Whole new ballgame for ad revenue

Major sports leagues controlling more of their content

"With the announcement last month that CBS Sports' second-in-command, Tony Petitti, has been named CEO of the MLB Network -- expected to debut Jan. 1, 2009 -- another step was made towards greater control of the league's content. Being touted by Major League Baseball as the largest cable launch in the history of television, the net has already signed agreements to launch in 50 million homes.

Baseball is hardly alone among U.S. sports leagues in seeking to have more control of its programming, thanks mostly to the ad revenue associated with new distribution channels. Major League Soccer (MLS), the National Basketball Association (NBA), the National Football League (NFL) and the National Hockey League (NHL) have all committed to delivering content -- including games, highlights and original programming -- in ways that better suit the needs of fans and advertisers.

Consumer adoption of broadband and mobile video services allows the leagues "to crawl into crevices that weren't there before," said Andrew Zimbalist, sports economist and economics professor at Smith College. "They are creating an asset that hadn't existed in the pre-digital days."

In doing so, league execs say, they're creating deeper connections to their viewers, sponsors and advertisers. They're also generating additional revenue to complement the rights fees received from the broadcast and cable networks.

Rob Correa, senior vp of programming at CBS Sports, said, "It's a long-term insurance policy for TV rights," and noted that no one can predict what the business models for the mainstream networks will look like in five to 10 years.

MLS commissioner Don Garber added that leagues are no longer solely dependent "on their relationships with their broadcast partners for revenue generation."

The MLB Network, currently building its ad sales team, has not yet reached out to ad buyers, according to Tim Brosnan, evp of business at MLB. But internal discussions are taking place with MLB Advanced Media, a standalone interactive media entity created in 2000, to see how the two MLB-owned media companies will work with one another.

Over at the NBA, Turner Broadcasting System (TBS) and the league revealed plans in mid-January to extend their 23-year partnership to jointly manage a portfolio of the NBA's digital businesses. TBS will run this out of its Atlanta production facility. Notably, the NBA was the first to launch a cable network, in 1999.

As of October, to coincide with the 2008-09 (and running through 2015-16) season, TBS assumed responsibility of NBA TV, the league's 24-hour digital network, hosting and operating the NBA.com network, and operating NBA League Pass, the league's out-of-market game package and its broadband and wireless businesses. Turner Network Television will provide talent from TV shows NBA on TNT and Inside the NBA.

Meanwhile, MLS' Garber emphasized that the league is focusing on extending its Web site and mobile digital platforms. As the youngest league (it formed in 1996), he explained, it's not yet big enough to have its own cable channel. This extended digital play will include the creation of longer-form content.

MLS has taken steps towards entry in the entertainment business. Six months ago it created the MLS Media Committee, which is populated with talent such as film producer and director Joe Roth (formerly chairman of Twentieth Century Fox, Caravan Pictures and Walt Disney Studios), and Andrew Hauptman, a film producer, and chairman and CEO of Andell Holdings, an investment firm that works with entertainment companies. They will be integral in the decision-making process for producing original content for the various platforms, including online and mobile, according to Garber.

This past October, the NHL launched the NHL Network in the U.S., which offers fans content 24/7 and is modeled after the structure of its Canadian cable net (also called NHL Network). The creation of NHL Network prompted a redesign of the league's broadband player last month; formerly NHL TV, it has been rebranded as the NHL Network Online to more closely align the platforms, said Larry Gelfand, svp of media sales.

"We specifically wanted to rebrand to synergize with on-air," Gelfand explained

In addition to game broadcasts, the NHL is delivering original content to the Web. This includes the daily "The Hockey Show," a live-studio production that features, in between game plays, on-air hosts and lift-outs from the NHL Network program, "On the Fly."

"Fans are more empowered with content on the Web and that's spawning a greater interest in 24/7 access both online and on-air," said Gelfand.

The NHL also offers a mobile component delivered through Verizon Wireless. Offerings include mobile video alerts of game highlights.

Perhaps the most successful of the league-owned networks, according to some industry execs, is the NFL's NFL Network, created in 2003. While its intention was to provide unique access to its content on non-game days for fans and advertisers, last September the league placed digital center stage when it reclaimed the rights to NFL.com, which CBS SportsLine had been managing. Previously, there had been little interaction between the network and the Web site, but due to the change in media consumption patterns, NFL.com was moved in-house.

"Television and digital are absolutely connected to co-exist with our fan and advertising base," said Ron Furman, senior vp of customer marketing and sales at the NFL.

The theme of this year's NFL upfront presentation was "Anytime, Anywhere, Any Screen," emphasizing that the NFL works closely with its advertisers to create an integrated package (including cable, online, mobile and print).

The leagues, of course, have challenges to meet. Sam Sussman, senior vp and sports activation director at Publicis-owned Starcom USA, underscored the need to produce meaningful content year-round -- no easy feat.

There's also the chance that the market will become oversaturated. "Of course, the danger is there will either be a direct threat of exclusivity [in terms of the deals struck with the broadcast and cable partners] or a dilution of the value of exclusivity (of the content). So there's a balancing act there," said Smith College's Zimbalist.

That said, the creation of these networks and digital-distribution platforms has given advertisers additional opportunities. For instance, when the NHL's new broadband player launched, most of the channels (upwards of seven) had sponsors attached. For example, the presenting sponsor for "The Hockey Show" was Bud Light, and Verizon Wireless served in the same capacity for "NHL Game Highlights."

Currently, NHL advertisers can buy a la carte. However, the league is in the process of shifting the model to an integrated package that could include national and local broadcasts -- both in-arena and digital components. This is particularly geared towards the larger flagship sponsors in hopes they'll invest across all assets.

"We're moving to an integrated approach and we want our advertisers and sponsors to as well," said Gelfand.

The NFL Network's COO, Kim Williams, added that during last year's eight-game, Thursday night package there were three interesting sponsorships: a pre-game show called "Total Access on Location Presented by Sears," "Wendy's Halftime Show" and "The Home Depot Post-Game Show."

"Those opportunities would not exist for our sponsors and advertisers if the network didn't exist," she said. Portions of these games were shown online and on mobile.

For Turner and the NBA, noted David Levy, president of both TBS and Turner Sports, "the leverage that we have as a combined asset (gives us the ability to sell) a fully integrated platform package -- which is good for both of us."

Added Bill Koenig, executive vp of business affairs and general counsel at the NBA: "We are hoping Turner can appeal to non-league sponsors, particularly for our digital assets."

Over time, what the leagues are ultimately trying to do, according to David Carter, executive director at the Sports Business Institute, is effectively become holding companies "so you can maybe look at a league as a parent company or conglomerate and look at their media distribution wing or subsidiary as another business enterprise."