What's that again about Old Media being clueless about the digital world? Not when it comes to online streaming of big sports bonanzas, such as golf's just-completed Masters Tournament or the NCAA's March Madness basketball championship tournament. For the 63-game March Madness roundball tournament alone, CBS (CBS) raked in $30 million from such advertisers as AT&T (T), Coca-Cola (KO), and Pontiac (GM) as 7.5 million college basketball fans streamed games on their personal computers, iPhones, and other digital devices.
Better yet, CBS scored big where it matters most, turning a profit that has so far eluded most old-line media's net game. Entertainment sites such as Hulu, a joint venture between NBC (GE) and Fox (NWS), have yet to turn a profit despite huge traffic for its free, advertiser-supported viewing of TV shows. CBS, which paid an estimated $571 million this year to televise the NCAA tournament, says it turned a tidy online profit, although it won't say how much. Ditto for the Masters. "I'd get a wedgie around here if they weren't," says CBS Interactive President Quincy Smith.
The experience at CBS, as well as at Major League Baseball and sports network ESPN (DIS), shows that compelling sports coverage remains a huge draw, regardless of how it is delivered. "Whether it's radio or satellite TV, sports has traditionally driven access to new platforms," says Arash Amel, broadband media analyst at market research firm Screen Digest.
Paying a Pretty Penny
And here's a mind-blowing concept: Users will actually pay for online sports content. "It's live and people are passionate about it," says Robert A. Bowman, CEO of Major League Baseball Advanced Media, which expects to generate $100 million this year from the 300,000 fans—a 15% bump from last season—willing to pay up to $109.95 a year to stream baseball games.
That fanaticism allows sports sites to charge hefty prices, says John Zehr, digital senior vice-president of ESPN (DIS), which streamed more than 3,200 baseball, soccer, and other contests last year. ESPN won't discuss income, but analysts believe the company likely turned a profit from the streams since it had already paid license fees on the sports events.
A big attraction for advertisers: Fans generally want to watch sporting events in real time, rather than storing them on digital video-recording services like TiVo (TIVO). While streaming viewers for other types of content chafe at watching online ads, says Screen Digest's Amel, sports sites can jam them into timeouts with little or no backlash.
And online streaming may come yet to the granddaddy of sports events, the Super Bowl. CBS hopes to entice the NFL to allow it to stream the game in February, when the network has the rights to telecast it from Miami, according to Smith. The NFL hasn't said yes, although it claims a success last year when it jointly streamed 17 games online with NBC as a test. The online streaming, which numbered in the millions, didn't cannibalize TV viewing of the Sunday night games, says Brian Rolapp, the NFL's senior vice-president for media strategy. He says 80% of viewers turned to the streams to complement TV watching, as the Internet version offered four alternative camera angles to supplement NBC's primary picture.
Rolapp says the league hasn't decided whether to stream games again this year, and would be open to discussing CBS's Super Bowl request. Says CBS's Smith: "They may say no. But there's night watchmen out there who can't get to a Super Bowl party."