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Ruslan Kogan

2012: The Year For Change In Online Sports Streaming

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Editor’s Note: This guest post is written by Ruslan Kogan, the founder and CEO of Kogan.com, a manufacturer and direct retailer of consumer electronics. He is a serial entrepreneur, a controversial figure, one of the pioneers of online retail in Australia, and has become Australia’s wealthiest self-made person under the age of 30.

2012 needs to be the year sports teams around the world wake up and start realizing that their multi-billion dollar licensing deals with networks are about to become worthless. My company designs and manufactures TVs, and we see a gigantic spike in sales any time there is a big sporting event — the Soccer World Cup, the Olympics, etc. It’s clear that loving sport is an almost universal trait, which helps bring us together (or sometimes cause a bit of animosity).

Let me explain: One of my favourite sports is tennis. A couple of years ago there was nothing better than a Federer versus Nadal encounter. I flew myself all over the world to watch this. I was in London for the 2008 Wimbledon 5-setter Final. I was also sitting front row for the epic 5 set battle that went on until the early hours at the 2009 Australian Open Final.

This was some of the best entertainment I had ever seen, and it got me thinking about how we could better showcase more of what I just witnessed to the world. Most people were beginning to accept that the future of TV and content was heading online, and at the time, I was chatting with Google about YouTube Live, and their ability to broadcast live events to the world.

And then it clicked: The ultimate showcase of sporting talent. I wanted Roger Federer to play Rafael Nadal in a best of three encounter. One match in New York. One match in Paris. One match in London. I put up US$20 million prize money to the winner. $0 to the loser. The event would be broadcast purely online. Passionate sports followers from all around the world would be able to tune in live or would also be able to watch the game at whatever time suits them.

I thought $20 million would be enough to convince Federer and Nadal to create Internet history, while also showcasing the true business potential of the format. My talks with Roger Federer’s management broke down and the deal didn’t go ahead. I don’t blame him — at the time he was trying to become the first player since Rod Laver in 1969 to win the Grand Slam.

Fast forward a few years and we’re slowly starting to see certain sports slowly realize what is about to happen to their industry (see the 2012 Super Bowl for an example). What’s it going to take for sports broadcasting over the Internet to become ubiquitous? Rip is right: We shouldn’t be saying “wow” when top-level sports is shown live on the Internet in 2012.

Hyper-targeted advertising

My Federer-Nadal proposal would’ve allowed for the $20 million prize money to be recouped through the targeted advertising that online enables, rather than the shouting-at-the-masses approach that current broadcast advertising offers.

By broadcasting a major sporting event live online, franchises could gain a huge worldwide audience. Using remarketing technologies available to today’s online marketers, they can also know a lot more about your viewers than one would with the current TV broadcast scatter gun approach. Plus, there would be a more accurate sense of the viewers location, their gender, their age, their interests and what other websites they like (both the Google and Yahoo advertising network can let you target based on these characteristics) – you would then be able to very accurately market with extreme precision to your worldwide audience of millions.

One would be able to advertise the tennis training, for example, at the local tennis center that’s just down the road, or the racquet that Federer just used to hit an amazing cross-court winner, or the energy drink Nadal just sipped on to give him a huge boost in the fifth set. The possibilities are endless. The move towards precision targeting with this sort of marketing approach would mean that conversion rates on the advertising would be tremendous.

And higher conversion rates, in turn, means a higher return on investment to marketers, which could result in marketers being willing to spend more. And when marketers are willing to spend more, you can sell the same advertising space you previously had for more money. In this instance, not only would you sell existing advertising space for more money, you would also be creating billions of impressions of advertising space that never existed.

What the sporting bodies can learn from record labels

The sports broadcast industry has been one of the slowest to move in this regard. For instance, the music industry was forced to come to terms with the fact that their major asset is not only the intellectual property rights they hold over the music, but the cult following that the artists have. Knowing this, they started to do product placement more and more successfully.

It’s nearly impossible these days to listen to a song without hearing about a few Vodka and Tequila brands followed by a few upmarket watch brands. Almost every popular artist also has a clothing label or cologne or headphones named after them. The music industry should be applauded for accepting reality and working out how to turn the cult following that their artists have into a sustainable business during the peer-to-peer file sharing revolution.

Why online sports broadcasting isn’t quite there yet

The governing body of tennis, the ATP, simply provided too big an obstacle to my proposal. Many sports are run by bodies that are only looking to the next couple of year’s revenue figures. One of their most important functions (in their eyes) is to squeeze as many dollars out of the networks as possible for exclusive broadcasting rights. The bottom line is that “what is not sustainable cannot be sustained” and the way tennis and other sports are broadcast and commercialized will need to keep up with innovations in the media space.

Hardware needs to play catch-up

It’s clear that watching a fast-paced, professional level sporting encounter on a 13″ screen in a browser window isn’t ideal, particularly when big screen TVs continue to become cheaper and cheaper. The hardware industry needs to pull its weight here as well. There are a few solutions floating around in the Smart/Internet/IPTV space, but nothing that “just works.” There is no one piece of technology that you can show to your grandparents and say: “This is how you’re going to watch the Olympics. Enjoy!”

There’s Apple TV, Google/Android TV, Boxee, Linux-based options, add-on boxes, and more. But as an industry we haven’t quite nailed it yet. We need to make some moves, and fast, to help enable this next era in live entertainment delivered through the Internet.

Industry inertia

The world of media and advertising is changing at a rapid pace, but the people up top who run the show are almost always scared of change. Nobody wants to be the one implementing the change, because that’s risky. Nobody gets fired for doing things the same way that everyone has done them in the past — but you could lose your job if you implement drastic changes that don’t produce immediate results. All of this could explain the battle that Steve Jobs had with all the recording studios over a number of years trying to convince them that they should be selling their music online — nobody wanted to be the one pulling the trigger on the innovation in case it didn’t work.

You can’t fight it

The world of sport has a similar challenge but they are not willing to accept reality and make appropriate changes – at least not when I approached them with a solution to the situation. You can always hear the rights owners of major sports around the world whining that their pay-per-view broadcasts are always ripped and re-broadcast online through free video sharing websites. The UFC even commented that they are dedicating millions of dollars to shutting it all down, but the moment they shut down 5 streams, 20 new ones pop up. You can’t fight the change the Internet is making to entertainment broadcasting, so it’s time to get on board.

What the short-term future looks like

As you know, YouTube recently announced the introduction of dedicated channels and premium content. I believe this is the precursor to YouTube disrupting every single existing broadcast network around the world, including the live sports industry. The hardware industry needs to make some profession — fast. Watching live entertainment needs to be simple and seamless.

Governing bodies of sporting codes need to look beyond their multi-billion exclusivity deals and start accepting the reality of change. In doing so, they’ll quickly discover the technical precision this new format allows them, and soon start making more money than ever before, while giving consumers and sports lovers around the world an even better viewing experience.

What do you think? Should have Federer accepted my offer and made Internet history? How long before we stop being surprised that a big sporting event is broadcast live online?