On The Landscape of Live Sports Streaming

With the COVID-19 pandemic having gripped the nation and forcing Americans to self-quarantine, there is probably no better time to discuss the future of streaming in sports and in the NBA. Industries that primarily require physical presence in order to generate commerce, such as brick-and-mortar retail, airline travel, live events, hospitality, casinos and restaurants, have fallen to standstill in the wake of government-ordered shelter-in-places. Conversely, companies that are catering to our new quarantined reality have thrived.

The old adage in the media and entertainment business is that “content is king,” and live sports has certainly worn the crown for some time.

Zoom Video Communications (ZM), a company whose primary purpose is web-based video conferencing, has seen its share price double in value in little over a month. Amazon, which, over the years, had realized the importance of establishing a physical retail presence through its acquisition of Whole Foods and establishment of Amazon-branded storefronts, is now banking more than ever on its unrivaled e-commerce platform, as Americans are unable to shop for goods other than those provided at “essential businesses.” As such, Amazon’s stock price has increased in a time where businesses more vulnerable to the pandemic have declined as much as 70%. The value of streaming giant Netflix dipped approximately 25% in mid-March, though has since recuperated much of that value, as its 167 million subscribers are more captive than ever to its now expansive collection of original content. Which brings us to evaluating the current state of streaming in sports.

The landscape of live sports streaming is changing as fast as play in the NBA is. In an excellent summation, Morning Brew categorized over-the-top (OTT) streaming providers into four groups:

  • Sports leagues (MLB.TV, NBA League Pass, NFL Game Pass) 
  • Skinny bundles (DirecTV Now, fuboTV, Hulu + Live TV, YouTube TV). These platforms license from big networks and offer slimmed-down content bundles.
  • Pure play streaming (DAZN, Flo Sports)
  • Tech/esports (Amazon Prime Video, Facebook, Twitter, Twitch) 

Currently, in most scenarios, if someone wants to watch live sports without having a cable subscription, they must subscribe to a service that picks up games televised by cable or television networks. The main reason for this is that sports leagues struck exclusive content distribution deals with these networks. Unfortunately, with the NBA, blackout restrictions still apply. Prior to the 1998-1999 NBA lockout, local networks were unable to broadcast games that were simultaneously being televised by a national network like NBC, ABC or TNT. That restriction has since been lifted, but it is still applicable to NBA TV and the streaming providers. This noncompetitive behavior still stacks the cards in favor of traditional cable providers, and is a critical domino that needs to fall in order for die-hard NBA fans to truly cut the cord. Rockets fans based in Houston that don’t have Xfinity simply are unable to watch the 70 home games broadcast on AT&T Sportnet year-round.

It is no secret that live sports is the most crucial value generator of satellite and cable TV providers. Xfinity customers contribute more than $9 a month to the ESPN networks, more than any network by a wide margin, with the exception of à la carte premium networks like HBO and Showtime. Typical cable viewers only watch 17 channels on average, and, anecdotally, some viewers would argue they only consistently watch just a handful of channels. This makes the cable TV value proposition even more questionable. In this context, if Disney, the owner of ESPN, is able to move its customers to its Disney+ bundle (Disney+, Hulu and ESPN+), which currently only costs $12.99 / month, it makes sense for die-hard ESPN fans to cut the cord.

But what about pure play streaming services like DAZN and Flo Sports? These providers are perhaps the most interesting, as they, much like Netflix, don’t have the financial safety net of a large media or tech conglomerate to back them. Hence, they are less able to offset steep losses arising from content acquisition and must charge higher subscription fees as a result. DAZN, founded in the United Kingdom, is not well known within the United States, but it is looking to change that, having raised $500 million to help it strike licensing deals with major US sports leagues. However, in a sign that its business model is more precarious and undiversified, the streaming provider is refusing to pay licensing fees during the hiatus of sports brought on by the coronavirus pandemic.

Elsewhere, big tech firms, having already established their own streaming platforms and original content (Amazon Prime Video, Apple TV+, YouTube TV, Facebook Watch), are not just dipping their toes into sports streaming, but cannonballing into it. Amazon reached a deal with the YES Network to stream 21 games free to Amazon Prime subscribers next season, and already has an agreement in place with the NFL to stream Thursday night football. Facebook Watch similarly inked a deal with the MLB Network in 2018 to broadcast 25 games, though that was dropped to 6 in the following season. These games aren’t exclusive, but if these types of joint ventures gain steam, churn rates for traditional television providers may increase.

The old adage in the media and entertainment business is that “content is king,” and live sports has certainly worn the crown for some time. The live sports business model, once thought as immovable and set, is now more fluid than ever. What is becoming clear, though, is that it is no better time to be the customer. The big four media and entertainment companies in the US – Disney, Comcast NBCUniversal, AT&T Warner Media, and ViacomCBS – have established their own direct-to-consumer streaming offerings, while pure-play streaming companies like Netflix and Amazon Prime have only grown more in stature with their own exceptional list of original content to complement licensed programming. With the NBA’s licensing deals set to expire in the coming years with major television networks, will we one day see the NBA strike an exclusive deal with a non-traditional OTT streaming provider? Time will tell.