Commentary

Digital Revenue Is a Function Of Effective Marketing

Like many Americans, I've been greatly enjoying the NBA Playoffs. The NBA has seen an increase in viewership, owing most of its new viewers to folks tuning in to see the fantastic matchups and extremely close games.

There's no doubt: the playoffs are viral, in the purest sense of the phrase. People are talking about these games at the proverbial water cooler every single day. If you haven't heard someone utter a variant of "Kobe is amazing" or "LeBron is the next Jordan," you are in the minority.

The TV ratings boosts for ABC/ESPN and TNT over last year's postseason have been nothing short of phenomenal, ranging from 11% to 42%.

Despite these increases, ABC/ESPN and TNT aren't resting on their laurels and sticking with the broadcast status quo. Indeed, these networks are taking the extra step of streaming some playoff games live on the Internet for free (although ESPN has some questionable access policies.)

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The networks, and presumably the league itself, have decided to embrace digital as a distribution, marketing, and advertising medium for sports. This is heartening to see because, frankly, it's the only way that these major players can protect their dominance of the industry. There's plenty of market for pirating, and even with the free, high-quality options, it still thrives. A quick look at the popular live-video Web service Justin.tv during game 4 of the Eastern Conference Finals shows over 700,000 aggregate views on channels unofficially rebroadcasting the series' games. Which brings up a great question: With the big networks offering a free, high-quality viewing option, why are over 700,000 games being watched illegally on often low-quality broadcasts?

The simple answer is marketing. Many users aren't aware of the networks' online streaming. Regardless, this is the exact market that TNT, ABC/ESPN, and the NBA must court (pun intended) for future offerings if they are to maximize revenue in the coming years.

The NBA has already launched a "league pass" product that allows fans to watch regular season games for under $200. As online streaming becomes more popular, packages like this could become a significant source of revenue for the league. Likewise, preparing the right pricing packages and guaranteeing access to digital rights will have significant impact on the bottom line.

It's likely that this postseasonal experiment will lead to richer and more interactive product offerings over the next few years, and we should only expect online viewership of sports to expand. Marketing, however, will still be the primary challenge and the essential task -- hopefully the NBA and the networks can come together to create unified price points (be they free, or otherwise) that are easy to understand, consume, and share. With package options that appeal to everyone from the diehard player to the fair-weather fan and an effective marketing plan, the NBA could capture a significant market.

If the NBA and the networks can crack that code, they may be the first to fully accept, nimbly react to, and profit from, the digital cannibalism of their traditional business model.

If you want a vision of the future of sports consumption, I suggest you watch the next Cavaliers-Magic game (airing on Thursday, May 28, on TNT, available online.)

Full disclosure: The author grew up in Cleveland, and is a serious fan. Go Cavs!

1 comment about "Digital Revenue Is a Function Of Effective Marketing".
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  1. Jim Sinai, May 27, 2009 at 3:28 p.m.

    Hey Tyler, nice article. You forget that MLB has been streaming baseball games as a pay per season service for some seasons now.

    Go A's

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