The Golden State Warriors versus the Cleveland Cavaliers.
The 2015 NBA Finals between these two franchises purports the present and future of the league. The former’s ability to roll out a collective, interchangeable unit that runs a fluid, fast-breaking style stands as the next vanguard. The latter’s leader, LeBron James, encapsulates the ultimate way to virtually morph into the total sum by a singular individual. The Warriors want to fast-forward. The Cavaliers just wanted to push play, even rewind its own strategies in order to try to convert to the changing landscape.
Watching the NBA Finals, it’s tempting to forecast what lies ahead, including how the game is consumed technologically.
In fact, the owners of both teams had the opportunity to preview this potential disruption during Chat Sports’ Minds Behind the Game panel held in San Francisco.
Joe Lacob, Co-Owner of the Golden Warriors and Partner at Kleiner Perkins, made the admission that while there’s been discussion out there that sports rights and TV networks’ relationships can break down due to à la carte services, it’s very difficult to project whether or not that scenario or another pans out. He mentioned Twitter, video technologies, and virtual reality as outlets that can reshape the current viewing model. VR, in particular, with its capabilities to bring fans a front row seat no matter where they live, is a vehicle that could “revolutionize” how fans watch basketball, provided improvements to scale transpire.
“I don’t know the answers to all that. I don’t think anybody does at this point,” said Lacob, with regards to the business infrastructure needed for all the parties involved.
Meanwhile, Dan Gilbert, Owner of the Cleveland Cavaliers and Founder of Quicken Loans, also shared his take on this issue.
Gilbert noted that TV networks’ “last bastion” presides in live sports, considering the fact that all other programming is viewed on-demand. Therefore, sports rights fees have risen exponentially in conjunction to and as a byproduct of the reality pertinent to users’ consumption habits. He believes how these networks go about packaging and presenting the games, in-game and surrounding coverage, presents the “value add.” Going back a decade ago, though, the NBA and its teams were willingly uploading highlights to YouTube without concerning too much on copyright matters; even though it would be possibly questioned if networks decided to show the same footage for free.
“The more media puts out your product for free, that’s what you’re trying to do. Any content, let it get out there as long as there are some revenues streams you can perceive in the future,” stated Gilbert, believing free promotion–no matter the end-user doing it–and distribution behooves everyone, with the business model to be configured at a later time.
In some respects, the Warriors against the Cavaliers, too, mirror the contrasting positions for live streaming and the networks: innovation versus conventionalism.
The streaming of live sports, though, dates back to events like the 2009 French Open and 2009 NBC Sunday Night Football, where they brought the option of high-quality playback and new interactive functionality. These early cases spurred the deployments of live HTTP adaptive bitrate streaming, the technology’s initial iterations. While it was originally accessible to just large corporations with big budgets, capture, delivery, and playback streaming technologies have vastly improved and become more consumer-friendly since then. Now any sports rights holder can deliver the live action to fans everywhere, making sports the industry as the largest driver of live video streaming.
During these NBA Finals, fans who wanted to stream the games live could do so through ESPN’s WatchESPN (also WATCH ABC) across web, iOS, and Android platforms, contingent users signed on with their respective cable or satellite subscription. Dish Network’s Sling TV, meanwhile, provided cord-cutters a $20 monthly subscription option that’s less than what they would pay for traditional services; Microsoft’s Xbox One became another vehicle in which fans could access this stream from if they’re a Sling TV user. These were the only legal ways that fans had to watch an NBA Finals game live stream.
Fans can rejoice in the fact that the streaming technology used by ESPN for the NBA Finals appeared to be the same WatchESPN multi-screen medium that broke new records for the mostly successful streaming to viewers during the 2014 FIFA World Cup. The record-setting pace translated to these Finals as well; it resulted in being the most-viewed ever of its kind on WatchESPN, with 757,000 unique average that’s a spike of 102 percent from last year coupled with an average minute audience of 207,000 viewers, up 116 percent from 2014, per TVbytheNumbers.
Of course, however, fans without a pay TV package meant they couldn’t access the live stream since they need to authenticate, which limited the league from reaching an even greater total audience from the vast, growing group of millennials that have opted-out already.
Conversely, Chris Knowlton, Vice President and Streaming Industry Evangelist at Wowza Media Systems (a Colorado-based video and audio streaming solutions company), informs SportTechie that technologically, the biggest adjustment leading up to the Finals that the WatchESPN offering has been resolving pertains to internal infrastructure issues that led to well-publicized outages during the 2014 FIFA World Cup and the 2015 Rose Bowl. That’s what ESPN had to address to ensure the NBA-viewing public they wouldn’t share that same experience, being another tech casualty.
Business-wise, ESPN has faced a loss of subscribers, as viewers continue to gradually defect from traditional pay TV alternatives and these contract prices have gone up. ESPN, to some extent, has offset these effects through charging higher per-subscriber fees to pay TV affiliates and increased advertising revenue.
“Ironically, the relative success of WatchESPN has likely bolstered the perception for ‘cord-cutters’ and ‘cord-shavers’ that they don’t need hefty cable packages to enjoy live sports video streaming,” says Knowlton.
“ESPN appears to be hedging their bets (Sling TV deal)…and they are suing Verizon for breach of contract for offering slimmed-down cable packages that don’t include ESPN to the ‘cord-shavers,’”Knowlton continued.
Undeniably, the user authentication requisite for live streaming sports makes networks and sports leagues more comfortable with streaming their product, as it provides an assurance that most fans have paid for this access. The Diffusion Group’s study from last year suggests authentication is no longer a significant barrier to adoption, while new auto-authentication capabilities should further minimize this potential friction point. If networks and sports leagues continue to offer must-see events and a painless authentication process, such TV Everywhere options should help retain users that conceivably prefer OTT offerings instead.
Whether NBA fans’ respective TV or internet service provider is a WatchESPN affiliate, that was a likely barrier to catch a live stream of the NBA Finals. Otherwise, they had no choice but to find a TV that has ABC, or wait (if they had any patience) until after each game to watch via ESPN’s VOD on WatchESPN.
Still, the 2015 NBA Finals proved to be the most-watched and highest-rated ever on ABC, with a near average of 20 million viewers through the six games and a 11.6 domestic rating, per TVbytheNumbers. Both of these marks were up by 30 percent and 26 percent, respectively, from last year’s Finals–notably to be in the realm of Michael Jordan-esque Finals ratings. These record figures reflect a growing trend of fans watching video wherever they are, and the increasing aptitude of devices and networks to support high-quality streaming.
For several years now, though, there’s been a rapid adoption of OTT streaming services, but centered around on-demand video; Sling TV now enters into the fold.
“Until ESPN offers a direct-purchase live streaming service (much like the recent CBS and HBO offerings), the Sling TV subscription count–especially as compared to declining cable subscriber counts–seems like the best barometer of future live sports video distribution trends,” believes Knowlton.
ESPN (like HBO and other premium video providers) is in a tough spot when it comes to streaming. They have to protect their existing revenues, which largely come from pay TV affiliates. Reportedly, ESPN has a safety mechanism in place should they believe at some point that Sling TV is cannibalizing their core subscriber base, under which ESPN can pull their content if Sling TV hits a certain threshold of subscribers. They’re arguably protected from a user experience standpoint negatively impacting its business, as Sling TV provides less capabilities than the various ESPN-owned properties, with no support for pause, rewind, or fast-forward. Thus, Sling TV may seem like a less attractive option for pay TV users to switch over.
In essence, ESPN joined Sling TV in order to help them avoid cutting into their existing subscriber base, yet still gaining incremental revenue from sports fans who have never paid for TV before.
“Sling TV may represent a great way for ESPN to test–largely at someone else’s expense–the efficacy of expanding beyond traditional pay TV and adding an OTT revenue model. For Sling TV, ESPN brings key content to their low-cost OTT offering that make it viably commercial, and the current go-to choice for sports fans who’ve always wanted live ESPN content but without traditional pay TV bundled pricing,” Knowlton states.
Beyond subscriptions for monetization, the total advertising spend for online-only video has been gradually narrowing the gap to TV’s, with data demonstrating support of fans increasingly choosing streamed video instead of traditional pay TV channels.
For instance, CBS indicated last August that their internet streaming is generating more revenue per user than their TV ads, trending higher, too. Sports, though, dominates advertising for livestreaming, accounting for 83 percent of ad views. The more integrations of programmatic and automated ad publishing within video content platforms (BrightRoll, Facebook, Google, to name a few) will lead to operations cost online video advertising to drop, even while the targeting aspect continues to improve.
Conversely, there wasn’t much objections by the NBA over the new wave of live streaming apps being an issue during the NBA Finals. While rights holders need to be attentive about copyright violations, the Periscope, Meerkat, or Wowza GoCoders of the world makes it easier for anyone to broadcast a live stream just via a smartphone. This reality doesn’t necessarily denote these apps as being bad, nor the vast majority of its respective users, so overreactions could have the effect of alienating one’s fan base or creating a PR crisis, as has been the cases in the past with music files and video clips.
Knowlton offers this outlook: “Common practices to address copyright violations, such as DMCA-compliant takedown processes, are a good start. Technology might be both the curse and cure, as solutions that auto-detect copyrighted content become more common in the market.”
What’s concurrently happening, however, is the expedited measures by the NBA in its own streaming property, NBA League Pass, insofar as unbundling of traditional TV packages, replaced by slimmer pay TV formats and lower-priced a la carte streaming video options.
Bloomberg reported that next season the NBA will let fans buy live games individually or subscribe for a season’s worth of their favorite team. These offerings will be only initially available through the range of devices connected to league’s streaming service, while they work its various TV distributors to get on board. This news ensues after the league established a five-year deal with China’s Tencent worth $700 million, not including Kobe Bryant’s recent participation via Sina’s pre-game and post-game NBA Finals livestream.
“Wow. That shakes the ecosystem,” Jimmy Shaeffler, former producer for ABC Sports and current Chairman of The Carmel Group, told Bloomberg, with regards to the NBA’s latest streaming developments.
“The whole idea of individual choice is seeping into something that could have gone a long time before it came to this,” added Shaeffler.
Tonight’s NBA Draft showcases the new crop of superstars entering the league. The NBA Finals produced the record marks that conveyed the game’s popularity at its crowned event. For its part, the NBA is taking proactive steps ahead in the steaming space. The NFL and Yahoo’s live streaming-only deal is novel, but that’s not to say that the NBA couldn’t do a similar transaction with a tech distributor, likely Google due to its YouTube’s demand.
The divide for live streaming and the networks’ stance pervades in the NBA: modernization versus conservatism.