Earlier this month, Netflix CEO Reed Hastings caused a bit of a stir by declaring that sports networks are heading on-demand. The statement was couched in a broader prediction that all TV will be available on-demand and online within the next ten to 20 years, but it's hard not to wonder if Hastings was alluding to a nearer-term opportunity for Netflix.
"What's happening now is sports networks will go to on demand. You'll be able to watch any game. You'll be able to watch it on any device," said Hastings on the CNBC show Mad Money with Jim Cramer.
Let's unpack some of the layers there. Hastings' statement assumes three things:
- Viewers want to watch more sports online.
- Sports networks and franchises will be willing to experiment with new online business models.
- The traditional cable bundle will continue to break down, with sports programming starting to slip the reins of traditional pay-TV subscription services.
Starting with the first assumption, that's a pretty easy statement to support. Most recently, Frank N. Magid Associates conducted a study for ONE World Sports to find out how sports fans are viewing content. While nine out of ten fans reported watching sports on TV sets, 37% also said they often stream sports online, and 57% said they watch sports online at least some of the time.
It makes sense. If you're a sports fan, you want to watch your favorite sports whenever and wherever they're available, not just when you're sitting on the couch in front of the living-room screen.
Moving to the second assumption, we're already seeing significant if still early experimentation by sports networks looking to expand access to their content online. MLB.com was a trailblazer with its streaming service for out-of-market baseball games, but it's hardly the only example out there now. Earlier this year we learned that the Tennis Channel has been remarkably successful with both its ad-driven TV Everywhere offering and its newer subscription Tennis Channel Plus service. By month 14, Tennis Channel Plus was already hitting revenue targets projected for year four. (See OTT & the Net New Effect.)
Meanwhile, the National Basketball Association has said it's offering single-team packages as part of its NBA League Pass streaming service this year, and that it will even sell access to individual out-of-market games for $6.99 each. This proves there's the potential for new revenue online, and sports franchises are willing to chase it.
Finally, there's the issue of the cable bundle. ESPN Internet Ventures broke the seal earlier this year when it allowed its content to be part of Dish Network's Sling TV, a skinny bundle available online for only $20 per month. (See Sling TV – Like Pay-TV, but Skinnier.)
Then there's NFL Mobile. Verizon Wireless customers can stream many live National Football League games for free on mobile devices, and unlike some other "free" broadcast content, there's no pay-TV authentication required for multiscreen viewing. (See ABC Makes TV Less Free.)
There will be some financial heartache as both sports franchises and programming distributors navigate to new online services. For example, Walt Disney Co. (NYSE: DIS), which owns ESPN, said in August that it's lost some subscribers, and that's likely a result of viewers migrating away from big pay-TV bundles.
However, there's no putting the genie back in the bottle. Consumers have gotten a taste of TV choice and flexibility, and they're not going to give it up.
Which brings us back to Netflix Inc. (Nasdaq: NFLX). If Hastings's statement on the future of sports programming was delivered with nonchalance, it was also born of massive data collection and analysis. And if Netflix thinks the market is headed in a particular direction, then there's no reason to believe the company won't try to capitalize on that trend.
Netflix bet on the future of video streaming. It bet on the success of original programming. Why not bet on sports? Sports are moving online, and Netflix could turn the sports programming market into a whole new ballgame.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading