Google, Netflix, Hulu, Amazon…this is just a shortlist of tech companies that want to disrupt the traditional TV networks. Some have made serious success — Netflix was one of the best-performing stocks in 2013.
Amazon today announced the deal with JetBlue to provide in-flight video services. Score one for the users of the almighty Prime! A great leap for Amazon to break into the airline video space, but it is really less disruptive than it seems.
What all these internet-based TV disrupters provide is still restricted to non-live contents, which are mostly TV shows — and the competition is heating up within this space. However, this is far away from disrupting the legacy networks like Comcast, Time Warner Cable, or AT&T, because none of the newcomers touch on SPORTS.
A perfect example is the recent “fight of the century” between Mayweather and Pacquiao. Broadcasting was restricted to Showtime and HBO, and they tried their best to prevent anyone else from streaming the game illegally — the match itself was even delayed just for the subscribers of these two services to sign in. On a more regular basis, everyday, games of NFL, MLB, NBA, and NHL are played, but no one outside of the legacy TV networks can provide quality streaming.
Why this is important? Sports games are the most profitable video contents:
- Deep-pocket sponsors pour big money into the games. Usually multiple billions of dollars are associated with each sport season, let alone less frequent games like the Olympics and the World Cup, which are top priorities for sponsors such as Nike, McDonald’s, etc. This also means higher premiums charged for the advertising.
- Broadcasting license is a major revenue source for the leagues and clubs. In fact, the success of the British Premier League was largely attributed to the revenue generated by global broadcasting, which enabled each football club to afford better players to improve the commercial value of the games.
- Audience is more hard-core. They tolerate longer advertising and often remember impressive commercials (e.g. Super Bowl). They consume more while watching, such as beers, chicken wings, nachos, fries, and pizza. They are attracted to superstars, who are most of the time more fit (read sexier) and more charismatic (or explosive) than actors/actresses. They are willing to spend more on by-products — jerseys to say the least.
- Games are a cooler socializing topic than TV shows. How often do you hear Wall Street bankers chat about the most recent episode of the 2 Broke Girls at a bar? NEVER! They talk about Eli Manning’s risky long passes, the fast-release 3-pointers that Stephen Curry made, or the trick shot Cristiano Ronaldo missed.
This is exactly why the existing system is so hard to disrupt — too much money is at stake, and legacy players are trying everything they can to protect the pie. Broadcasting licenses are heavily restricted — TV networks and sports clubs are all in this together.
A more fundamental problem is the infrastructure. Almost all households use internet provided by the cable networks. Remember the conflict between Netflix and Comcast/Verizon over the speed of streaming? How can you expect them to kill themselves in the TV territory by taking the advantage of the internet service they provide you? That’ll be a stupid suicide.
There’s still a long way until tech giants like Google, Facebook, or Amazon to become the household internet provider. Until then, I’ll keep overpaying Comcast to watch the Champions League and the NBA finals.