Wednesday, November 23, 2016

Should Amazon Add A Sport Tier?

If there was a piece of content that truly helped to drive usage, then it must be live sports.  It has been both a blessing and a curse for those that seek to license it and distribute it.  Sunday Night NFL on NBC has helped the broadcast network build audience share and promote other content offerings.  Major league sports, including the Olympics have driven up bidding wars to attract audiences to their respective networks.  But it has come at a huge cost, too.

Look at ESPN and the success it has had over the years from live sports.  From picking up baseball games and Monday Night Football to major tennis and soccer coverage, ESPN has built a large following and become an important network on any cable providers' line-up.  But the cost to license this content has also driven up their license fees to those same providers which then increase their subscriber fees to the customer.  And finally the customer has pushed back, through cord cutting, and ESPN finds itself losing its subscriber base.  ESPN's parent company, Disney, may now be mulling spinning or selling off the ESPN brand. 

 Enter the next technology platform post cable called streaming which is attracting those cord cutters to subscribe and watch.  Amazon Prime offers movies and TV shows but may now see that to compete in this space it must offer live content too.  And they potentially see the answer in sports content.  According to the Wall Street Journal, "the e-commerce giant has been in talks with heavy hitters like the National Basketball Association, Major League Baseball and the National Football League for the rights to carry live games, according to people familiar with the matter. It also has talked with soccer, lacrosse and surfing leagues, the people said." 

Any streaming rights deals negotiated by Amazon might lead to lower license fees for ESPN's cable carriage.  Or Amazon might consider talking to Disney about buying ESPN.  Still given the already high costs of sports content, one worries if any profit can be squeezed out.  With rising costs, both on TV and at the respective sporting event, customers can no longer afford to go to the game keep a cable subscription with a sports package.  Ratings have leveled off, if not dropped, and sports content may have lost some value. 

Is sports the right move for Amazon to grow its streaming business?  Will customers pay more for content that once was free on broadcast TV and less free on cable.  Or will it ultimately shrink the customer base, lessen interest and shift viewer interest to other content.  Interestingly, this year's political coverage did just that, shifting eyeballs away from the game to the debates and other election coverage.  And it ultimately showed that even sports can be beat.