Tennis Grand Slam Opens Digital Doors for ESPN

ESPN completed the coverage grand slam of tennis last week, inking a combined six-year, $140M deal in conjunction with The Tennis Channel for US Open cable coverage beginning next year. Included in the agreement, ESPN procured “massive amounts” of digital rights. Networks and leagues clearly realize digital is on the verge of becoming a prominent player in sports media – if it’s not already – as shown by its inclusion in recent contracts, such as this one and the NBA-TNT agreement. But what is included, how a monetary value is placed on it, and how the partners quantify the unknown future remains a question.

Including digital rights in TV contracts is step one of new media’s emergence on the sports landscape, a move away from the wild west of the unregulated Internet now that Internet video and mobile have become more prominent. The release mentions ESPN360.com coverage of matches during the ESPN2 TV window, rights for ESPN Mobile to stream events. Good start for now, however the contract is six years. Where will technology be in six years, three years, or even by time the deal starts in 2009? If ESPN holds the rights to take the US Open to any digital platforms that develop between now and then, its a coo for John Skipper and the worldwide leader. The network paid pennies on the dollar for digital rights, if you compare the $140M over six years to the previous cable deal with USA Network. Digital rights could feasibly bring in significantly more profit than the TV side, as revenues continue to increase and expenses remain low compared to television, especially the annual value of the rights fee paid to the USTA.

The next step in this maturation process is for leagues to peel off digital rights into separate contracts, almost how cable and broadcast television rights are separate. As digital consumption moves to mainstream, monetization increases, leagues stand to collect more rights fees by separating digital. New media contracts should never exceed two years anymore. ESPN wrapping up six years, as part of a TV deal is a great opportunity. A low-risk, high-reward to take advantage of an exploding market. Both technology and user habits shift so quick in today’s world, it’s impossible to predict a dollar value for digital media rights six years from now, never mind know what language needs to be included in the contract. Who knew the iPod would hold a place in sports media consumption six years ago?

Similar to my thoughts on golf, tennis is a perfect sport for new media because it has a massive amount of simultaneous action that goes untelevised, and it has international appeal. The simultaneous action gives ESPN the opportunity to further engage fans attending the event. They can only be at one court at one time watching one match. Tennis fans may have an interest in another match going on (streaming mobile), may want to know if a top seed is at risk of losing (text alert), or if a significant event occurs like an injury or miraculous shot (mobile highlights). This just scratches the surface. Incremental revenue is available by further engaging the current consumers. Fans are already at the event, maximize their consumption, these users want more. If research finds not enough people have the technology, look into a rental program, or handheld for a day.

Most tennis players are from outside the US, therefore many tennis fans don’t live in the US and may not watch ESPN or ESPN2. Further, many consumers may follow certain players and not care about the tournament as a whole. Give those users the opportunity to create their own experience. Beyond simple text alerts with player news, stream all the matches on ESPN Video that are not already on the network. It doesn’t cannibalize the audience, only non-televised matches stream online. Rather it supplements the audience by opening the door for fans that want to follow one specific player, or a matchup between two countrymen.

Interactivity is a cornerstone to new media. In terms of creating their own experience, allow users to select from one of a few camera angles to watch the match, as the NBA and TNT are experimenting with. Make the highlight reels that television uses to showcase a player, available online so a user watching a match can click and watch highlights, or a pre-recorded package about the player.

Social networking is another key aspect of interactivity. With each match, create some form of message board for fans of each player, and perhaps a separate one to comment specifically on a match. Let’s fans comment on a bad call, or a great shot, or the strategy a player is using, or why Roddick can’t get a first serve in. At this point, users at the match come back into play. Mobile social networks are growing, and live sports is a great place to engage a community. Make the users part of the process. Connect users at home with fans at the match.

Since I don’t know the details on availability of archived footage, I’ll avoid that discussion here, except to say its another opportunity for deeper engagement with users already drawn in.

Jumping back to online streaming of matches, ESPN holds monetization potential by charging for access. Ad-supported is the model of choice nowadays – the stream it and they will come, then we’ll figure out some way to monetize it mentality. Another approach is PPV style, similar to CBS College Sports and MLB.tv. ESPN does not stream live sports for Internet users today. The ESPN360 product requires a cable or satellite service provider. The network could create a player, stream select matches, then institute a tiered pricing model that charges users either per match, per day, or for the entire tournament, to stream the remaining matches – blackout free.

Take that one step farther, with all four grand slam events, ESPN can create offerings for users to purchase insider access for the tennis grand slam, or they can leverage the individual player fan market discussed earlier, and charge for all matches for a certain player, which is more of a glimpse at the possibilities than a true idea to move on.

New media remains a blip on the network television landscape, as far as viewership and revenue. Still, its a new opportunity for media companies to expand their reach and create new business. ESPN was smart to grab digital rights for six years, now its up to them to maximize those rights. Soon enough, networks will have to ante up for these rights, and possibly even compete with non-traditional online entities. New media success in sports stems comes down to three I’s: Instantaneous access, Information on-demand, and Interactivity. CBS started to deliver with MMOD in March, ESPN has a full year to make tennis, a more niche sport, more successful.

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