The picture hanging on the office wall of Brian Rolapp, chief operating officer of National Football League Media, depicts the 1965 matchup between Northfield Mount Hermon School and Deerfield Academy.
The spectators are so engrossed in the football game between Massachusetts schools that few seem to notice the fire engulfing Mount Hermon’s Silliman Hall in the background.
“Sports is still a great unifier of people,” said Rolapp, a 42-year-old Harvard Business School graduate who previously worked in media investment banking at CIBC World Markets. “I don’t want to sound like an old man, but it seems like there’s fewer of those things, and there’s something very powerful about that.”
The challenge for league commissioners and team owners like former Microsoft Corp. (MSFT:US) Chief Executive Officer Steve Ballmer, who has agreed to buy basketball’s Los Angeles Clippers for an NBA record $2 billion, is turning that power into profit.
“If you look at a lot of teams that have traded hands, the predominant cash flow of all these sports leagues are the media revenue,” Rolapp said.
That’s no longer just the television set, which historically has been the principal method of delivering sports.
“You’re seeing the digital space, social media and streaming events, content in other forms increasing in dramatic numbers in terms of growth, and that’s made sports and sports franchises more valuable,” said National Hockey League Commissioner Gary Bettman, who last year signed a 12-year, $4.9 billion contract with Rogers Communications Inc. (RCI/B) Rogers outbid BCE Inc. (BCE) for exclusive broadcast rights in Canada.
Rogers and Bell, as BCE is known, in 2012 teamed to buy a majority stake in Maple Leaf Sports & Entertainment, which owns the Maple Leafs, Raptors and Toronto Football Club, to access content that can be repackaged and sold to customers on tablets and smartphones.
“The opportunities are limitless,” Bettman said.
That isn’t hyperbole, says Tamara Gaffney, principal analyst with Adobe Digital Index.
ADI’s U.S. Digital Video Benchmark report for the first quarter of 2014 showed a 246 percent year-over-year growth for TV Everywhere, which lets customers use their cable networks to access content via Internet-based services, including tablet applications and mobile. Those numbers will rise as technology improves, said Gaffney, using the World Cup as an example.
WatchESPN, a website and app that allows live viewing of the all-sports network on smartphones, tablets and laptops, averaged 829,000 unique viewers through the World Cup’s round of 16, a 173 percent increase over the 2010 competition, according to ESPN..
“Leagues and teams are trying to figure out how to monetize all this,” Gaffney said. “When they do, the opportunity is there because the eyeballs are there.”
No league is currently more valuable than the NFL, which generates about $10 billion in annual revenue. About half of that is derived from media and broadcast contracts with Fox, NBC, CBS and ESPN, a unit of the Walt Disney Co. (DIS:US) All of the networks are willing to pay handsomely for live sports, which is one of the few pieces of DVR-proof content that can draw a large audience. NFL games accounted for 34 of the 35 most-watched shows in the fall season, while the Super Bowl attracted a record 112.2 million people.
“Interest in sports continues to be ascendant,” ESPN President John Skipper said in an e-mail.
Major League Baseball has been trying to sate that interest since 2000, when owners unanimously voted to establish MLB Advanced Media LP, or MLBAM, the league’s interactive media and Internet company.
MLBAM began streaming live video in 2002. Its work in mobile began years before the 2007 debut of Apple Inc. (AAPL:US)’s iPhone, MLB said. MLBAM has three million paid subscribers to its digital products, including At Bat, which Apple says is its 10th highest-grossing app of all-time. Apple didn’t disclose financial figures.
Each team owns 3.33 percent of MLBAM, which is projected to have more than $800 million in revenue this year, said Bob Bowman, the unit’s chief executive officer.
“There’s massive upside,” Bowman said. “There’s a whole generation of people who don’t consider this new media.”
Besides live events, sports fans have a voracious appetite for game-related content, including statistics and video, said Don Cornwell, a managing director at Morgan Stanley (MS:US), which is handling the sale of the NFL’s Buffalo Bills for the estate of the late Ralph Wilson. Cornwell said advertisers will seize on the ability of sports to aggregate an audience, especially in the coveted demographic of men age 18-34.
“Imagine a world where all of your dollars spent from the advertising perspective are personalized,” Cornwell said. “That’s the holy grail.”
Ballmer in an e-mail declined to comment on revenue opportunities in sports because the NBA has yet to approve his purchase of the Clippers. That may take some time as Donald Sterling is challenging his wife’s authority to sell the club in court.
Also boding well for leagues, teams and owners is a growing list of sports-content distributors. Besides traditional outlets like ESPN, video-sharing website YouTube, a unit of Google Inc. (GOOGL:US), Internet subscription service Netflix Inc. (NFLX:US) and Amazon.com Inc. are poised to become significant providers of sports, including live games from the major leagues, said the NFL’s Rolapp, who makes an annual trip to Silicon Valley for meetings with executives.
“I solemnly believe that it’s just a matter of time until there’s going to be an online player of major sports rights,” he said.
For the NFL, the fastest growth from a consumption and monetization standpoint is the offseason and the days between games, Rolapp said.
NFL owners at their May meeting spent much of the time discussing how to profit from their newly created video service, NFL Now. The mandate for clubs these days is to collect even more off-field, behind-the-scenes content for which fans are willing to pay.
“Clubs are going to contribute more content to that than they’ve ever contributed to any other national league asset,” Rolapp said.
In a smartphone, tablet and Google Glass world where sports fans can watch whatever, whenever and wherever they want, content is indeed king, says David Levy, president of Turner Broadcasting System, whose cable channels include TNT and TBS.
“We’re not at TV versus laptop versus desktop versus iPhone -- we’re competing for screens,” said Levy, adding that Turner purchased Bleacher Report in 2012 because it needed a 24/7 digital platform to distribute its content. “All the growth is mobile.”
NBA Commissioner Adam Silver shares his predecessor David Stern’s view of technology spurring revenue growth. The NBA had about $5.5 billion in revenue this past season, and its national broadcast contract, which includes digital assets, expires after the 2015-16 season.
“Based on the latest Clippers sale, I’m not sure these are middle-market businesses but multibillion-dollar global businesses,” Silver, who replaced Stern as commissioner on Feb. 1, said in a telephone interview. “How high is up? I think about the 150 people we have on the ground in China. The real issue is should we have 1,000?”
The ultimate challenge, Silver said, is to replicate the courtside experience for the vast majority of fans who’ll never set foot inside an NBA arena.
“Media is the ultimate scalable opportunity,” Silver said.
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