By Zach Leonsis
One of the fundamental misconceptions about our business, Monumental Sports & Entertainment, is that we’re just a sports & entertainment company. ‘Wait, what? But how exactly could that be?’ you might ask. ‘Sports and entertainment are literally in your company’s name!’ Well yes, of course that’s true. But we’re also just as much of a media and technology company as we are a sports and entertainment company. Monumental is that, on top of lots of other accurate characterizations: a double-bottom line business, a public trust, a community galvanizer, and hopefully a platform for good. For this article though, let’s focus on Monumental as a business and specifically on the media and technology part. Allow me to explain…
From a business perspective, if we were just a sports and entertainment company, then our only revenues would come from our ticket sales, global partnerships, merchandise sales, building rentals, executive suite leases, and other in-building revenue opportunities. These are core revenue streams that every professional sports franchise needs to drive in order to operate a viable enterprise and field a competitive roster. These core sales & marketing revenues are vital! We work daily at Monumental to grow these businesses and create the best customer experiences possible. But these sales & marketing revenues don’t account for everything. In fact, for many sports organizations, these revenues might only account for half of total revenues. The other significant portion of revenue comes from local and/or national media rights. And there’s good reason for why media revenues are so high for sports teams.
Live sports programming is, unequivocally, the most highly valued programming for both consumers and distributors. If you were to look at the highest rated live events from any recent year, multiple live sporting events will dominate that list. It’s relatively simple to understand why: because live sports are the world’s last frontier for live appointment viewing. Unlike a series that you might watch on Netflix or Disney +, you can’t ‘binge watch’ a season of sports games. And the ‘shelf life’ of a game is actually pretty short (48 hours is typically the max). If you’re a sports fan, you want to enjoy the moment of watching a game live, in the moment when it actually happens. You want to be ‘in the know’ so you can have real-time conversations with friends and fellow fans who are also watching at the same time. It’s hard not to watch games live. Heaven forbid someone tries to give you a score update from your favorite team’s game while you’re both busy with something else and recording the game at home for later viewing. Have you tried doing that lately? Did someone accidentally spoil it for you by mentioning the score or did you accidentally read an update by peeking at your Twitter timeline for just a couple of seconds? It’s nearly impossible to not be in the loop with real-time events these days.
The other thing about live sports is that the game times are predictable and reliable. Barring a natural disaster, the puck is always dropped and the ball is always tipped on time. And this happens all the time — daily and nightly. Because there are lots of games played by every team and league, which means there is a lot of programming for distributors to send through to your cable box or satellite dish on pretty much any day of the calendar year. One more thing? These programs show no sign of getting cancelled. The major four leagues have existed for decades. And we’d expect them to continue to grow their following for decades to come. People have invested years of their time into watching sports teams, so there’s a growing interest in watching the next season.
There’s something else about live sports programming though: it’s one of the very last pieces of programming that you must subscribe to a cable or satellite service to watch in-market. The leagues have developed and launched sophisticated out-of-market strategies by packaging games to be delivered on digital streaming platforms like NHL.TV and NBA League Pass. These are perfect if you’re a D.C. sports fan living elsewhere. But not so much if you live here in D.C. and don’t subscribe to a traditional MVPD (multi-channel video programming distributor) like Comcast, Time Warner, Cox, Verizon, DirecTV, etc. For almost all other programming, particularly for original content, you have alternative distribution platforms that you can use to access it. You don’t need a cable or satellite subscription to enjoy it. Some examples: Netflix’s The Irishman via AppleTV, HBO’s Westworld via HBO NOW (or soon HBO MAX) on your computer, or NBC’s This is Us via their app on your smartphone. Nowadays, it’s pretty easy to watch all of your favorite shows elsewhere by purchasing an SVOD (subscription video on-demand) package from a major streaming platform. Hence, the streaming wars have launched between companies like Netflix, Apple TV +, Disney +, Hulu, and Amazon as they fight to drive more DTC (direct-to-consumer) subscriptions amongst customers who might already have cable, and want even more programming or customers who don’t have cable, and frankly never will. DTC relationships matter because user data is so valuable now and personalized experiences are going to increasingly matter as we move forward.
Live sports programming is a critical staple that keeps the value of the cable and satellite bundle high for consumers; and teams and leagues are now compensated for that significant value. Look no further than the major league deals that were struck with networks like ESPN, Turner Sports, NBC Sports and others. These networks ‘get’ that owning premier sports rights draws the biggest audience, and that if they own those rights, they can drive better subscriber economics as part of a larger cable package of channels, while also driving greater ad sales from either local or national marketing budgets. Local really matters here. You can stream most of these ‘cable only’ games online or on your smart phone, but again, you have to prove that you’re a subscriber via an authenticated viewing experience. That’s not an SVOD experience. It’s a complimentary service that a linear network can offer, but not a separate P&L or a stand-alone business. It’s also a great way for millennials and gen-z fans to leverage their parents’ cable account credentials to watch games for ‘free.’ Yes, us millennials do this. I promise that I’m a subscriber though!
I’m candidly not like many of my friends when it comes to the services that I subscribe to today. I subscribe to a cable subscription that includes every sports tier imaginable, so that I can watch every game regardless of the league or location. I also subscribe to Netflix, Disney+, Hulu, Amazon Prime, Monumental Sports Network, and more. I’m oversubscribed. Most of my friends, and certainly the generations that are coming after me are not subscribing to cable or satellite services. We’ve all heard about ‘cord-cutting’ and ‘cord-nevers,’ and we’ve all heard about subscriber declines at major networks too. I think we’re getting closer to a date when subscriber losses are going to force leagues, teams, and networks to think differently about distribution. Subscriber revenues are the lifeblood of a cable network, far outweighing ad revenues frankly. If losing subscribers is scary for networks, it’s scary for teams and leagues too because at the end of the day, teams, leagues, and networks are partners, and we all benefit from a strong distribution system. There are a lot of smart people trying to figure out different package types for linear vs. digital, social vs. behind-a-paywall. Thank goodness for that.
I was fascinated by something said last week by NBA Commissioner, Adam Silver, at Sports Business Journal’s Dealmakers in Sports Conference. Commissioner Silver, who is consistently brilliant and not afraid to push the NBA forward, was quite direct: “Especially for the NBA, which is primarily a cable-satellite sport, that system is broken to a certain extent…it’s not just in terms of the loss of homes, but our young viewers, in particular, are tuning out cable…” I don’t enjoy talking negatively about the cable world because we have a great partnership with NBC Sports Washington, and ultimately the cable bundle is actually an unbelievable value for consumers. Think about it: 200+ channels for less than $80 per month? That’s way more bang for your buck than a one-off SVOD subscription. But unsurprisingly, Commissioner Silver is on to something. We are at risk of losing our connection to a younger generation of fans who aren’t subscribing to cable and are looking to digest video via other distribution channels instead. These are primarily digital ones that are direct-to-consumer as younger viewers curate their own bundle of programming based on their own personal preferences. I believe that one day, as things become more unbundled in the future, that there will ironically be another great ‘re-bundling’ of services to provide more economic value to consumers again. That’s a whole different article waiting to be written.
At Monumental Sports & Entertainment, we’ve done our best to recognize this trend and turn it into an opportunity instead of a challenge. That’s why we launched Monumental Sports Network, the first-ever regionalized, in-market sports streaming platform. We started it from scratch: we’re only in the DMV (the District, Maryland, and Virginia) right now and our programming includes around 500 games that include our (2019 World Champion!) Washington Mystics WNBA games, Capital City Go-Go G-League games, Washington Spirit NWSL games, ACC basketball, football, and other games, on-demand Washington Capitals NHL games, Washington Wizards NBA games, live high-school games, and more original programming on all our teams. We launched this platform to make our sports programming more accessible. We want to reach those younger consumers who aren’t subscribing to cable or satellite services, and who prefer streaming services on their Roku sticks, smartphones, or laptops instead. If you’ve got any sort of internet connected device, there’s a good chance you’ll be able to find us. It’s important that we’re accessible and it’s important that we’re relevant to our youngest generation of fans, and potential new fans too!
Three years since launching our OTT (over-the-top) platform on nearly a dozen different platforms and devices, we have learned a great deal about subscriber acquisition & retention, we have produced some amazing original content that has won several local Emmy Awards, we have driven hundreds of thousands of app downloads, we have streamed to millions of unique visitors, and we have developed a growing paid-subscriber base that’s well into the tens of thousands. Our OTT network has allowed us to experiment with new technologies, like multi-camera user-interfaces provided by Kiswe mobile and automated production technologies like cameras built by Keemotion. We’ve also integrated real-time data feeds and advanced stat pages powered by Sportradar, which I believe are going to become increasingly popular with our fans. While at first, there was a learning curve for many of our fans who wanted to watch Mystics and Go-Go games, consumers have adjusted and now know where they can watch and engage with our two teams. The user experience is really first class. If you have an interest in the Wizards’ rising stars or in our World Champion Washington Mystics, you can engage on any device. We also simulcast several games on NBC Sports Washington which acts as a great barker channel for Monumental Sports Network. Are we done perfecting the delivery or growing the audience? Not at all. We have a ways to go. It’s still early days. Has it provided us with a glimpse of what in-market streaming might look like in the future for other teams? One hundred percent.
Streaming from an OTT platform, especially as interest grows for more and more unique storytelling around players and non-game activity, allows programmers to be far more creative about what’s produced as well. Now, everything is on the table. Everything from team warm-ups and batting practice to training sessions. Alternate feeds, data-layer enhancements, Twitch extensions: they all give fans a different point of view of the teams they love. Hopefully a more personalized experience too.
MLB recently announced that they plan to allow clubs to stream their games in-market. That will take some time to roll-out as clubs work with their rights holders to determine the best path to take advantage of this new opportunity. They’ll also need to make sure that they don’t disrupt their current carriage deals which are still very much where the majority of media revenues are coming from today. It’s a good example of the changing times though and perhaps a preview of what might be coming across all of sports. We’ll have to react to new developments quickly.
One of our goals at Monumental is to lead in innovation and fan engagement. We know that a day will come when pristine, unbuffered streaming to whatever device you wish will become available, no matter where you are with customized highlights, data-feeds and even social viewing experiences. Our work to this point is great news for our fans and great exposure for our corporate brand partners. We take great pride in leaning forward, not backwards, as the fluid and increasingly difficult business of media distribution continues to evolve right in front of us.
