Wide World of Streams: How Sports is Navigating Media’s Shifting Landscape

For the first time ever, the NFL aired one of its playoff games last week exclusively on a streaming network — NBCUniversal’s Peacock. Millions of Americans had to pony up $6 for a one-month membership to tune in to watch the Miami Dolphins play the Kansas City Chiefs (plus, of course, Taylor Swift). In effect, the game was a pay-per-view event, with the added bonus of access to the back catalogs of Law & Order and Parks and Recreation.

The strategy worked: The game drew 23 million total viewers, according to Nielsen. Sure, that’s paltry compared to the 40 million people who watched the Green Bay Packers embarrass the Dallas Cowboys a night later on a Fox broadcast. But it was the most-watched livestream event in US history, sucking up a staggering 30% of all US internet traffic on Saturday night.

This inaugural “Peacock Bowl” marked one small step for football and one giant leap for sports media.

Amazon made a similarly significant leap last week, with a life-saving, last-minute investment in bankrupt regional sports network Diamond Sports, potentially bringing the local Bally Sports broadcasts of 37 different MLB, NBA, and NHL teams in 17 different markets onto Amazon Prime Video.

Meanwhile, the NBA is pursuing a new national media rights contract that’s projected to be worth as much as triple the $24 billion deal it inked with ESPN and TNT nearly a decade ago. The only wrinkle: longtime partners ESPN and TNT may now be effectively priced out.

The old world of media is collapsing, while a new order is rising. Live sports, still the most lucrative and sought-after video content, finds itself caught in the middle. And bridging that generational divide is proving to be no bunny shot.

River or Stream?

Sports rights have always been a shortcut to mainstream media legitimacy. Way back in 1993, Rupert Murdoch realized it was much easier and cheaper to simply buy NFL rights and turn Fox into a de facto fourth major broadcast network than to buy NBC, CBS, or ABC — a semi-controversial move at the time not too dissimilar to the NFL’s current habit of finding new homes.

Time Warner, without a broadcast network, knifed its way into the sports media history books by bringing NBA rights to TNT.

Amazon appears to be implementing a similar strategy. The company just completed its second season as the exclusive broadcaster of Thursday Night Football, which was previously held by Fox and the NFL Network.

The pivot to streaming was a major step to meeting football audiences where they are — and where they’ll likely be in the future:

• This year, viewership increased 24% to an average of 11.86 million per game, and 10 games crossed the 10-million-viewer mark, twice as many as last season.
• Still, that’s a slight dip from the broadcast’s final season on Fox and the NFL Network, when Thursday Night Football drew an average audience of 12.9 million viewers.

The ratings slump shows the tension sports leagues find themselves navigating. If you bring on the future too early, you risk losing audiences along the way. But the Amazon deal had a worthwhile tradeoff: an $11 billion check to the NFL in exchange for the rights to 11 seasons of Thursday Night Football.

Regional Sports Blues: Amazon may parlay its national sports success into the much smaller arena of local sports rights. RSNs, like Bally Sports or your local NBC Sports station, have been pounded in the era of cord-cutting and declining ad revenue. In the past, RSNs were, at least according to some sports-apathetic critics, subsidized by all non-sports-watching cable subscribers who were paying for the channels as part of their cable bundles regardless of whether they ever watched them. The critics were right. Now, In the age of à la carte and direct-to-consumer streaming services, smaller-market RSNs are struggling to survive without the cable-bundle spigot.

Case in point: Diamond Sports, which declared bankruptcy last season after being unable to pay the expensive local sports rights it had agreed to in several markets. Several MLB, NBA, and NHL teams were left in the lurch, with local broadcast rights reverting back to the leagues.

Amazon has reanimated Diamond’s zombie body. In a restructuring agreement supported by most of its major creditors, Diamond will get a $450 million loan to fund the remaining bankruptcy proceedings and pay down debt. Once finished, Amazon will inject $115 million into the network — and score local broadcast rights to Prime Video in the process, likely for an additional fee for in-market subscribers. 

Still, it’s not necessarily game over. Two weeks ago, when details of Amazon’s rescue plan first surfaced, the MLB spoke out against the deal, essentially arguing it wanted to negotiate digital rights directly with Amazon and not through the Diamond Sports intermediary.

Airwaves Jordan: Local broadcasters in major markets have had slightly more recent success, with many teams owning their RSNs outright, such as the New York Knicks and the Madison Square Garden Network, and the Chicago Cubs and the Marquee Network.

Small markets, however, have needed to be a lot more creative. And some are turning back the clock.

The NBA’s Utah Jazz, for example, was broadcast last season on an AT&T SportsNet RSN. But when AT&T got out of the RSN game, the team suddenly had to figure out how to reach its fans. The answer: In addition to establishing a DTC product called Jazz+, the franchise opted to broadcast games, for free, directly over the old-school airwaves of local station KJZZ. 

The gamble paid off, sort of. The team went from reaching ​​roughly 1.2 million fans on its RSN to roughly 3.2 million fans via good old-fashioned rabbit ears, according to a spokesperson who spoke with ESPN. The team had made about $20 million per season from its AT&T SportsNet deal, a revenue goal that team president Jim Olsen said the franchise would reach in the “medium term” under its new broadcasting strategy.

“At the end of the day, whether or not you’re a large or small franchise, your goal is to reach as many people as possible and have ongoing engagement with viewers,” Jamie Lumley, sector analyst at Third Bridge, told The Daily Upside.

Tudum: So where does that leave Netflix, the one major media company able to finally turn a profit in the age of streaming?

The company has been mostly hesitant to break into live programming. Instead, it’s focused on peripheral sports content, like the popular behind-the-scenes documentaries “Drive to Survive,” following Formula One racers, and “Quarterback,” which follows NFL stars.

Last year, Netflix hosted its inaugural live sports broadcast, a celebrity all-star golf tournament called The Netflix Cup, which mixed and matched F1 drivers with PGA Tour golfers. This spring, The Netflix Slam will live broadcast a night of tennis headlined by “old man” Rafael Nadal and ascendant star Carlos Alcaraz.

But don’t expect too much more from the home of Stranger Things. 

“At the end of the day, the top-tier sports rights are incredibly expensive. So for [Netflix], doing some of those second-tier sports, like Formula One, makes more sense and really enables them to get growth in a profitable way,” Lumley said. “Profitability is the top priority within the streaming landscape.”