Live sports, perhaps the final frontier in streaming, remains in many ways the industry’s most significant challenge. In the past few years, it’s become clear that sports is the glue holding subscribers to the cable bundle, and a critical asset for streamers looking to grow. At the same time, though, sports rights are increasingly expensive, and packages are both fragmented and locked in long-term deals. Technical issues, like live video lag, are frustrating. And some platforms must manage the transition of sports to streaming without cannibalizing their linear businesses, which depend increasingly on these same sports rights.
So, perhaps not surprisingly, no single platform has been able to offer the full slate of games and leagues that could conceivably replace the traditional cable experience. Apple, despite its size, seems to be in experiment mode, nibbling with rights to Major League Soccer and Friday night MLB games. Peacock has seen success with the WWE and is airing Sunday morning MLB (and it’s the streaming home of NBC’s Sunday Night Football, TV’s biggest show), and Amazon debuted Thursday Night Football this season. DAZN, a sports streaming pure-play platform, has tried to establish itself through niche sports like boxing and snooker. (Yes, snooker.) In other words, most platforms see the opportunity, which only makes the consumer experience more balkanized and expensive.
Naturally, ESPN is at the center of this transformation. The Disney-owned outlet professes, quite accurately, to being the “worldwide leader” in sports, but that title still refers largely to its role on linear and in digital publishing, with franchises (SportsCenter, PTI, First Take) and live broadcasts (Monday Night Football, Sunday Night Baseball, ESPN NBA Sunday Showcase). By comparison, ESPN+ seems slender. It is, in fact, ESPN Minus. Due to exclusive cable deals, the sports streamer is home to less valuable leagues (certain NHL games, UFC matches, and PGA events) and evergreen content, like the 30 for 30 franchise or Peyton Manning’s underrated Peyton’s Places show.
According to CNBC, ESPN is now exploring creating a streaming sports hub that would surface both its own content and sports aired on other platforms. An NFL fan looking for Sunday Night Football, for instance, would see a tile for the game within the ESPN experience, which would direct the person through to a Peacock page to subscribe and watch. ESPN would reportedly take a cut of the subscription fee. Consider it the App Store for live sports on streaming.
Amazon and Apple already offer a general version of this concept with their “channels” services, which offer subscriptions to HBO, for example, through a customer’s Prime account or Apple ID. Neither, however, has cracked the sports market. Here, ESPN may have an advantage. Even if it isn’t yet the worldwide leader of sports on streaming, ESPN may be able to convert its strong brand association with sports to become the clearinghouse platform of the future. After all, the barriers to sports on streaming are cost and discoverability. And an ESPN hub, apparently codenamed “Project ESPN Marketplace” in Bristol and Burbank, would ostensibly make it easier for superfans to access different leagues in one place, while also improving discovery for casual fans who enjoy the channel-surfing experience.
The Marketplace Opportunity
Last year, ESPN.com saw an average of 106.7 million unique visitors per month, up about 3 percent year over year. And while Google may have resolved the issue of discovering how to watch games, no tech platform has solved the issue of conversion for sports, as one former sports app strategist explained to me. The issue isn’t telling people where the game is; it’s getting them to pay for the game.
ESPN is usually associated with sports nuts, but the big potential theoretical upside of Project ESPN Marketplace is in monetizing casual fans. Amazon Prime Video Channels and Apple Channels have created the paradigm for this concept. Prime Video Channels, for instance, boasts more than 240 channels distributed to Prime subscribers globally, with more than 160 channels in the U.S. as of 2018. It doesn’t replace services like HBO Max or Disney+ but rather supplements those outlets by recreating its own veritable bundle for the ease of customers looking to house all of their streaming needs in one place (and takes a small but meaningful percentage of the subscription fee). Apple does the same, both through its Apple TV+ streaming homepage and in its App Store.
These services have become more valuable as streaming has become more complicated. The same dynamic is taking place in live sports. As more broadcasts move to Peacock, Paramount+, Apple, Prime, Hulu and, of course, ESPN+, the more opportunity there is for ESPN. Casual fans who wanted to watch a game airing on FS1, for example, might prefer accessing it through an easy-to-use and easy-to-cancel streaming platform, like ESPN Marketplace, rather than signing up for cable or YouTube TV. The value of ESPN Marketplace again only increases theoretically as one considers the various ways that decaying regional sports networks are trying to reach customers. ESPN could provide some structure to the market. The business’s cut of subscriber or sign up fees could also represent meaningful passive revenue.
And the market is only growing. Younger sports fans are turning to streaming first to watch sports that were previously only on cable, and a hub that directs casual fans to these services can help ESPN discover additional revenue. To wit: while the overall ratings for Thursday Night Football dropped during its first season on Amazon, there was a rise in young viewers. Clearly, moving TNF to streaming cannibalized some viewership, but it also helped the game with the next generation.
The biggest issue that I can foresee is that ESPN’s hub doesn’t really solve for the main issue facing sports. Diehard fans don’t need a hub to tell them where to watch a game, and casual fans aren’t turning to ESPN to find out. Google solved for discovery, but it didn’t solve subscription fatigue. Trying to focus on converting the casual fan requires more than just acting as an information aggregator. ESPN doesn’t solve for the paywall issue of subscribing to a new service for more than a single game, and it doesn’t solve for the issue of the ephemeral nature associated with those big sporting moments that make casual fans want to tune in. It’s here that major money is made to be had, and it’s here that no one, not even ESPN’s aggregation tactic, has solved.
The Casual Fan Economy
As ESPN embarks on capturing the value of the casual fan, a couple of behavioral notions come into view. First, casual sports fans favor moments over seasons. A die hard Packers fan living in Dallas, say, will pay for Sunday Ticket and never miss a snap. A casual fan, however, may only tune into a game when they discover on Twitter that Aaron Rodgers (or, perhaps next season, Jordan Love) is embarking on a two-minute drill. And as my developer friend underscored to me, hype is ephemeral. Following the game, they may forget to open the app again because they only got it for that one event and they’re not interested in having access to the Packers. When the credit card bill comes around 30 days later, they cancel.
I’ve been thinking a lot about the current state of news discovery, and how we use the devices in our hands to keep up to date with what’s going on. Instead of seeking out an article or diving into a podcast, our attention is stoked via push notifications or email blasts. Most of us learned about the Alex Murdaugh verdict via a news outlet’s push notifications, and then went to Twitter to see details and what people were saying. Sports operates in a similar way. If people want to see something that just happened, they go to Twitter. If they want to watch a specific game and they don’t subscribe, they type in “team + team ‘Reddit’” because despite Reddit’s best efforts to moderate, it’s still extremely easy to find an illegal feed.
People in sports media see streaming as the big disruptor. ESPN’s digital solution is to act as an aggregator of all this missed attention in a more active direct–to–consumer economy. The issue, however, isn’t solving for diehard fans, or solving for where casual fans can watch. The real economic opportunity is convincing casual fans to spend additional cash on a moment that’s going to pass relatively quickly, or to pay anything at all when free options exist and are easy to access. MSG Networks will charge customers $10 a game for those casually interested, but by the time an Islanders or Knicks game is interesting, is a customer going to want to spend $10 on a game just to catch the next possible moment, or will they seek out the clip from a speedy Twitter or TikTok account? My strong bet is on the latter.
Consumer behavior among younger Millennials, Gen Z, and Gen Alpha isn’t tied to specific distribution models. It’s not just linear or streaming. It’s streaming or simulcasting events on Twitch or catching a game’s highlights on TikTok or finding a stream on Reddit. There’s also no real solution for this issue right now, though various companies have invested time and money into figuring it out. If it nails Marketplace, that could be ESPN’s next challenge.