Don’t be Evil!

Zaz (David Zaslav), boss of Warner Bros Discovery, can’t catch a break.

We have often covered in these Columns how he is now really struggling. For a sport strategy post NBA, with tense carriage deals negotiations, VENU uncertainty, the debt, and basically trying to “turnaround” a failing company and share price.

But surely he could rest easy on the prospects of the “Joker“ sequel with Joachim Phoenix? A slam dunk (if Zaz still allows basketball analogies), based on the success of the first one. 

Alas no.

The film has been an unmitigated disaster, both critically and financially, lampooned, and figuratively pelted with Rotten Tomatoes. For those that like the disaster genre, Hollywood insiders will explain to you in grotesque detail all the lay-ups (😉) missed in the script, casting and marketing of this film. Mamma mia, why would you go to Venice, killing any natural suspense and build-up in hype? Post-Italy, everyone knew weeks ago that this sequel was a true dog and destined to fail. 

 

What has this got to do with a sportbiz Column? 

Well… everything, really.

Warner Bros Discovery (WBD) is one of the biggest bidders for sports rights, so the bloodbath of “Joker Folie a’ Deux“ will ultimately cost our sector dearly, especially those hoping for interest in their rights from BT Sport, now called TNT. By now it should be clear that sport is simply a little boat being buffeted mercilessly by storms much much bigger than itself.

Hurricanes coming from America’s West Coast.

The existential travails at group level of the likes of Disney, Comcast, WBD, NBCUniversal, the regional sports networks, are exactly where we should all be now focusing our radar, if we want to manage sport well. Big Media has made our industry rich in the last 30 years, and if it catches a cold, our sector will get pneumonia.

It’s already got a fever, a sore throat and a runny nose!

 

Big Media itself is “in play”.

Financially and strategically, media conglomerates and broadcasters are flailing around as they fight the end of the cable bundle, being decimated by piracy and cut-the-cord. The industry is full of lay-offs, and salary cuts for talent. Because, frankly, younger customers don’t even know what the fucking cord is, and they ain’t paying for our subs.

The old model is done, and streaming isn’t so profitable, so cost-savings and consolidation is just inevitable. This Sportico article tells that tale.

Don’t forget that AT&T, buying DirectTV, was one of the most horrendously stupid acquisitions in corporate history. It was lauded at the time, because everyone is a genius in a bull market.

Sportico call it correctly. 

Too late in the game.

All the important signposts for sport are now visible to us in California, either in Hollywood or Silicon Valley, and I often find myself looking over the pond, as…..

🎶the sun comes up over Santa Monica boulevard. 🎶

Any old excuse to enjoy the magnificent Ms Crow here.

This ain’t no disco, ain’t no country club either. This is LA, and it is our destiny.

 

All I wanna do this Sunday is ask the obvious question?

 

What is Big Tech going to do now?

Apple, Amazon, and especially Google.

It is today’s Column. 

My generation is old enough to remember Larry and Sergey, founders of Google, and everything in that amazing story that led up to their IPO in 2004, exactly 20 years ago. Especially the Playboy article. Google it 😆!

It was a very different world. Some may even remember the West Wing episode when Josh Lyman tells Donna to “google” for some information, and this, for many, was exactly the moment when the company, now called Alphabet, won the browser wars. 

If the President uses it, then I’m ditching Netscape, Mozilla, Microsoft and whatever else is out there. The cool kids use Google.

 

Google has grown to be “a monopoly”.

Very few will remember that the original company motto for Google was “Don’t be Evil”, a phrase in fact included in the IPO prospectus and the corporate code of conduct. Refresh your memory on that here, (wikipedia), because it shows how the world always changes, and the road to hell is often paved with good intentions.

Today Alphabet is, in fact, under the full court press (😉) of the law courts.

Google is a monopolist, and it has acted as one. – US District Judge Amit Mehta.

The “crime”, in plain English, is that they have used their leverage to buy exclusive distribution deals, making sure other browsers, like DuckDuckGo, are being actively kept out of competing. This is a big risk for Alphabet Inc and they will watch the US election in November with great interest, to imagine what can come next. Could a new administration take a different view on Big Tech?

This article gets Column readers fully up to speed.

Don’t be Evil seems rather quaint.

Something very similar happened to Microsoft a generation ago, as regulators made the same accusation, exactly at the time when it wasn’t even needed anymore. The market was changing so much, with the invention of the internet, that Microsoft was losing its monopoly naturally. I personally believe that this is also now true for Alphabet, with today’s intense market disruption in content, AI, distribution.

If I was a Google, I’d be more worried about ChatGPT.

 

The future of sport depends on this court case. 

Hyperbole?

What happens in these courts, and the fall-out, is going to change absolutely everything, in search, in AI, in digital publishing, SEO agencies, platform distribution and, most importantly, content. That obviously includes sport, but more holistically than we think. 

YouTube (YT) is a hot topic in sport these days, but people are missing the real action. Many of my colleagues are gushing about how sport needs to embrace YT, and celebrating the success stories. Good. 

Many others are putting out excellent pieces on practical strategies for YT and sport, offering great advice. I’d like to specifically mention Paola Marinone, Paul MacDonald, Jo Redfern and Andy Marston as my go-to people on all this.

Here is a stunning summary Jo did for me. Some people are so generous.

There is absolutely no doubt on the virtue of sport (et al) using YT for return, to widen an audience, top of the funnel conversion of fans, awareness, etc. I’m not going to repeat, or compete with, my friends above, also because I don’t believe that this is actually the main macro issue.

 

This moment in time is much bigger than explaining to sport how to tactically use YT.

That is line-manager stuff mainly, and this publication has a CEO/investor audience also.

The big vision is really about ownership of the screen, discoverability, choice paralysis and the future of distribution. About which platform, or new cable bundle, is going to dominate sport delivery going forward, and how will all that impact future bidding for sports rights?

The real insight is in understanding the rationale behind YouTube TV, and how it will likely change everything. But we shall get to that product later. For now, we just need to realise something very very important.

YT is this generation’s search engine, and it is where kids already find absolutely everything in their day-to-day. Not just content, but “how-to” videos to get them through life, relationships, and the workplace. 

 

Kids now live on YT.

My son is fifteen. He’s never going to sit down and watch live sport on a TV channel, because he doesn’t watch anything on a TV channel anymore. However, if it was streamed on YT, with the right kind of personality, he may be interested to do that.- Murray Barnett.

Sadly, most sports leagues and clubs don’t yet really get any of what Murray is saying so profoundly in this quote. They only see YT as an add-on, a little tactical jam on top of their main strategy of getting a big cheque for their rights, (broadcast and sponsorship).

Because, deep down, sport hasn’t changed one bit. It talks a lot, on endless podcasts and at conferences, but behaves exactly as it always has.

It is undeniably a slow “follower” in understanding and adopting tech, AI, and new distribution (like YT or Twitch), and still refuses to see that the big media rights bids and minimum guarantee days are ending. This is delusional denial, and/or ignorance.

The WSL example of YT success is great and we must congratulate them, but how much of all that was forced, because they could not get their renewed improved media deal with Sky away? And the FA Player is rubbish. 

Regardless of how sport arrives there, it needs to get up to speed, STAT, on what Google/YT now is.

 

The datapoints don’t lie.

1.

There were 35bn hours of sports content viewed in the last year on YT, up 45% on the previous year.

2.

The core of sports on YT is highlights. The majority of major sports leagues, bodies and broadcasters around the world now upload highlights immediately after matches, regularly generating 1m+ views per clip, with many monetising via ads. But let’s be very very clear: today, unless you are Mr Beast, you aren’t going to be making a lot of money out of YT ads. Not yet anyway!

It will come soon, as more of the TV media-buying budgets switch to content on platforms. But not today.

3.

Sport also uses the platform more and more for “shoulder content”: training footage, player interviews, press conferences etc, to increase fan engagement. Liverpool have 10m+ YT subscribers, and most EPL clubs have 1m+. Maybe not yet a big revenue driver, but social numbers help in selling sponsorships, in theory. Sadly, one of the big gaps at rights holders is that they don’t have the skills to sell digital sponsorships well. Ask Horizm.

 

YT today is marketing, awareness, and reach. 

Swimming where the fish live, ideally using partnerships with influencers to get to these new audiences, to fill the top of the funnel. Not just for sports. For any message.

Alex Cooper, the host, comes from Barstool, and now is a major media influencer in her own right.

I am anything but a Kamala fan, but her use of “Call Her Daddy“ (I’m told by my daughter) has gone down so well, with extremely high engagement. The Donald is using exactly the same tactic with Joe Rogan and Theo Vonn. Some of the more immaginative football clubs, like AC Milan, are also now doing similar things with YT.

So are the smartest athletes. This article is instructive.

According to Two Circles, Gen Z are 74% more likely to be drawn to a sport by a certain individual/influencer (rather than a team), and yet some leagues still try to prevent these players promoting the game..

Accreditation is generally not possible for the photography/videography of an individual player, specifically content to be published on their social media. – Bundesliga

Good luck winning that war. You don’t market anything well by preventing your most popular assets from creating content about it.

It’s just insanity, but this is the sports industry.

You take this sector outside its old playbook of selling exclusive live rights for a big up-front cheque or MG, and people are just utterly adrift.

So where is all this going? 

 

It’s the Highlights, stupid. 

The biggest single conundrum facing sport is right in front of its nose, but basically still totally ignored.

The industry sells the rights to live access of a full game: 90m, four quarters, nine innings, five sets. That’s the product and revenue model. 

But that’s not what the market is going to want going forward.

In Como the most emotional debate of all was around if women’s football should drop the 90m format entirely. Their full game arguably will never have product/market fit as a media product for broadcasters. It’s not what the market is demanding these days. It should move directly to King’s League………if you pass GO, collect a significantly higher rights fee and fan engagement. 

This trend has been visible for years, with examples like House of Highlights (ultimately bought by Bleacher Report). Kids want a product of much quicker gratification, and wow betide anyone not offering the SKIP button on pre-roll YT video. They have no patience for the old leisurely pace of sport delivery. Remember Murray Barnett’s boy.

I saw all of this gestating 15 years ago, clear as day in the analytics, from my time as an investor and Chair of GivemeSport. In fact, most of what I’ve written in recent years has come from what I learned about fan media consumption working with Jae Chalfin and Nick Thain.

The analytics never lie, and sport really needs to start getting its head around a future where its product is not necessarily going to be live games, and the mass-market offering goes back to the good old pre-90s days:

Highlights. 

 

But what about the super-fan? 

For the uber-committed fan, highlights will however never be enough, and they will always want the full-fat experience of their passion. Specifically they will demand what this industry has called a variation of an OTT, owned-an-operated, DTC, media hub. On a subscription model.

All serious sports bodies, if of big-enough size, will need to have one of these. It is the whole know-your-fan ARPU playbook, based around the rich data and spending power of the super-fanatics of any sport.

 

The intelligent question today is: who exactly is going to deliver that? The rights holder?

What if we admit that sport organisations just don’t have the DNA to do the whole data B2C thing? What if all these services and tech providers banging their head in this industry just realise that it’s a thankless task?

Whether it’s data services, or AI code, fan engagement widgets, or frankly anything around operating entertainment content in a modern way, sport doesn’t want to know. If we are very honest, they don’t care about data, and they won’t pay for any of these services. They can’t conceive the concept of any “investment” in all that, and nine times out of ten want it all for free, ideally linked to a sponsorship. Everyone reading this paragraph knows this to be exactly true. It’s tragic but accurate.

In fact, over the years working with many B2B sportech providers, I myself have gotten very jaundiced about selling tech into sport. Such that I’m starting to conclude that it’s a philosophical mismatch. Sports organisations are best when focussed on winning games. Athletic excellence. The rest isn’t for them, and they certainly won’t divert player budgets into investment to create a true B2C business.

NOT. A. CHANCE.

They will play around the edges, tick a few boxes, and secretly hope the world goes back 10 years to the old B2B bull market in rights. Because that is all they know as a revenue model and a skill. Tendering rights.

 

So who will build the DTC super-fan content?

Big clubs like Barcelona have started to spin off their “Studios”, and they won’t be the last.

Again the US gives us the first signals. The NFL are selling their media hub to Gerry Cardinale? This article clearly shows the direction of travel. Rights holders are getting out of the content game, and looking to sell or partner.

I know of a major European soccer club actively looking to offload its media arm under the strap-line:

All investment needs to go on the playing side.

So there remains three candidates to build a proper DTC offering.

Media companies like Paramount; financial investors investing and finding the right operational management; Big Tech.

 

Welcome to the “Platform Wars”

The “streaming wars” of the last 5 years are in retreat, as broadcasters all now take a step back to lick their wounds, and mop-up the red ink. The real conversations are today around who has the real leverage over carriage deals, in the eternal debate as to whether content or distribution is king.

One senses that “distribution” is now getting the upper hand in the race to recreate some kind of bundle.

All kind of deals are getting done at pace, as everyone knows that whoever wins the “platform wars” owns the client. It’s similar thinking to GLASS from Sky. If you control the screen (HDMI 0 as Barney Francis calls it), you don’t necessarily need to bid for rights. You are the webmaster, and you can clip a coupon on everything.

 

Who is best placed to win the platform wars?

Amazon, Apple, Netflix, Comcast, Disney?

They are all now making their big chess moves, many in obvious marriages of convenience. Here is an example.

 

…because they are all in truth scared of Alphabet/Google/YT. They know.

Highlights are already owned by Google/YB, with OneBox. This lets you get a very quick solution to what you need to see in a game, and it’s working very well. People less and less are going to Match of the Day, or Champions League hubs for their fix, and YT has won the war for highlights, especially for teens. And from there the kids will find “on platform” other sports, look at skills videos, old player clips, archive.

YT is their gateway. It is their Wikipedia.

Let that sink in. It’s dramatic. If you have read nothing else today, read this, which explains why. 

More and more, the screen to consume all of this will be the connected TV. Not mobile. Google/YT is going after your living room viewing hours, and they are in fact now the major competitor of Netflix. They will soon be pitching for those massive TV ad budgets.

So sport just getting good at YT tactics isn’t the point. It is a bigger strategic discussion, and must be at the core of all thinking by this industry’s CEOs, and every sport rights strategy.

This is why YouTube TV is so interesting.

 

YouTubeTV is the new bundle.

For most readers of this Column who are outside the US, YouTubeTV isn’t well understood. It isn’t present in Europe, but the smoke-signals of its growing importance are all in our newsfeeds.

Jen Chun, the NBA executive most responsible for negotiating the league’s local rights deal with Diamond Sports, has left to join YouTube as managing director and head of sports and studio partnerships. The poach is an obvious tell that YouTube plans to continue amassing sports rights: in December 2022, it acquired Sunday Ticket, and earlier this year, it was involved in negotiations for an NBA package that ultimately went to Amazon.- Puck.

YouTube TV is an aggregator subscription platform, and is just frankly “cable” reimagined. $73 a month.

It lets you watch live and on-demand TV from major broadcast and popular cable networks like ABC, CBS, NBC, ESPN, AMC, HGTV, TNT. 100+ channels of local and national live sports, breaking news, and big shows the moment they air. You’ll also get unlimited cloud DVR storage space and can share 6 accounts with your household. It has, of itself, also made a serious investment in rights, with the NFL Sunday ticket package.

 

YT’s sports strategy is key to understanding its broader streaming ambitions.

They clearly see an opportunity to capture most users as they cut the cord, as their customer journey is so seamless. YT has the unique benefit of being a distributor of content across V.O.D. and live, and also being a content company that can monetize time and attention after audiences are done with a particular program. Fans can watch an upcoming game through YouTube Channels and then watch additional content for free on YouTube without ever leaving the app. Attention is fully captured and monetized by one platform. The hotel is Californian.

🎶 you can check out any time you like, but you can never leave 🎶

It is global, with tremendous scale, and high adoption on smart TV sets, and that gives amazing leverage. Even though some streaming services, including Disney+ and Netflix, have backed away from aggregators, the industry’s tune may be changing. An aggregator with a never-ending funnel of content that exists on the world’s most powerful recommendation system is a huge advantage at a moment when every streamer is currently exploring opportunities and partnerships, without spending huge sums on marketing.

YT is the new content bundle, built with two huge advantages: it’s connected to the biggest search engine in the world, and maintains the most time spent per platform monthly on television sets in the US, according to Nielsen.

YouTube TV can be added to any smart TV system, so it feeds on itself as a virtuous circle, and it’s not an exaggeration to say that it has in this way quietly become the frontrunner in the battle for the future of over-the-top television.

So what is Google going to do in sports rights? YouTube (TV) may not be buying a lot of rights like the NFL, that’s not their game, but it seems a small leap to imagine them being the absolutely obvious partner for sports bodies to build their super-fan DTC offering.

If I was them, I’d be a bidder for IMG Media, to give them the production capability. Ari Gold is selling.

 

The sports’ rights market in 2030

This Column’s radical prediction is that, outside of very very few premium rights holders like TKO, EPL, IPL, F1, there will be no significant up-front media bid for any rights. Especially not if sport remains stubbornly selling only “live” for entire matches.

I believe that broadcasters like DAZN, SKY, TNT, ESPN will only pay material rights fees to premium content, and that is why sports like rugby, tennis, golf, need to sort themselves out quickly, to offer a product that works for these broadcasters. Not four separate majors, different competitions, minor events.

This is exactly why tennis needs a Premier Tour.  Because otherwise the broadcasters will basically ignore them, as not compelling enough to move the needle.

Many sports will just go “no-bid”, and will panic. At that point they will be forced to react, and when they look around, what will they see as a potential solution?

There will be a broadcaster offering a JV risk-sharing approach with little up front money.

And there also will be a man or woman from Google/YT offering help, pitching something like this.

Look, we already dominate the consumption of your sport with OneBox, and we can make good money together on ads and sponsorship there (see Jo Redfern’s document above; marketing 101). But how about we now help you build your super-fan media hub as a JV? We have all the data, and ability to convert your fans from the top of the funnel. It’s a natural joined-up strategy.

All of this will sit on YouTubeTV as the gatekeeper to everything. Consumers will have a new bundle and one subscription, and have access to all this content linked seamlessly with search and discoverability of Google/YT. We won’t pay you a big rights fee, but we will invest in TennisTV as a partnership to both make money. We will share data with you.

Google is your natural content partner, and you can leave it all with us. Go and win games. We will distribute and monetise, as full partners. 

This for me is absolutely the direction of travel. So much so that I don’t fully understand why YouTube TV isn’t yet in Europe. Can someone tell me?

 

Google/YT will be the dominant player in sports. 

Some may even eventually call it a monopoly. And that may cause them some issues one day. 

Oh wait… they already have.

Yes, everyone needs to follow the Alphabet antitrust legal cases with full attention. Isn’t it funny these days how much time sports fans need to spend getting their head around judges’ opinions?

That’s where we are sadly as an industry. Exactly as predicted. A proper perfect storm. 

At the other end of all this, land will be sighted, doves with branches will be seen, and there will be YouTube.

Get prepared to speak to them. Do it today.

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