Live streaming services from DirecTV Now to YouTube TV, which launched this week, are selling themselves to potential customers by advertising the fact that you can watch pro sports like NFL games and seamlessly transition from TV to smartphone. Not so fast.
Because the NFL has a $1 billion-a-year mobile rights deal with Verizon, only subscribers of that cell service can actually watch the NFL on their phones through one of those services — a major flaw in a theoretical, frictionless TV-anywhere future.
And as TV watchers migrate from traditional pay-TV bundles to internet streaming services — Time Warner CEO Jeff Bewkes said earlier this year that streaming could overtake Big Cable in three to five years — patchwork mobile rights could become a big issue.
After all, when the majority of people are watching over the internet, those old distinctions matter a lot less — except when they prevent Patriots fans from catching the fourth quarter of a playoff game when they have to shift from the living room to their iPhones.
“As far as the blending between the TV screen in the living room and the one that’s in your pocket, that is happening at a fast pace to be sure,” David Singer, a partner at Jenner & Block who specializes in media and entertainment litigation, told TheWrap.
In that convergence, the NFL sees the writing on the wall — and a potentially lucrative new revenue stream. On Tuesday, Amazon inked a deal with the league to simulcast 10 Thursday night games online, split evenly between NBC and CBS, for a cool $50 million — $40 million more than Twitter paid for the same package this past season.
That’s not even for exclusive rights — the games will also be broadcast on NBC and CBS, and those networks, as well as Verizon, can stream the games too. But Jeff Bezos’ e-commerce and media behemoth now offers subscribers to its $99/year Prime service the opportunity to seamlessly switch from “Mozart in the Jungle” to Cam Newton in the huddle, and the NFL gets to continue to dip its toe into what could be the future of sports broadcasting.
Reps for the NFL have not responded to TheWrap’s request for comment.
Aaron Swerdlow, an attorney at Gerard Fox Law who formerly served as general counsel for a boutique sports agency, said the NFL’s traditional broadcast partners might want a piece of those mobile rights, too — and their deals come up for renewal beginning in 2021. CBS, Fox and ESPN — which pay the NFL a combined $7 billion a year — could push for a change in mobile rights when their TV deals come due. Four years from now, broadcast rights that don’t include mobile might be a much tougher sell at the prices the NFL is asking.
“They’re probably just as interested in getting streaming NFL rights on their app as much as broadcast,” Swerdlow said. “The next generation of fans aren’t subscribing to cable. This content almost has to migrate online.”
“There’s a recipe here for change, because you have the league or the teams in some respects that own the rights to their games trying to reach out to a new audience,” Singer said. “Then you have these platforms like Facebook — in five to 10 years they could be the largest network in existence. What this all goes to show is this is a very competitive business environment.”
Far more people still watch the NFL on traditional TV than over the internet, and rights are priced accordingly. Twitter’s Thursday night streams brought in fewer than 300,000 viewers per minute, while NBC and CBS averaged nearly 16 million. But as more people watch games on portable internet TV services, a lack of a unified mobile rights protocol is likely to create a growing user-experience issue.
CBS launched its CBS All Access streaming service in 2014, and added the NFL last December. During the company’s fourth-quarter earnings call, network honcho Les Moonves said pro football was a big draw in bringing on new subscribers. But new CBS All Access subscribers who signed on for pro football — and who don’t have Verizon cell service — undoubtedly find it frustrating when they can’t watch games on their phones.
And AT&T, Verizon’s biggest rival in wireless services, owns DirecTV, which has the exclusive rights to the NFL’s Sunday Ticket plan allowing viewers to watch every game. (The Sunday Ticket mobile app is not restricted to Verizon.) For that matter, AT&T can’t love the NFL’s exclusive Verizon deal, since the company pays the NFL about $1.5 billion a year — half a billion more than Verizon pays the league for mobile rights — for the Sunday Ticket package, while Verizon’s deal prevents customers of its DirecTV Now from watching on their phones.
That patchwork system of mobile rights may be confusing to consumers and suboptimal for broadcasters and telecom companies, but it allows the NFL to generate multiple streams of revenue from the same product.
“The owner of the copyright can slice and dice their rights any way they want,” Singer said.
However, a continued rise in streaming subscribers, particularly among millennials who are hard to target on linear television, could change that calculus for both the league and its broadcasters.
“The NFL has an eye on how the next generation of fans and consumers will watch,” Swerdlow said. “Right now they likely have to [break out mobile rights] under the agreement with its broadcast partners. You might see that wall dissipate when the deal with the broadcast partners expires.”
“The leagues want to build their audience and draw those viewers in,” Julie Shepard, a partner at Jenner & Block who focuses on new media and content distribution told TheWrap. “In order to get exposure and build that younger audience, the leagues view mobile as a way to do that.”
Swerdlow suggested the NFL might benefit from piggybacking on brands more relevant to a younger audience as it continues to evolve, mentioning Twitter’s partnership with CBS to broadcast last year’s political conventions. Singer agreed with that outlook.
“Those deals will probably look different in the future,” he said. “I foresee deals that are partnerships in some respect. It’s likely that you would see networks partnering with digital platforms.”
Swerdlow pointed to a recent deal signed by the World Surf League to broadcast its events on Facebook — an easier place for millennials to find it than on the type of obscure sports network it would likely be relegated to in the old system (and which many skinnier bundles are dropping). But even as distribution systems change, he said sports content is likely to remain among the most popular programming — as it was when radio broadcasts made way for TV.
Ultimately, the best predictor of the future of football watching might be to follow the ad dollars — which move where the eyeballs are.
“Advertisers mostly value the young viewers,” Swerdlow said. “The NFL’s main sponsors target those young male viewers. And young male viewers are moving from broadcast television to streaming sports.”