MLBAM Postseason Deal Solidifies Key Premise in Digital

MLBAM announced a deal with Turner and Fox to offer a postseason version of its popular live streaming video package. I’ve read a few comments describing confusion over adding another product to the myriad of permutations that MLBAM already offers, but this should be a case study on monetizing digital content.

MLBAM is taking its valuable core content – mainly live baseball games, to which its held onto the digital rights to – and pushing it out through every viable distribution channel. Then it’s repackaging the content to develop a new offering of the same core content, charging users a fair, reasonable price for each unique offering

MLBAM is executing the Internet business model many write about, but few perfect. Taking advantage of the low distribution costs to put their content out in multiple places, understanding the profit margin increases with scale, so finding ways to deliver the same content to more people directly boosts the bottom line, and understanding the value of its content to strategic partners (i.e. Turner and Fox) and to customers in the marketplace. The $10 computer version or $4.99 mobile version may not sound like significant revenue generators, but in all likelihood the marginal cost to develop these products is next to nothing since it leverages the same technology MLBAM already uses all season and the same content and camera angles going to broadcast. Net result is a significant profit margin for the partners to share.

Of course, the other key factor is that MLBAM offers the best products. Aside from executing on the business model, MLBAM delivers a great user experience, and is more willing to try new technologies, new distribution, and new features in digital than any sports entity. The HD feed is ridiculously close to what you get through TV. The Twitter feed and social networking integration with TBS Hot Corner are fun value-adds to occupy fans during what can be tediously long games. Camera angles, Tivo/DVR-like replays and highlights, box scores and game summaries, multi-screen layout, it has almost everything fans want. They should consider integrating a live, real-time fantasy game involving the players playing in that game, but that’s an entirely different topic for another post.

Overall, MLBAM is a model for not just sports, but any digital business with valuable content trying to figure out how to monetize it. Focus on your core product, find as many unique ways as possible to package it, leverage every possible digital distribution channel, find partners to extend the distribution even further, and monetize it every step along the way.

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ESPN Mobile Strategy Hitting Stride

After waiting out its Verizon partnership before entering the smartphone application world with its Scorecenter app earlier this summer, ESPN is about to go full throttle with its mobile strategy. Announced this week, the Worldwide Leader will debut a Fantasy Football iPhone app and an ESPN Radio app for the iPhone and Blackberry, along with an MVP service for Blackberry.

The key factor – all will generate subscription revenue. Put the MVP service aside for now, it will charge a recurring monthly fee, since details of the service remain sketchy. Fantasy football is one of the most deeply engaging products on the web and attracts an avid user base that is more likely willing to pay for an application than an average user, making it a perfect candidate for a revenue generating application. Finding the right price is a trickier proposition, but if they bundle enough value it should warrant more than the median price of $1-$2. Likewise, the ESPN Radio application – assuming it includes podcasts and radio shows – leverages an already established national audience and specific personalities (i.e. Bill Simmons, Mike & Mike, etc.) that have rabid followings. Build in the on-demand ability to access content wherever, whenever, on-the-go and its an automatic value add for listeners.

If ESPN simply converts a percentage of current Fantasy players and radio listeners, they can easily generate $10mm (that is a conservative 5mm total users at an average price of $2). Even without free, ESPN should find new sponsors for each app to earn incremental revenue, something they have integrated well into most of their mobile ventures. Further, by integrating Mobile Web into applications it indirectly lifts traffic to the mobile website, as does the constant bottom line and the simple brand extension of ESPN to the mobile device. All this amounts to additional mobile web ad revenue. Add in the opportunity to steal market share by providing a differentiator over the competition, and the lifetime value of the new customers it may attract, not to mention the revenue they gain by increasing engagement with their platform and having users view more pages and use more services.

Two key notes that content owners should take. First, while this has not proven itself out yet, though I feel strongly it will, don’t give away the house for free. Scores are a commodity, so they made Scorecenter sponsor-supported, but Fantasy and Radio content are premium services where ESPN can add value and provide a unique offering. Users User’s will pay for that – or at least we’ll find out. Second, it’s not necessary to develop the most innovative, groundbreaking product to capitalize in mobile. Reinventing the wheel with slight changes is more likely to succeed. ESPN is taking proven content and simply repackaging it for mobile, adding a few new features that cater to the distribution channel, and maybe bundling the content together in a unique way, but in the end its Fantasy and Radio two of ESPN’s core competencies.

It’s harder to see these lessons given ESPN’s scale and breadth of success. However, for a smaller entity or a struggling entity, leveraging these concepts can yield significant benefits in digital media

Boston Sports Web Scene Will Be Telling

Traffic statistics show ESPNChicago.com is a ringing success, blowing away its online competition in the nations 3rd largest market, though it’s unclear how ESPN attributes traffic from many of the pages shared with its local site and core ESPN.com web property. Regardless, it’s next foray, into the Boston market, proves to be more telling.

Boston media outlets have already started to engage in their own online warfare, with Entercom aggregating all sports radio properties back on WEEI and ramping up its web presence, while NESN and the Boston Globe continue to strengthen their web presence, and Comcast New England enters the fray. Now comes the 900 lb. gorilla, ESPN – or is it?

Boston fans are as loyal and diehard as they come. NESN and WEEI each lay claim to exclusive Red Sox coverage (though nothing online is truly exclusive, they do have the other platforms), thus the broadcasters and former players that fans listen and see every day are under their umbrella. The Boston Globe rolls out Bob Ryan and Dan Shaugnessy, both synonymous with Boston sports and each with a well-developed following. Though ESPN touts Boston-ites Bill Simmons and Peter Gammons among its illustrious staff, neither is likely to pen Boston-specific content (or any more than they already do). Given that, is ESPN actually the underdog in what is a crowded local sports news market?

Unlike Chicago, where the local RSN and radio websites lack depth, and where ESPN had an established media presence on radio, Boston’s sports web entities are well-developed, offer deep, insightful coverage, and have powerful names behind them. ESPN did hire Mike Reiss away from the Boston Globe to cover the Patriots – and that is a key point that I’ll continue to harp on. Newspapers, particularly the Boston Globe and its web property Boston.com are approaching the point of insolvency, yet they still employ some of the most valuable local assets, writers with established reader bases that can move the needle. Competitors from other mediums that want to win the hyper-local web race need to procure these assets, showcase them through multiple mediums, and leverage the traffic that follows them. Since some newspaper journalists maintain a loyalty to print, RSN and radio media should offer a unique business proposition. Sign prominent newspaper journalists away from the papers, have them write on a similar schedule for the website, then license the content back to the newspapers for print and possibly distribution on the newspapers website. Paper still gets the content that subscribers want, yet minimizes the cost by offloading the salary, while the RSN/radio property gets the name, the fan following, an additional marketing platform through the distribution deal, and has multiple mediums through which to activate the journalist.

If ESPN swoops in with its purse strings and pulls off this strategy, forget it, they will win online. They already sort of have an in with Bob Ryan from his TV appearances, but if they get his written content that could be a game changer. Another area this battle hinges on is how well NESN and WEEI can leverage its exclusive Red Sox access. Can they take fans where the other web sites, including ESPN, can’t go. Can they offer premium content that the others can’t, or promotions with Boston-centric prizes that the others can’t match? Arguably, it’s the area many web properties have thus far failed, protecting and leveraging premium content – WEEI and NESN must master this skill to fend off ESPN’s challenge. Meanwhile, the Boston newspapers may not be sustainable in the long run, however their content and assets may tip the balance of power in the online battle. Perhaps the newspapers can leverage that to help keep them afloat or develop an alternate revenue stream.

Come September 14th the battle will start – and we didn’t even discuss how this battle may be fought and won on multiple fronts (or platforms). It’s not a zero sum game, however it remains to be seen how many significant sports entities one market can yield.

Don’t Blame the Cable Guy For Channel Carriage Disputes

For the past few years it’s been the NFL Network battling cable providers, now the NFL’s latest creation, the Red Zone Channel faces a similar fate, meanwhile the Tennis Channel wages war with Cablevision in NY. As fans all you want is the channel and all you hear are the networks chirping about how the cable providers are standing between you and your favorite programming.

What customers don’t hear in detail are the outlandish requests these networks make, and the lack of economic sense of a deal from the cable provider perspective. Consider this – reports say the NFL wants to charge cable providers 25 cents per subscriber to carry the Red Zone channel on digital basic cable. For a provider with 10 million subscribers that amounts to a $30mm annual expense for a channel that is only available for about 6-7 hours a week for 17 weeks (Sunday afternoons during the season).

From an operator perspective, it’s difficult to issue a rate increase to customers for barely 100 hours of annual programming, thus picking up the channel on digital basic would be an additional expense without much added revenue, compromising significant profits. Sure, it may help retain or add some subscribers, but will many people change cable providers for what amounts to an insignificant amount of overall programming. If customers didn’t already switch to DirecTV for the complete NFL package or leave over not having the NFL Network, it’s likely they have found a way to satiate their NFL fix. Further, playing the game theory side, if multiple operators pick up the channel, soon all will follow, removing any leverage on customers and reducing profits for all providers.

The Tennis Channel case adds another layer of complexity. It does not have exclusive rights to any significant programming. As Cablevision advertised, viewers can watch about as many hours of tennis as they can hope for on ESPN and CBS, especially with DVR aided viewing. Cablevision failed to mention USOpen.org will provide live online streaming of matches and the US Open iPhone application will have a live video component. Similar options exist for all tennis Grand Slam events. At this point, does anyone outside of the niche, die-hard tennis fan need the Tennis Channel? Better yet, is anyone willing to pay higher cable rates to get the Tennis Channel or switch to satellite or telco-cable just to get the Tennis Channel? Didn’t think so, therefore Cablevision does not have incentive for increasing expenses to add the network to basic digital service.

Cable operators feel squeezed from both sides – networks increasing fees and new competition putting downward pressure on rates. With online streaming about to emerge in the form of TV Everywhere and other authenticated services, cable providers need to revisit channel packages and become more creative to offer customers more options and maximize the value they capture from each additional channel. This may include introducing a la carte packages for niche programming above and beyond digital basic, or putting a stronger marketing push and new packaging around tiered programming (sports tiers, etc), or creating new service bundles that integrate online and VOD access. Providers need to make sure they provide enough upside potential for channels to make it attractive. That comes back to the reason why content owners (or distribution owners, in the case of cable operators) need to charge a premium for good content – whether online or offline. For now, if the cable operators are smart, they will continue to push back on these niche networks with outlandish, unsubstantiated demands and develop a system that pays these niche channels based on actual customer demand. Networks may not want to hear this, but on the flip side the larger revenue per subscriber may compensate for the lower subscriber number, however any revenue is better than none, which each faces during a contract dispute with operators.

YES Network Marketing Follies for Live In-Market Streaming Package

“Watch the Yankees when you’re locked out of your house?” I know that’s not the first thought when I’m locked out, it’s a distant second, with everything else behind gaining entry! Yet, that is how YES Network is pushing their product to the market place.

When the Yankees, YES, and MLBAM announced the first live in-market streaming deal in July with a price tag of $39.95 for the rest of the season or $19.95 per month, it immediately raised the question of who would pay for this and what would they gain. MLBAM and cable nets are absolutely right in that they should charge for it out of the gate, and prevent the issues every other media business that moved online with free content now faces. However, subscribers have to be Cablevision (and now Verizon) customers with both Internet and cable service. My question, and one YES should consider as they market the product, is one would someone already paying for network at home, pay a significant fee to watch games online all season?

The marketing plan does not communicate a value proposition to its audience, a reason why they should pay additional for this service. Further, it’s creative leaves much to be desired, and I don’t think I’ve seen any distribution outside YES and its website (though I’m not a Cablevision or Verizon customer). MLBAM offers a tremendous online game package with great features and high quality feeds, YES should be touting what you don’t get with a regular cable subscription at home. Talk about the live stats on the side, the fantasy player tracker, the ability to call up highlights on-demand, social media integration to discuss the game with fans, and even PIP if they are MLB.tv subscribers.

Next, consider when customers will use this service. According to YES, its at the beach or when you’re locked out. Maybe I’ve been locked in a cave, but I’m not seeing many laptops in those situations (leave mobile out for now), nor do I feel the Yankees game is top of mind in either situation. The ads do mention work, which is likely the number one place, but what about in the house when your wife/parents are watching something else, or at school, or stuck traveling – or you want to track stats and interact during the game. Build out realistic scenarios, then develop creative that presents them in a more humorous way – similar to how the NCAA tournament employs the boss button. A key missing ingredient in the marketing is that I never see someone watching the games on their laptop in any realistic situation. All YES shows are generic Yankee highlights, if you watch it without sound it’s not completely evident what the product is.

One problem could be that YES is marketing a product that does not yet exist – single PPV games. Without any added value, customers will always opt for TV over online, making a full season or even monthly package less realistic. Then the marketing campaign touts one-off scenarios when the product is useful (beach, etc.), yet you can’t buy a single game for say $2.99.

Two other points on YES product roll-out. First, I mentioned the poor distribution earlier, but placement on their website is abysmal. I actually looked at the site for a good minute or two and thought it was not on the homepage, until I finally found it at the top, with the same colors as the background and no distinguishing creative. Not going to attract fans who are not looking for it. Second, the team should offer fans a chance to sample it, say one game free for all eligible subscribers, or put a time constraint. Get people to experience it, try it, live it – and win them over that way. Make completing a survey a stipulation for the free access, and leverage that data for next year’s product.

Under the current conditions, I don’t see how this product is generating much subscription revenue at this point. Though, it does have promise if executed correctly.

Arroyo Proves Banning Twitter Makes No Sense

Sports news on Wednesday included the Ravens and Steelers publicly stating they have no policy on Twitter, hardly news if you ask me. News about who can tweet and what the penalty is and when they can tweet has quickly become nauseating. Partially because it’s not really news, but second because these policies are haphazardly put together. Banning Twitter is not going to prevent PR trouble, nor will it prevent an athlete from saying something, in fact preventing an athlete from using Twitter can exasperate the situation when athlete says something the team does not want him to say.

Case in point, yesterday Bronson Arroyo shows up in a front page USA Today story saying he uses supplements without checking if they are legal, and goes on to spit in the face of the MLB drug policy with his comments. This comes only days after his two former teammates were confirmed as PED users. Arroyo’s comments helped nobody – MLB, MLBPA, or the Reds. In essence, this is what teams and leagues fear about Twitter – an athlete putting out a stream of conscience before taking the time to think about the words.

Well, Arroyo didn’t need Twitter to do this. Arguably, he made a bad situation worse by putting it on the front of USA Today, published by a reputable reporter. On Twitter, you can argue situations don’t boil up to this point. With only 140 words, players don’t have the space to stick foot firmly in mouth as Arroyo did. Further, players can’t say they were joking, or have the opportunity to elaborate – essentially less recourse. Sometimes Tweets even get swept under the rug. Arroyo proved taking away Twitter does not prevent negative PR in sports, especially in today’s media world of 24/7 coverage where everyone can be a reporter of news.

A previous post elaborated on some of the rationale, but sports achieve nothing by banning Twitter. Arroyo proved that by doing what management fears without using Twitter. Sports properties need to embrace it, not ignore it, and educate on its use, not prevent it. Using Twitter as a reason to educate athletes may mask the fact that many were never trained properly to start.

Essence of SEC New Media Policy What Content Owners Need

The SEC partnered with XOS Technologies last month to form the SEC Digital Network, and the conference didn’t execute the deal for charity purposes – they intend to generate revenue, potentially lots of it. Put aside the mega 15-year television rights packages with ESPN and CBS Sports, the SEC, as many major college conferences do, have many hours of valuable content that never make it to air on major networks, plus they retain digital rights to almost all of the content that involves any of the schools.

At a high-level, the conference cracked down on the amount of digital content media outlets have access to and what they can do with it. The goal appears to limit non-exclusive independent media coverage (i.e. bloggers) and to control the legal use of its content, akin to how MLBAM manages MLB content. Did we mention that MLBAM is by far the most successful digital outlet in sports? No coincidence. Media outlets can complain all they want, instead they should takes notes on how to control content, make it valuable, and earn revenue from it.

Instead of complaining, media organizations should look to partner with the SEC Digital Network. The SEC has essentially created a market for its content by limiting the supply, wiping the slate clean for competition, and understanding the demand. Next, the conference can carve the content up in numerous different ways – by sport, by type of content (highlights, press conferences, player interviews, coaches shows, etc.) and auction access to it, for lack of a better word. Make the media outlets pay to gain access to it, perhaps different access for local (to each school) and national media, but the key is to issue fewer licenses than exist media outlets. Basic economics, limit the supply to make it more valuable. This would monetize the content up front, providing what amounts to a monopoly rent to the conference since fans of each school demand the content and no alternatives exist. Can you replace Florida Gator highlights with anything else in Gainesville, or replace Alabama highlights with another team or conference? Not unless you want riots.

Now the content license holders – newspapers, local news, national magazines, whoever it may be – have the opportunity to charge subscriptions, package the content in any way they want, be innovative, and run a media business. Fans will have no grounds to complain. If they want access bad enough, they will the pay the price, if not then they will be satisfied with the national linear television coverage.

As for bloggers, of which I am one and am generally an advocate for, nothing changes. You can bid for the exclusive license and make it a real business that competes with newspapers and TV, or you can pay the subscription fees and write second hand recounts, as most currently do. Everyone can still post opinions. However, the limited supply of professional content will further differentiate what’s true journalism and what’s citizen journalism.

This scenario includes many hypothetical scenarios, however its an example of how content owners can monetize content. Implementing paid online content using major college sports, where fanatical demand exists, is an easier place to start than local news or Page 6 gossip. Another step in the process, left for another discussion, is how the SEC would crackdown on illegal use of video and photos, and where they draw the line between UGC and illegal use. The SEC is on to something, now I want to see them carry it through into revenue.