Tuesday, April 20th, 2010...12:37 am
March Madness On Demand Or On De Fritz?
I’ve been paying close attention to the television negotiations for the NCAA Men’s Basketball tournament. You may have heard that the NCAA is playing around with the idea of expanding March Madness to 96 teams. You may have also asked yourself why mess with the perfection that is the current tournament. Many, including myself, think a 96 team tournament is lame. The answer is simple. C.R.E.A.M – Cash Rules Everything Around Me. Dolla dolla bill y’all.
The NCAA currently has three years left on an agreement with CBS, signed in 1999 for over $6 billion, which would pay them about $700 Million per year for the broadcast rights to the tournament. The NCAA can also opt out of the current deal and sign a new deal (kind of like Dirk this summer). The expanded format, which includes the 32 additional games, is attractive to both CBS and ESPN as it allow for two more full days of programming. Reported by SBJ, ESPN’s bid ($800M per year over 14 years) is a bit less than the combined bid by CBS and Turner ($840 per year). The NCAA has yet to make a decision.
Besides having a rooting interest in this as a college hoops fanatic, I’m also intrigued by how the digital component plays into the equation. March Madness On Demand, the online streaming of all NCAA tournament games, is lauded each year as the ideal online live video programming event. In 2010, over 6 million viewers tuned in to the first two days to combine for over 8.7 million hours of live streaming. More importantly, the event generated over $37M in online ad sales.
Let’s take a closer look at this $37M. It’s 20% better than the online ad revenue in 2009. It’s almost 9x better than the revenue MMOD generated in 2006 (the first year it was free and completely ad-supported). And if we turn back the clock all the way to 2005, when CSTV acquired the rights to MMOD and produced the event (with yours truly playing the role of the little boy who tried to put his finger in the well to avert complete calamity), the total revenue was less than $1MM with online advertising accounting for less than $300K. AdAge does a good job of breaking down the annual digital revenue.
Despite this exponential growth (in a time when television sales has stayed pretty stagnant), digital revenues still account for less than 10% of total revenues generated by CBS. What’ shocking is trying to predict how the networks valued digital revenue growth in making their bids. My guess is that the number is close $0.
Yup. I’m calling it like just like I had Butler going to the national championship game. One of the most successful online video franchises in the history of the web will cease to exist in 2011.
Whoever has the rights in 2011 will have a huge cable presence. CBS plans to partner with Turner and broadcast games on CBS, TNT, TBS and truTV. I’m not sure of ESPN’s plan but my guess is that their distribution would include ESPN2, ESPNU and ABC. Basically the Mega March Madness product exclusive to DirecTV will be shifted to regular cable. Chris Littman (another Litty??) of the Sportingnews.com does a nice job breaking down the media implications.
Cable companies don’t like to give away their most valuable content online for free. No matter how well they sell digital, it is still more difficult to monetize a user to the same extent as a television viewer. Combine that with the fact that cable companies make a substantial percentage of their total revenues (usually greater than their advertising revenue) from carriage fees paid by the major cable companies for their content. This shift to cable plus the additional programming is what accounts for the higher rights fees. Cable companies (Comcast, Time Warner, Cox, DirecTV, etc.) are super protective of their investment in content and won’t stand to see it given away for free online (unless they can fully control the experience). If you want proof, check out the digital access model employed by ESPN for ESPN3.com.
For the viewer/fan, this means they will probably be able to watch every game televised live in it’s entirety on good old television. No more cursing CBS as you miss miraculous game winner after unbelievable buzzer beater. What you will most likely forfeit is the opportunity to watch games online at work during the day. Of course, this all becomes a moot point as the convergence of digital and television unfolds (which seems inevitable but might not happen in 2011).
Does it seem like this would be a move backwards? Maybe or maybe not. Even without an online streaming product, I’d bet their will be some kind of digital or mobile distribution solution. Perhaps this is in the hands of the MSO’s (as Comcast is trying to do with Xfinity) instead of the content providers. Perhaps the NCAA carves out specific stipulations regarding digital in the deal. Or it could be a renegade technology (Slingbox-esque). Perhaps I’m totally wrong and MMOD will be back in it’s same exact form next season.
I am willing to bet that how the tournament is broadcasted and distributed five years from now will be more shocking and unimaginable than the how far it’s all come since I worked on this little project back in 2005. At the time, the prevailing thought was that MMOD didn’t sell well because it just wasn’t good content/product.
What I’m really saying is brace yourself to experience Steve Lavin and the Johnnies cutting down the nets in 4D (don’t forget the psychedelic dimension) brooo!!!!