Sunday, 18 April 2010

Monetizing On-Line Sports Contents: What's the Score?

There is no more discussed subject in the online content world than that of the "business model." By now, we are all familiar with the problem. Online contents tend to be available for free. However, advertising, or some other form of third-party sponsorship for the contents, has proved to be an elusive foundation to support a viable business model. The promise of ever-more eyeballs on the internet does not seem to have translated into the kind of advertising revenues that can adequately replace the lost income from existing types of content distribution.

As a result, the flavour of the month (actually, the last 12-24 months) has been to (re)migrate to a subscription fee model. Getting people to pay for their use and access of online contents, so the argument goes, will provide a more reliable and substantial basis to garner profits from such online activities. However, the move from advertising to a fee-based model has proved elusive. As Craig Moffett, a media guru at Sanford Bernstein, said in a recent interview, content owners tend to talk a good name when it comes to charging users, but the actual evidence about how widespread the implementation of this change of approach has been is extremely spotty. It is not so easy to convince someone to pay for something that it has previously received for free.

The sports world, however, may be a bit different in this regard. An interesting discussion on this appeared on a posting on April 9, written by Scott Anthony and entitled "Major League Baseball's Good Enough Gamble Paid Off." (I am aware that baseball is that most American of sporting games, so those of you who are not American, please bear with me.) Indeed, the fact that baseball provides for discrete, rather than continuous action, being more like cricket than football or basketball, may make it especially suited for online uses. Still, Anythony's observations merit general attention.

According to Anthony, a decade ago Major League Baseball (MLB) took the step of creating a free-standing entity called Major League Baseball Advanced Media (MLBAM), to which all 30 teams signed over control of their digital assets. Each of the teams then forked over to MLBAM a million dollars a year, for several consecutive years, to fund MLBAM's activies. The purpose of MLBAM was then to find ways to monetize the baseball experience in the digitial context.

What followed was a variety of different efforts to make money online from the use of the sporting contents, starting from audio feeds, moving on to streaming visual feeds, expanding the platform from the computer screen to the iPhone, providing condensed forms of the game, giving mobile alerts, and supplying virtual play-by-play coverage. All the while, the business model focused on extracting subscription fees from baseball fans as the primary means to fund these various forms of provision of on-line contents.

So how well has MLBAM done? No published figures are available, but an amount of $500 million has been suggested by analysts. Anthony claims that MLBAM is ahead of other sports leagues in successfully monetizing its online contents. Assuming that this $500 million figure is gross revenue, the actual profit from these activities will be less (how much less is not clear). As well, given that there are 30 major league teams, the per team profit that is distributed after the net amount is divided equally among them is a far smaller amount.

And so the question: Just how central can the MLBAM model be for generating sports revenues from providing online content? Stated most generally, will online content for sports events replace or complement income from other sources? Fans will continue to pay for tickets to see the live event; television and cable will continue to broadcast the sporting event to a much wider circle of supporters; and club paraphanelia will be merchandised, at least for the most prominent clubs. It does not seem to me that the various online MLBAM content products will replace these sources of income.

If this observation is right, then the business model for online sports contents is fundamentally different from that of online news and online movies. Regarding online news, there is a "life and death" tone to whether news contents can be monetized; regarding movies, the tone is less severe (after all, there is still the movie theatre), but there is still concern how to monetize movie contents in an age of declining video sales. That said, the continuing attempts by the sports business to find ways to monetize their product in the online world bears continuing watch.

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