights and exclusive content.
But Cricket Australia maintained ultimate control over its streams – a key thing that allows it to tailor the content to what the fan base rather than the broadcasters desire. Ultimately, this helps build the code's popularity in time for the looming battle over live-streaming rights.
"Broadcasters are getting into streaming, pay TV companies are getting into broadband and telcos are getting into content so everyone is converging into the middle," he says.
"So there will be media/telco companies who want to scoop up as many rights as possible to make sure they get across as many platforms as possible because they'll want to go where the eyeballs are.
"Sport is still one of the last few bastions able to aggregate large numbers of people … and that's one thing the streamers [like Netflix] are currently not in."

Tech makes it happen 

The television of the future probably won't have an antenna at all. Photo: Karl Hilzinger
One of the biggest drivers of this push is the rising tide of internet access. Like it or not, the government's NBN project aims to deliver broadband speeds of more than 25 megabits a second to every home and business by 2020.
It's around this point that telcos, content providers and broadcasters will have a genuine ability to switch away from using TV signals and onto internet-enabled streams, which cost less to deliver thanks to fewer signal towers and spectrum costs.
But this will also be the point at which the traditional broadcasters lose a key reason they've traditionally been the gatekeepers to Australian sport. The television of the future probably won't have an antenna at all – every kickoff delivered over broadband speeds thought impossible a mere 10 years ago.
In the new era, however, telcos will hunger for scale and profit margin because the NBN will be their wholesale suppliers of broadband. Premium players such as Telstra and Optus will have to justify why they're more expensive than the TPG Telecoms of the world and they'll use things such as content and customer service to do so.
"Sport today has a lot of traction, especially in a country like Australia, and that's why it's so attractive for some of the providers," Vodafone Hutchison Australia chief executive Inaki Berroeta says.
"It was once carried by single providers but now with the NBN there are other ways of broadcasting it.
"But there are also some of the challenges you see in other markets where the fact that some providers have exclusive rights means customers have to buy multiple platforms if they want to see all the sports."

Telstra stuck in a tough spot 

In the new era, however, telcos will hunger for scale and profit margin. Photo: Peter Riches
The nation's biggest phone and internet provider, Telstra, is stuck between a rock and a hard place. On one side is its 50 per cent stake in the highly profitable pay-TV provider Foxtel, whose premium margins rely on being the go-to provider of live sports and other content.
But on the other is the NBN churn that could strip Telstra of its vital customers unless it offers users what they want, namely content on demand. Its head of media, Joe Pollard, who previously worked at Nine Entertainment, says the strategy remains one of offering an entry-level service with Telstra TV or its more-expensive Foxtel bundles, which will remain viable thanks to deep pockets.
"I think it'll come down to who is willing to pay for the rights," she says. "At the moment where all of the commercialisation of that content sits well and truly in the free-to-air advertising or pay-TV model.
"It would be very, very difficult to have an at-scale payback on rights on the amount of money that is being paid for in the ... direct-to-consumer model."

Roadblocks ahead 

Optus must spend big on infrastructure if it wants to deliver high-definition football. Photo: Getty Images
But there remain plenty of cultural, regulatory, technical and financial barriers to the shift taking off. Australia's relatively small population makes it harder for sports codes to reach consumers directly as they have in the US and Europe.
And the anti-siphoning rule, which stipulates that free-to-air broadcasters must get first dibs on certain hugely popular events and matches, could well prevent the TV stations from becoming extinct.
Australian Competition and Consumer Commission chairman Rod Sims this week said the rule may need to be reviewed thanks to the rise of online streamers and players such as Optus – a point supported by Seven chief executive Tim Worner.
"The acquisition of sports rights by telcos and others will place pressure on the current anti-siphoning framework, which only covers free-to-air and pay-television broadcasters," Worner says.
"The one thing we do not want in this country is to create a community of haves and have nots, where only those that can afford it can watch the sporting events that up until now have brought the nation together."
Optus will also be forced to spend big on infrastructure if it wants the ability to deliver high-definition football over the internet with data centre upgrades just the tip of the iceberg. Its rights kick off from August 2016 onwards – more than four years before the NBN is due to be completed.

The future is here 

Optus caught the dominant players flat-footed.
None of this is likely to stop the wave.
Monash University's Associate Professor Brett Hutchins, who is halfway through a four-year research project into these specific changes, tells Fairfax Media that the move by Optus caught the dominant players flat-footed.
"Fox Sports no longer has the unquestioned dominance they've long enjoyed ... and they're not accustomed to losing so I'm sure this will shorten them up but it'll also focus their attention," he says.
"There's a tipping point in most markets and they weren't aware the tipping point was already here.
"That has something to do with complacency and the idea that 'the Australia market is so small [the sports codes] will always come to us' but while ever they've got AFL, NRL and some cricket and the A-League as well as super Rugby I think it'd be pretty silly all those sporting organisations want Foxtel to be weakened."
But if Cricket Australia's approach of wooing fans directly takes off, it may be the case that none of the broadcasters gets a choice in the matter.
"Once you build a capability, like [Major League Baseball] have, then one of the benefits you can do is look into other areas and how else you can use it," Amarfio says.
"We're developing capability as well and we've had to because we've had to become content creators that we never were before – we're cricket administrators.

"So down the track we may have to look at how we branch out and leverage ... whatever we become great at."