Last week, as the fog of Upfront/Newfront presentations finally lifted, I was fortunate to witness the heads of the top sports networks talk about the [R]evolution their industry is going through. The discussion ranged from the rising costs of content rights and the lack of respect for those rights by Silicon Valley-backed streaming services, to making sense of “millennial targeting”, OTT adoption, and the technologies they’re investing in.
Okay, it wasn’t in a “bar”, perhaps more like a velvet-rope club. The Paley Center gathers only the finest, and on this morning they brought John Skipper (President, ESPN Inc.; Co-Chairman, Disney Media Networks), Mark Lazarus (Chairman, NBC Sports Group), Sean McManus (Chairman, CBS Sports), and Eric Shanks (President, COO & Exec Producer, FOX Sports) together for an intimate and candid breakfast discussion. Here are some of the topics that resonated in the room.
The Greatest Challenges They Face
There’s a lot of noise in this space about “disruption” and one of the key challenges is sorting through the noise to understand whether something is actually a real “disruption”. Likewise, you need to be able to react fast enough to give audiences what they really want, but not kill your core business in the process. To that end, distribution strategy is a critical area of focus and will become increasingly challenging as rights continue to get more expensive and distribution platforms fragment. Part of the distribution challenge involves distinguishing your brand in an increasingly crowded marketplace through both the quality and quantity of content you offer.
What To Make of Millennials
The two themes that seemed to resonate most among the speakers (and the crowd, given the nodding heads) were that the term “Millennials,” in and of itself, is useless—meaning 18-34 is SUCH a wide demo. 18-24 year-olds, for instance, act more like teenagers and generally don’t have much money to spend, especially in relation to their 25-34 year-old peers. So the idea of “targeting Millennials” as a whole is not realistic. Instead, thinking about targeting in terms of the sports people actually watch, (shockingly) makes more sense to them.
Because the younger range of the Millennial segment doesn’t have much money and is seemingly obsessed with shorter-form content, the panelists felt the networks need to be smarter and more efficient in attracting them “into the pay funnel”. That requires serving up sports that by nature are shorter and faster paced (UFC and action sports) and doing so on mobile and social, where younger Millennials focus their attention.
The Rising Cost of Sports Rights
It’s been said the only two certainties in life are death and taxes. Well, you can also add the continually rising cost of sports rights! But, the speakers all agreed paying for those rights is worth it because broadcasters have become incredibly skilled in monetizing those rights and have no intentions of changing tactics—“buy ‘em till the money runs out!” seems to be the watchword. The key is to have enough money to acquire a broad portfolio of rights, so you are never too dependent on a few properties, since you will inevitably lose a bidding battle at some point.
Why Meerkat vs. Periscope Bores Them
Well, “bores them” might be too strong—but clearly the group was not particularly alarmed by the incredibly hyped discussions around these two new live streaming apps. Yes, they found the attention to be an annoyance, but didn’t see a near-term threat to their core business, because on the whole, the streaming experience offered by these new services is sub par. The moment the experience improves to the point of encroaching on their core business, they will pounce, because as we know, they’re paying a lot for those rights. What was also clear, was their disdain for Silicon Valley’s apparent “head in the sand” attitude about content owners’ rights. In other words, if you’re going to try to disrupt our business, don’t hide from the real issues.
The hour long discussion seemed to fly by with a half dozen other topics covered, ranging from how they’re approaching social media, and OTT strategy, to what new technologies excite them. It will be great to look back at this discuss in six months and again in twelve to see how things have played out.
(For those of you wishing to play along at home, The Paley Center has conveniently posted a video of the session.)