Live sports, the lynchpin of traditional TV, making inroads to OTT

As new over-the-top (OTT) services continue to be launched both in Canada and the United States, online alternatives for live sports have also been increasing. But in a world where live sports continue to be crucial for the traditional television system — and the kind of revenue only available through that system is necessary to pay for expensive sports rights — it seems companies will have to continue a balancing act between the two technologies. The most important part of Rogers Communications Inc.’s $5.2-billion deal for NHL hockey rights is that it covers all platforms and runs for 12 years, Scott Moore, president of Rogers’ Sportsnet, said in a phone interview. “Which means that as a technology and distribution company, we’ll be able to follow the viewer wherever they want to watch hockey,” he said. “If that means they want to watch hockey on their tablet, we’re able to provide them with the best hockey viewing experience on their tablet. If in five years, they want to watch hockey on Google Glass, we’ll be able to follow them to Google Glass,” he said. “And if they want to watch hockey on a 3D hologram that’s projected out of their forehead, we already have those rights.” Where the balancing act comes in, Moore noted, is that even in 2015 the economic reality is that “pay cable over-the-air television are the best and most lucrative places to make a business case out of sports rights.” There is an increasing number of places to watch sports online, from sports-specific services like those offered directly by leagues like the NFL and MLB, to Rogers’ NHL GameCentre Live service, and most recently Dish’s offer of online access to ESPN in the U.S. More people are aware of these options, too. In the past year, big sporting events like the 2014 Winter Olympics and the 2014 FIFA World Cup provided “an awareness and usage boost for OTT video services,” Emily Taylor, an analyst with IDC Canada, said in a phone interview. According to CBC/Radio-Canada, which had the rights to both events, twice as much Olympic content was consumed online in 2014 than four years earlier, with similar increases in video views during the World Cup. While the industry has been experimenting with an expanding number of services, some customers are turning to pirated or “grey market” sources for their sports fix, Taylor noted, which can be “cheaper and more readily available and arguably maybe even easier to use for some consumers.” Figuring out how many viewers are turning to piracy is a challenge, as The Wire Report noted recently. “Really, anything that service providers or content providers can do to make legal, easy-to-use, reasonably priced ways to access over-the-top video for sports is to their advantage, to help reduce that illegal streaming and bring more revenue back into the TV services universe,” she said. Rogers launched its GameCentre Live OTT hockey product in September. According to Moore, usage is up “about 400 per cent” over the previous year (until Rogers bought the hockey rights, the service was offered directly by the NHL). Moore could not specify how many of those customers were those trying the service as part of a free trial for Rogers’ customers and how many were paying for the service, which costs $200 for the season. “More and more people are discovering it,” he said, though he added that there have been some growing pains around branding and consumers’ discovery of the product. “We’re working with the NHL to make sure viewers understand what it is and how to find it,” he added. While usage is up, it remains miniscule compared to traditional television. Moore said GameCentre Live can have as many as 40,000 to 50,000 people watching some games, or as few as 3,000 to 5,000 for other games — compared to more than a million people that a Toronto Maple Leafs game can draw on television. “ still nascent. It’s important, but it’s nascent,” he said. “Three years from now, that may be different. Ten years from now, it almost certainly will be different, and we have to be prepared with a number of different products and delivery mechanisms to be able to serve our viewer and our consumer any way they want to be served.” Moore added that Rogers wants to make sure that it strikes a balance between “being on the vanguard of technology, but also tethering those products to a cable subscription wherever possible.” “You’ve got to be ready for it, but you can’t all of a sudden turn off a switch and say we’re no longer going to be on over-the-air television, we’re putting everything on wireless and WiFi and you’re going to be able to watch on your tablet,” he said. “It’s not going to be that quick. It may happen in three years; it may happen in eight.” He noted that one reason Rogers’ partnership with CBC is only for four years is that change in how content is consumed. In a few years, an over-the-air television network may not exist, Moore noted. “I hope they do, but we have to be prepared for the day that those delivery systems may not be as robust as they are now,” he said. There are also challenges around monetizing OTT products. Ratings agencies still can’t measure wireless or OTT viewing accurately, something that’s necessary for advertising agencies and sponsors, Moore said. It’s also be important to retain a subscription revenue stream as viewing moves online, either through having it authenticated or tethered to your cable subscription, or offering a pay-per-view service, or having a subscription product like GameCentre Live, Moore added. While the industry considers these questions, we’re still a ways away from a tipping point where most viewing will move to OTT, IDC analyst Taylor said. The industry will have a lot of experimentation to do before that happens and it becomes clear what type of product will work best, she said — such as whether it should be ad-supported and what type of distribution model and distribution partners it should have. There is also “a bit of a learning curve and a comfort curve” for Canadian consumers before that tipping points happens, she said. “There’s so much experimentation right now, and I think it’s really a lot about keeping the money in the system, making it as easy as possible so people don’t turn to those pirated or grey market sources that are easier to use than ever before,” Taylor added. Gord Hendren, president of Charlton Strategic Research, said in a phone interview that sports are crucial to the current TV system. “There’s not a question that live sports is hugely important, and that it is the sole remaining piece of content that consumers prefer live,” said Hendren. “The current providers have got a lot invested in their sports portfolios, and it’s a core piece of their strategy.” But while the traditional TV providers are entering the OTT space, OTT companies could also decide to enter the sports world themselves. As a report from Ooyala Inc. on the state of the broadcasting industry in 2015 noted recently, “a major OTT player decide to bid for major live sports rights-and win.” “Could it happen? Yes it could,” said Hendren. “Could Google buy, let’s say, the rights to the Olympics globally, on all platforms?... And then it would all be channeled digitally and then they’d sell off linear rights as a secondary. Sometime in the future, I could see that happening.” For the moment, though, Hendren said that linear TV remains the best way to deliver live sports, since large audiences have significant broadband needs and consumers are likely to watch sports on their largest screen. He added that most TV service providers also have TV everywhere products that allow customers to watch sports online. “We are well-served in this country with regard to sports,” he said. He added that niche sports, like cricket in Canada, can find possibilities in the digital world. “When you’re delivering that kind of content, is it going to be embraced in the broad network? Maybe not, but it could be on a secondary, more digital platform.” Overall, current OTT offerings are complementary to the system, Hendren said, and a tipping point where viewership shifts mostly to OTT is still a long ways away. “We’ve done studies around this for the , and still a majority of viewership hours are consumed on linear TV, whether that’s live or on-demand or on a PVR,” he said, noting that’s something that’s going to “take years to change.” OTT activity for sports isn’t growing as fast as other OTT services, such as Netflix Inc., Hendren said. He noted: “In fact, it’s very entrenched in existing linear television, and I don’t see that trend changing in the foreseeable future.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Live sports, the lynchpin of traditional TV, making inroads to OTT

Broadcast | January 8, 2015

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