DOWN BUT NOT OUT: HOW THE DINOSAURS IN TRADITIONAL SPORTS SURVIVE THE DIGITAL CHALLENGE
The following is a paper I submitted to The New School, as part of the Graduate Certificate in Media Management in 2019.
The traditional sports broadcast model is broken.
The leagues and media organizations of the future will be the ones who adapt quickly, resist stagnation, and start acknowledging that they no longer call all the shots. While the above is generally true globally, the objective of this paper is to concentrate on the challenges facing the Canadian sports media landscape and offer solutions on how it can survive. While the focus is national, I believe the writings in the subsequent pages are transferable to the industry as a whole, all over the world.
That path forward will involve some tough cultural and institutional changes in three general areas. The first, challenges media executives, league decision-makers and journalists to stop romanticizing the past. Cord-cutting is real, television ratings declines are not temporary, and there is a real need to innovate. Secondly, a major relearning of the modern sports fan is required. It is no longer good enough to assume the fan is passively waiting for a sports broadcaster to just air the game and deliver the expected coverage we have consumed in the past. Consumption habits have changed and the always-on storytelling via social media platforms and engagement opportunities beyond just cable is now the new norm. Lastly, the organizations that can authentically partner and tap into the young and fertile esports audiences will be the leading brands of the future. The growing esports industry presents exciting and authentic new revenue opportunities if broadcasters and brands educate themselves on this space.
THE SPORTS STREAMING REVOLUTION IS FOR REAL
In the Spring of 2018, I knew I was holding onto a game-changing secret that was about to fundamentally reshape the sports broadcasting landscape in Canada.
I was the Head of Public Relations for DAZN — the upstart global live streaming sports platform recently launched in Canada and challenging powerful traditional sports broadcasters around the world, including Canada’s duopoly (TSN, owned by Bell; and Sportsnet owned by Rogers). In my inbox, I had the news that we had just won the exclusive rights to all 138 UEFA Champions League and 205 UEFA Europa League matches, including the Super Cup for the next three years. Although it was not one of the nation’s top five pro-sport properties (NHL, CFL, NFL, NBA or MLS), I knew that UEFA drew pretty decent TV audiences, especially among its soccer hungry ethnic communities and had been a mainstay on terrestrial television. Once we made this news public, this was likely going to be the first time that a traditional sports outfit was losing major broadcast rights to a streaming service.
Forbes contributor, Bobby McMahon described it exactly as I imagined it would be in his article announcing the news: “DAZN has pulled off a major coup.”
Since that announcement, DAZN has won the exclusive rights to the English Premier League (another steal away from TSN); Facebook landed a League deal with MLB enabling them to broadcast games involving the Toronto Blue Jays that otherwise would have been watched on Sportsnet; and when the new Canadian Premier League (the coast-to-coast professional soccer alternative to the MLS), had free range on who to choose as a media partner, they turned to Spanish-owned MediaPro in a landmark 10-year deal while bringing in CBC as their traditional TV partners for a limited number of games. To say that the sports world has changed dramatically in recent years is an underestimate, and the signs have been there for quite some time.
DENIAL, ARROGANCE AND THE RESISTANCE TO CHANGE
Years earlier, and at the beginning of my pro-sport career, I remember attending a game in a private box as a guest of a senior executive from a major sports broadcasting company. In between the free beer, the conversation quickly turned to the future of sport and cable television subscriptions. This executive had been in the business almost as long as I had been alive, so naturally I listened attentively, wanting to be a sponge around such a seasoned veteran.
“I don’t believe the hype,” the sports exec said confidently to a small crowd of us, referring to the multiple options in streaming services that were starting to pop up on the scene in Canada. “There is lots of noise in the media around people cancelling cable, but the numbers are not that bad and at best an exaggeration of reality.”
I had just months earlier, cancelled my cable subscription so naturally, I thought I could provide some real world insight into the changes I believed were hitting the pro-sports world and the traditional media apparatus that surrounded it. I did not even get to finish my thoughts before I was quickly dismissed, and told that “no true fan would ever want to watch their favourite teams on their small cell phones.” My initial reaction wanted to be to challenge back on the assumptions, but instead I exited the conversation respectfully and went back to watching the game.
At that time, only a few years ago, only one of the three major sports networks in Canada had begun offering an OTT (over-the-top) alternative to their cable-only channel, and DAZN had yet to launch in Canada. So, we were early on in what is now a completely different media landscape. While I did not have access to subscription numbers, I did know that the arrogance displayed by the long-time media executive and the inability to understand the very basic tenets of streaming (fans were not restricted to just streaming off cell phones) was worrisome. This is who is supposed to be in charge of the future of sports broadcasting?
The denial that a shift in the way fans were consuming sport, and the resistance to the idea that consumers, especially millennials, were simply not subscribing to cable television at rates needed to replace older viewers, is not unique to just sports. In fact, these prevailing attitudes among long-time media personnel are symptoms of the problem within the larger traditional media world. One only has to look to the music, movie and newspaper industries to learn what happens to those who resist change. Napster was supposed to be just a fad, Netflix would never stop us from going to the movies, and getting your news on tablets and websites? All ridiculous thinking, we were told!
CABLE IS DECLINING, STREAMING IS ON THE RISE
This past April, in an annual report on consumer habits, Convergence Research Group confirmed what some of us in the business already knew was coming: “The number of Canadian households paying for at least one streaming video service will eclipse traditional TV subscribers for the first time next year. That report was not only future-looking, it put into perspective the dire reality of cord-cutting’s impact on the business of traditional media in Canada, including of course, sports broadcasters. “Last year, Canadian TV subscribers declined by 204,000, and another 253,000 cancellations are expected this year,” the report stated. That is nearly half a million subscribers in just two years, in a country of just 37 million. Overall, the report estimated that about “32 per cent of Canadian households will not have a traditional TV subscription by the end of this year — an increase of about two percentage points from 2018.” On the other side of the equation, “revenue for streaming video services grew 33 per cent to $1.12 billion, with forecasts on track for it to reach $1.51 billion in 2019.” Those are a lot of fans watching sports on their cell phones, eh?
Now, it is not all bad news for traditional media. The streaming revolution is in part being supported by the same companies who used to resist the changes, in fear that embracing a switch to streaming would impact their traditional TV audiences and prime revenue funnel. What is happening now is the realization that providing an OTT option, in addition to cable, can actually keep traditional media companies in the game. Bell has launched Crave to compete with Netflix, Global and CTV have streaming services of their own (although you need to authenticate with a cable subscription still), TSN recently offered a standalone streaming only version of all five of their sports channels, CBC has launched GEM, Sportsnet continues to offer Sportsnet NOW, and DAZN is still available and growing. The challenge here for Canadian broadcasters is that many are catching up, and finding it difficult to do so. While other providers saw the changes coming, and adapted early, I believe many in Canada believed their position of power and lack of options would shelter them and allow them to ride out the storm in an attempt to keep subscribers stuck with expensive and inflexible cable packages. That did not happen.
So, why the change of heart and why did it take so long? I contend that three factors had a large part in the seemingly sudden shift: building brand new OTT or streaming infrastructure costs money and requires access to talented people and access to creative thinking; the fact that DAZN began to win broadcast rights to sports properties that typically were guaranteed to go either to TSN or Sportsnet shocked the system; and the entry of Facebook, Twitter and Amazon into the North American sports broadcasting conversation was the final scare for the old guard of the sports industry. The change in focus then was more of a forced reactive approach rather than a forward-thinking, strategic business decision to meet the fans where they already were living. That is a risk Canadian broadcasters took — part financial, part arrogance — and now they find themselves in catch-up mode while the world around them continues to shift even faster.
CONSUMPTION HABITS HAVE CHANGED
During my time at the CFL, many of us kept a close eye on the results of commissioned national research which helped us better understand where our brand ranked among all other competitors. For the most part, the CFL trailed only the NHL in terms of the most popular sport in Canada, measured by total number of fans. The exception to that was during the Toronto Blue Jays playoff runs, where the MLB surpassed us as the number two sport nationwide. That research while kept mostly internal, was echoed by other surveys that confirmed our numbers. In a Yahoo Sports article, the rankings read as follows: NHL (46%), CFL (26%), NFL (23%), MLB (22%), NBA (12%), and MLS (9%). The point here is not so much on the fan numbers specifically, but more about why our television ratings were stalling at a time the league was experiencing such strong popular support. What we noticed was that fans were flocking to our league and team social media channels, and the amount of visits and engagement on our league website were all increasing drastically. The growth rates on digital and social were much larger than the story we were able to tell on television, even when the numbers were positive. What this signalled was that fans — a huge number of them — were engaging with our brand in a completely different way.
That trend is the reality for other professional sports too. We have multiple apps to keep us updated on scores, we consume micro athlete-focused content pieces on our commute into work, we scroll through and share memes, and we catch up on the dramatic storylines by writers, podcasters and outlets in places like Bleacher Report, VICE, The Athletic, Hype Beast, Complex Sports, and TMZ, just to name a few.
The separation between sports, news and entertainment has never been more blurry, and the access fans have to information — good and bad — is now instant and immediately global. In addition, professional teams and players have invested in content teams to circumvent the traditional media hierarchy and begin to tell their own stories. They have had to adapt because, due to staffing cuts, sports writers are now covering multiple sports and unable to keep up with the demand of the modern fan. To put it bluntly, younger fans just do not see the return on investment when it comes to costly traditional cable packages and definitely not newspaper subscriptions. Why would we when we can be active participants by seeking out access to what we want and when we want it. These developments are yet more obstacles for traditional broadcasters who now have to contend with not only increasing competition on a broadcast level but the always-on storytelling side of the business as well.
One of the criticisms often waged against our new digital media era, is the lack of agreed upon audience measurement numbers. The argument is typically anchored on the failure to produce a Neilson-type (Numeris, in Canada) television audience metric that advertisers and sponsors can base decisions on. Is it combined views on video content? Is it streaming numbers on platforms like DAZN? Is it follower count of social media platforms? Is it likes and shares? The fact that all of those data points are fragmented and to date, unable to be put into one single measure is what is keeping some leaders from adopting a fully digital strategy. That thinking and criticism is short-sighted and one of the last forms of resistance by stubborn traditionalists who need to justify the declining importance of the television audience as a measure of industry health.
Let me describe the measurement tool in which millions of Canadian ad dollars are decided. Television ratings in Canada are measured by citizens with pagers that pick up noise frequencies from any given broadcast and then attributes a representative national number to each person who has a pager. So, an 18-year old man in downtown Toronto may represent 35,000 Canadian male millennials. In remote communities with sub-par internet, ratings are captured using written logs in a daily dairy. So, a 50-year old woman in remote north Alberta may represent 10,000 middle-aged women. If either person forgets to turn on their pager, or if they are at a bar with the volume off, or if they fail to write in their journal and mail it into Numeris, none of those television watching moments are captured. That is the method in which we as an industry have judged success in the past and encouraged, by some, to maintain.
The fact that sports fans are consuming content in new and diverse ways should not have been a surprise to anyone in the sports business. What we are seeing today follows similar experiences within the newspaper, movie, music and printed books industries. While not all of those industries are undergoing the same type of change — music for instance has rebounded with the advent of popular paid streaming services, while newspapers continue to collapse and struggle to remain relevant — all of them have been disrupted and forced to rethink their business models. The question is no longer if or when, but by how much the sports broadcasting industry will change.
ESPORTS: NEW AUDIENCES AND REVENUE OPPORTUNITIES
Eight months ago, my former boss at the Canadian Olympic Committee took me out for a beer and tabled the idea of joining him on a brand new challenge: building a global esports organization headquartered in Toronto, Canada. I listened, asked a lot of questions and left feeling like an entire world of sport and entertainment was being built without me having any idea it was even happening — and I was right. I ultimately made the jump and am now fully entrenched in an industry that is gaining a lot of attention and receiving tremendous amounts of investment. My hesitation in leaving traditional sport however was anchored on a fear that I would lose traction in my pro-sport career and slowly be forgotten by all my colleagues and friends in pro-leagues, the media and inside the brands that support those leagues all around the world. Not only was that fear unfounded, but my move into esports has only strengthened those relationships and provided me with more opportunity for creative partnerships and content collaborations than ever before.
Since starting my role as Vice President of Global Content and Communications at OverActive Media, I have explored content partnership opportunities with several pro leagues in North America, a handful of sport organizations in Europe, numerous major global brands, and enhanced my relationships with sport journalists and outlets that are slowly realizing that the gap between traditional sport and esports keeps shrinking. Other industries are noticing too, including music.
In the past few months, several major, Grammy Award winning artists have announced investments in esports organizations. In October 2018, “Drake has transitioned from casual Fortnite player into video game overlord today, assuming the mantle of co-owner of professional e-sports organization 100 Thieves.” In April 2019, The Weeknd was “the latest celebrity to buy into the gaming industry as a new co-owner of Canadian esports franchise OverActive Media… The partnership makes The Weeknd (a.k.a. Abel Tesfaye) the first-ever Toronto Defiant and Splyce global ambassador, with plans to partake in OAM’s brand and content building efforts in Canada and beyond.” And, professional athletes are jumping onboard as well, including: Stephen Curry, Andre Iguodala, Steve Young, Kevin Durant, Odell Beckham Jr. and Michael Jordan.
The esports and professional sport links do not end there. In fact, many of the world’s esports organizations competing in franchised leagues like Overwatch, Call of Duty and League of Legends, are owned or operated by professional sport owners and staff. “German soccer team Schalke 04 operates a League of Legends team in the European pro circuit, while French powerhouse Paris Saint-Germain has its own Rocket League team. In 2016, the NBA’s Philadelphia 76ers became the first major North American team to get into the field when it acquired e-sports group Team Dignitas. And the list goes on. In a Canadian context, younger members of the Aquilini family encouraged the Vancouver Canucks’ owners to “take a hard look at esports,” said Adrian Montgomery, president of Aquilini Entertainment and head of the one of the newest Overwatch League franchises, named the Vancouver Titans.
In late 2017, Sports Business Journal published a report suggesting that “of 24 sports looked at, all but women’s tennis has seen the average age of viewers increase.” That is a massive problem for traditional sports organizations, a business that depends heavily on broadcast deals and sponsorship dollars. The appeal and the argument for a closer relationship with esports then becomes pretty clear: “of the 214 million people that watch e-sports worldwide, 69 per cent are aged 18 to 34 and 85 per cent are male. For sponsors/advertisers … the appeal of esports is rather obvious: the genre appeals to a narrow, desirable, and increasingly hard-to-pin-down demographic.” Therefore, the audience segment that traditional sports — almost all of them — have lost, can be found inside the complicated and growing esports ecosystem.
CONCLUSION
The traditional sports broadcast model is indeed broken, but it does not have to mean an end to the entire industry. With some courageous risk-taking, rethinking stagnant business strategies, and making the proper investments that take into account real long-term growth instead of short-term profits, the industry can and has all the potential to rebound and set itself up for success.
This paper contends that the path forward will require some tough decisions by media executives and league decision-makers. At times, and as an immediate start, that will require getting rid of leaders who still think that continued resistance to the digital live-streaming revolution is a worthy business strategy. It is not, and the sooner leagues can re-negotiate their media rights deals to include both traditional television partners and OTT providers, the quicker they will begin to attract back a younger fanbase and set themselves up for more creative revenue generating opportunities. Those opportunities live in branded content partnerships, 24/7 storytelling, extending the sport experience well beyond the final whistle or the field of play itself, investing in the platforms fans live on each day, and a real genuine deep dive into the world of esports. Pivoting focus and priorities to most of the above are the ways traditional broadcasters and leagues will survive.
We live in a fragmented, instant, global media environment where a young girl in small town Saskatchewan can cheer on her hometown Roughriders just as easily as she can follow her favourite English Premier League team — or perhaps more appropriately, grow up with full access to the intimate life and career of her favourite female tennis star.
The modern sport fan is no longer a passive viewer, abiding by appointment viewing schedules and forced to wait for a television broadcaster to entertain and inform. The modern sports fan is now the one calling the shots and any league or traditional media outlet who thinks otherwise, is on a rapid and turbulent journey towards distinction.
