The NBA recently announced a new TV deal with Disney’s ESPN and Time Warner’s Turner Broadcasting. One piece of the deal in particular has been getting more attention than the rest, and for good reason. The deal opens the door for ESPN to launch a subscription streaming service that will include some NBA games, with the potential to be widened to include other sports. ESPN insists that this is not intended to compete with traditional cable TV, but many in the industry see potential for this service to become something like the Netflix of sports, with similarly disruptive implications for the pay-TV business.
It’s no secret that sports are possibly the one thing keeping many people from cutting the cord entirely. It’s easy to hate everything about cable, from the high price to the lousy customer service to the hundreds of channels that nobody ever seems to watch. But for many people, fear of missing out on their football or basketball games alone is enough to keep them paying over $1000 a year for cable. This new deal however, could change all that. Unlike ESPN’s current online offerings, the new streaming service could be purchased and viewed without the precondition that the customer already be a cable subscriber who gets ESPN. When you can start getting your sports on any device without having to pay for an oversized bundle of channels, it’s hard to imagine a scenario in which many people won’t jump at the chance.
While this may sound like a big win for consumers and Disney/ESPN, it doesn’t come without challenges. The thought of ESPN’s streaming product as the ‘Netflix of sports’ alone reveals that. If the service really takes off as it is expected to, it will quickly account for a lot of traffic, and perhaps a lot of lost cable subscribers as well. The comparisons to Netflix are apt, as the movie-streaming accomplished the same thing. During peak hours, Netflix accounts for as much as 30% of web traffic, and it’s no secret that cable has been losing subscribers for some time now as cord-cutters are increasingly able to rely on Netflix and similar services. But a few months ago, it was the cable companies who were able to exact some revenge, by forcing Netflix to pay up for improved access to their networks with “peering deals.” Before these deals, customers of some ISPs were experiencing degraded speeds for Netflix content, a crippling problem when your business depends on streaming HD video across the web. Now after shelling out big bucks to Verizon, their FiOS internet service has suddenly jumped to the top a monthly Netflix performance index.
The Netflix of sports will likely receive similar treatment to the Netflix of movies. It’s yet to be seen whether this will change the dynamic between ESPN and cable TV operators. ESPN is one of the most in-demand and thus most expensive channels on cable TV, giving parent company Disney incredible negotiating strength to both name their own price for content and force additional channels onto cable companies and their subscribers. By offering an online streaming service outside of cable TV, ESPN may unintentionally be giving the cable companies some much needed leverage, since they’d be able to go back to Disney, the same way they did to Netflix, and demand payment to ensure uninterrupted delivery of the service. Unlike with ESPN on cable, if a standalone online service does not work as promised, users will be much quicker to complain or drop the service entirely.
It will surely be interesting to see exactly how this will all play out, but one thing is for sure, making sports available without cable is going to have an impact. It seems as if sports are poised to follow movies into OTT territory, in more ways than one. Not only does it give cord-cutters one more source of high quality and mega-popular content to watch, it takes away one of the few exclusives that have largely kept people tethered to cable. But perhaps more interestingly, as more and more content goes over-the-top and direct to consumer in the process, does it have the potential to change the currently lopsided dynamic between content makers and aggregators like the cable companies, who also function as the ISPs that deliver the OTT services that compete with their own offerings. Either way, the TV of tomorrow won’t look much like the TV of today.