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


ESPN Makes Local Splash, While CBS Flies Under the Radar

Last week’s confirmation of the inevitable – that ESPN will expand its locally focused web sites into additional major markets provides a major threat to the digital component of RSNs and seriously jeopardizes the long-term sustainability of local sports coverage in newspapers.

However, lost amid the ESPN announcement was CBS Radio announcing the launch of local sports stations in DC and Boston. CBS Radio already has the leader in NY, and established stations in Philly and Baltimore, giving it a stranglehold in the sports crazy Northeast and Mid-Atlantic. Its foot print extends to Chicago, Detroit, Dallas, and Houston among top markets. So you say talk radio is dying medium. Not quite, in fact, if CBS gets it right, they will be right there competing with ESPN on multiple fronts.

First off, radio is not exactly a dying medium across the board. Sports talk carries that special level of fan engagement that the web tries to recreate, but is unable to always capture the passion and spontaneity of live radio. Further, live radio broadcasting of games is an art form, sports version of fine literature. Plus, unless you are in front of a television (given the lack of mobile streaming) it’s the still the best option, so talk radio and radio rights to team games still have value. Look at the latest NY ratings, WFAN actually increased its numbers almost across the board.

Though not strongly integrated with radio, don’t forget CBS has a Top 3 web presence. If they can integrate it tightly with the web, similar in strategy but maybe different in execution to how ESPN is setup, put some marketing power behind it, and improve the streaming interface, then you may have a formidable setup. The integration opens the door for locally focused sites to compete with ESPN’s move. The radio stations have already created personalities with local followings in each city. CBS can leverage simulcasts, podcasts, use the talent for short-form video, and easily integrate UGC given the audience focus of talk radio. Integrating radio and digital expands distribution to the point CBS can justify hiring additional journalists in local markets – possibly beat reporters or the equivalent of columnists. See where I’m going here.

Almost every media discussion comes down to newspapers. Local sports writers have loyal followings. A player specializing in another medium is going to capitalize on that following at some point. It’s already happened in a few markets, but ESPN or CBS are best positioned to go after them, though I still think the major RSNs are asleep at the wheel for not locking them up, or at least doing a distribution deal with their newspapers to get content and more importantly hold the talent on retainer. That said, a CBS can either hire away beat reporters, then use them for exclusive radio beat reporting, online coverage, and short-form video packaged for online. At the least, they can strike a deal with newspapers to syndicate articles and get exclusive use of the talent for radio coverage and multimedia content. And once CBS and ESPN get rolling online, everything can be packaged for iTunes, mobile, video syndication, social media, and the myriad of other possibilities.

Don’t sleep on CBS. They have given no indication of taking this route, but you don’t have to look too hard to see that it exists. A successful push by CBS and ESPN could be another nail in the coffin for newspapers.

[Aside: this doesn’t even mention the power CBS can leverage through its broadcast channel]

Two Major Digital Deals Accelerate Live Sports Streaming Issue Into Forefront

This week ESPN struck a deal with MLBAM  for additional mobile and online video highlights, the ability to sell content through iTunes, and most importantly, rights to stream its national telecasts via ESPN360. Only days earlier the NBA authorized teams to stream games online in their local market, a first for any major sport. Both followed the NFL announcement that Sunday night football will be available live on and this season. Buckle up, its no longer coming – live streaming is here, and its about to explode.

These three recent deals involve diverse issues – the NBA allowing teams to compete directly with local RSNs, MLBAM distributing digital streaming rights rather than broadcasting in-house and expanding ESPN’s repertoire of rights both content wise (mobile, highlights, games) and scope-wise (international rights), while the NFL tiptoes around big money national television contracts and the implications on those contracts if they expand the offering.

In all scenarios, the sport wins because online streaming expands viewership and engages fans more deeply by enabling interactive features, such as integrated statistics, multiple camera views and message boards. Selling digital rights generates additional revenue, either through selling services, or distributing more than just TV rights.

Networks range from cautiously optimistic to downright angry. RSN’s with local basketball TV rights may challenge the NBA’s decision to allow local market streaming. It’s a mistake because fans want streaming. If we’ve said it once, we’ve said it a thoushand times, streaming television online does NOT cannibalize the viewing audience, it complements it. Viewers with access to an HDTV will always opt for that over the computer. However, fans who can’t watch for some reason, be it they are at work, or share a TV with others that are watching another program, now have access. Even viewers already watching the broadcast may opt for complementing it with an online experience to take advantage of the interactive features and additional camera views, plus other social engagement tools offered.

Rather than squawk about it, RSN’s should capitalize on the opportunity by buying the digital rights from the local team. With new audience measurement tools that integrate online and VOD viewers into the toal broadcast numbers, such as NBC’s TAMI product being tested during the Olympics, RSN’s can provide tangible evidence of cross-platform usage and leverage it to sell advertising. If they play their cards right, RSN’s can increase advertising revenue by integrating online and television.

ESPN picks up where TNT started in the NBA playoffs, enhancing national telecasts through broadband, then supplementing it with additional digital rights. ESPN’s strategy is to maximize its digital rights in every programming contract. Though the worldwide leader’s implementation leaves a lot to be desired, they hold the rights for the coming years to many valuable properties and have the opportunity to set the standard live streaming in major sports. First, they need to address the fact that ESPN360 is not widely available. The network streamed last Sunday night’s telecast, and will continue to do so, however most people will hardly realize it because ESPN360 is more mysterious than Versus.

Possibly more intriguing and opportunistic for ESPN are the expanded video highlights and international rights, two topics that require separate discussions.

Meanwhile, the NFL is late to the game because they can be. It’s unique apppointment viewing schedule and immense popularity allow it to tiptoe into the process, learning from the others mistakes, while the NBA and MLB need to leverage the opportunity to grab more fans. Those leagues also have more to work with because of the local television deals and additional games that the NFL does not have.

Leagues and teams will benefit the most by packaging digital rights as part of national and local distribution deals, though its still difficult to put a valuation on them. ESPN and MLBAM did not disclose terms of their contract. Leagues (or MLBAM in the case of baseball) can still generate incremental revenue by selling subscription based out of market packages, which serve a niche audience. While RSN’s and national providers will increase advertising revenue with additional inventory and higher CPM’s if they generate deeper fan engagement, the goal of the digital rights. Networks that implement successfully will see increased traffic in other parts of its site, leading to increased revenue. Subscription based revenue remains a possibility down the line. Possibilities exist for sports ad networks, amongst other synergies.

Digital Industry Moving Slow on Wireless

Of all the breakthrough technologies driving digital media, wireless should be at the forefront. Consider that almost every family in the US has a cell phone (84% of households, over 250 million people). You can’t go anywhere, stadiums, subways, schools, sidewalks, movie theaters, cars, without seeing people, young and old, using cell phones. Text messaging, phones, Internet, cameras, you name it, someone’s doing it. So why is wireless revenue for digital media sports entities still a blip on the radar?

Standards remain a big problem. Almost every phone provider and wireless carrier has different development platforms. Most phones have still have varied screen sizes. And to make matters more difficult, the landscape is constantly evolving with new releases. A content providers nightmare. Faced with developing a variety of formats to roll out just one application, content providers have stayed behind the curve opting to utilize more standardized offerings, such as text messaging.

Rights issue to video also hold back innovation. In order to maximize profit, some sports rights holders opt to negotiate exclusive deals with carriers, preventing millions of people that use other carriers from receiving desired content. It’s a mistake by the content provider (i.e. the NFL). No users will switch mobil providers simply to watch NFL highlights, you need to make it as accessible as possible to everyone. Exclusivity rarely works in the digital world, especially when you are trying to push out a product to mass appeal for the first time.

Even with these issues, it’s on the cusp of exploding. Phones continue to get better and better. Each round of smartphones has better display attributes (size and clarity) and better battery life.  Users are quickly moving over to smartphones, much more conducive to mobile content. Carrier networks are evolving with faster speeds, and at some point the day will come where standard will rule, making life easy of mobile application developers.

Thus far, text-based applications are the most successful. Local networks post questions during the broadcasts to text in a vote for the player or play of the game, or they will post a trivia question and have fans text the answer. Teams and sports media proviers also have text message based score and news alerts. Some providers charge a small fee, but primarily carriers collect a portion of the text fee, and providers garner the sponsorship money.

It’s a first step in fan engagement, yet it completely leaves out the fans at the game, and the fans not watching at the time. It requires appointment viewing. Content providers should expand the program to have question of the day contests, where users can text a question in and have the broadcasters answer it, or have it answered on the post-game show. Teams and networks should also integrate with sponsors, particularly QSR. Run an advertisement that offers a deal to users who text in an order (for example, pizza) within a certain time. Easily measureable and highly integrated. Teams can run ticket promotions at the stadium. Post a question on the scoreboard answered via text message, winner gets a pair of tickets or a dinner.

Mobile video is going to take off as smart phones improve. Costs, battery life, and rights issues are holding it back. As they are resolved, mobile video will can become a big money maker. The makers of Slingbox have a similar application for mobile phones,  allowing users to watch games and highlights from anywhere using their phone. In today’s world of constant information expect that technology to take off. How many people will be watching those afternoon baseball games at work, without worrying about streaming through the corporate firewall? Fans at games can benefit tremendously from mobile video. One word, instant replay. A great dunk, a great catch, a controversial call, fans at the game are not privvied to the thousand replays shown on TV. Eneter mobile video, allow the broadcasters or stadiums to stream replays out to the fans. I believe fans will pay a per game fee for that service, and it has great sponsorship potential.

Another form of text messaging is to connect the fans at the games with the fans at home on the Internet. Allow mobile access to message boards, connect the fans at home watching with fans on the road or at the game. Given a forum and a topic, users will engage. It leads to further engagement on the web site by home users, and another use of wireless. More engagement and more texts makes the product more attractive to sponsors.

MLBAM offers mobile video alerts, essentially the next generation of text alerts for news and scores. The alerts are accompanied with a video link. All highlight plays that you want get sent to your phone, when news breaks users not only get the alert but imagine also receiving the press conference or video of the news coverage.

WIthout delving further into more ideas, the fans will use mobile, now the teams and media need to find the revenue. The obvious part is to have a sponsor for the content or contest. However, it’s important to integrate the sponsor. Ad’s should accompany the content to the phones in a non-intrusive manner and give fans the opportunity to engage with the sponsor if they choose. Content providers should work together with mobile carriers to find a way to make the pie bigger to the point where each can take home revenue. Right now only the carrier nets revenue.

Wireless ticketing, concessions, and e-commerce will also have a major impact on the sports industry, but require separate discussions. It’s an all encompassing technology. Almost every fan has a cell phone attached to their hip morning, noon, and night, and uses the phone constantly all day. Phones are the perfect revenue-generating device for sports media because the eyeballs are already there, it’s just a matter of pushing the right content out and providing the right incentive.

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 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 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.