Key Takeaways
I recently described user intent as the difference between success and extraordinary success in legacy media and streaming.
The bidding process for U.S. rights to the Premier League is down to NBCUniversal & ESPN
Both have proven they draw linear and streaming audiences at scale, but each offers different advertising solutions
Advertiser demand is evolving to reach viewers across linear and digital & not all distributors are able to meet that demand
ESPN & NBCU each offer different solutions to that demand, and ESPN's solution is better positioned to win Premier League rights
The bidding process for the U.S. rights to the Premier League is now down to NBCUniversal and ESPN, as Sports Business Journal tweeted on Monday night.
Also this week, the Sinclair Broadcasting Group had its Regional Sports Networks permanently dropped from the Dish Network, suggesting the RSN model faces an ominous future.
Both stories reflect something I wrote about last week in The Metaverse, Dotdash, & Serving User Intent:
understanding user intent has been the difference between success and extraordinary success in legacy media and streaming.
This description of user intent was influenced by something Dotdash CEO Neil Vogel said on the IAC Q3 2021 earnings call:
...one of the things we say, which we stole from another publisher, is like not all of our content that we have makes us money, and we don't care about that.But all of it supports the content that makes us money, which means that if you're going to have a health domain, there's obviously going to be some topics that are very big and some topics that are very small. The small topics have to be treated with the respect and the care of the big topics because the person who uses that or the advertiser that sees it, it doesn't matter to them that it's a small topic. It matters to them that that's their topic. And we look at all domains that way.
This business logic is: the best digital and streaming businesses serve user intent from the consumer side ("consumer intent") in all shapes and sizes, and facilitate "advertiser intent" to reach those consumers in all shapes and sizes through targeting.
Vogel implies not all digital and streaming businesses can do either or both, despite having viewership at scale and cross-platform ad tech. [1]
ESPN, NBCU and Sinclair are solving different but related problems than Dotdash in DTC sports streaming. Their content value proposition in linear is much narrower than Dotdash's - a live broadcast on linear and/or OTT streaming must attract as many owners of a cable box as possible within a short window of time.
Whereas, Dotdash must both generate a steady flow of traffic from a variety of sources over 24 hours/365 days a year, and leverage data science to optimally maximize delivery of both content and ads to those various users.
In sports streaming, the problem mirrors Dotdash's: the distributor must aggregate an audience of consumers of all shapes and sizes to stream a live sports event across multiple operating systems and devices within a short window of time. That also means the solution is less sophisticated than Dotdash's: aggregating sports viewers for an event is a different problem than answering a long tail of questions about interior design or health diagnoses.
I think all signs suggest the consumer intent to watch live sports will be met first, and best, by linear for the foreseeable future because that is where consumer intent to consume live sports predominantly exists at scale.
But, in advertising, if advertisers increasingly need more in terms of targeting sports viewers, that need can only be met with digital inventory (e.g., OTT and connected TVs). But, viewers at scale can only be found on linear and not streaming.
So how will distributors of sports solve for that now and foreseeable future?
ESPN, NBCU and Sinclair each offer different answers to that question.
ESPN, NBCU & Premier League Bids
The Times reported NBCU and ESPN are "fighting it out for exclusive access to all 380 matches" of the Premier League. It will be a six-year deal reported to be worth $2B, double the price of the deal reached with NBCU in 2015.
NBCU is favored "though competition from ESPN is understood to be significant." The lenses of consumer intent and advertiser intent suggest why ESPN actually may win tomorrow.
ESPN & User Intent
CEO Bob Chapek highlighted in the Q3 earnings call how "all seven of the major deals we made in the last year and a half included a streaming component". But, he shortly shared thereafter "90% of the most watched telecasts last year were sports and they continue to perform extremely well."
He also had a notable choice of words to describe the objective of ESPN+:
We continue to build out ESPN+ with exclusive sports content that makes our DTC offering the perfect complement to the ESPN linear experience.
The obvious takeaway is that linear is the priority for ESPN for reaching viewers with the intent to watch live sports - and will continue to be for the foreseeable future.
But, ESPN+ grew more than either Disney+ or Hulu in Q3 (+3.2MM subscribers to 17.1MM) and 70% year-over-year, too. Meaning, ESPN is meeting consumer and advertiser intent across both platforms because it has scale across both platforms. As Chapek implies, ESPN+ - and its integration into Hulu - offer complementary value because it has scale.
I highlighted this scale back in April in The NHL Is Paid Handsomely by Disney & WarnerMedia:
Disney has solved for achieving scale in sports distribution on streaming already, in addition to distributing sports content on linear channels ABC and ESPN. It has:* ABC and ESPN in 75MM+ linear TV homes (though ESPN averages 115MM viewers per month)* 40MM+ subscribers for Hulu and another 4MM+ for its Hulu + live TV vMVPD offering, and* 12MM+ for its ESPN+ service.
It distributes ESPN via Hulu + live TV and integrated ESPN+ into Hulu in March. We may not be able to predict how well Disney will be able to monetize the NHL with sponsorships, advertising, subscription, and affiliate fees. But, we do know it already has the scale to do so across linear, streaming and digital.
ESPN has extraordinary scale across its streaming and linear platforms.
As for meeting advertiser intent, Disney Hulu XP enables advertisers "to buy once and deliver to audiences across streaming, sports, entertainment and news content in one single deal", first-party consumer data (Disney Select), broader programmatic solutions (Disney Real-Time Ad Exchange, or DRAX), and Hulu Ad Manager for small- and medium-sized businesses.
Disney is also building proprietary ad tech off of what it purchased from Hulu:
The muscle behind its tech is a 500-person engineering and product team led by Jeremy Helfand, previously Hulu’s VP and head of advertising platforms. The team already built the video ad server and the video header bidding solution that allows programmatic buyers to compete for every Disney ad impression.
Last, Hulu sees “10 times as much in ad spend as Amazon” in streaming TV.
Disney has a wealth of options and audience scale for meeting advertiser intent of targeting users across platforms. Advertisers seeking to advertise against the Premier League on ESPN and ESPN+ will be well-served.
NBCU & User Intent
Comcast had a weaker story for NBCU and sports than Disney in Q3 2021. NBCU CEO Jeff Shell shared a data-less story for Peacock's progress after the Tokyo Olympics:
So everything on Peacock is heading in the right direction and there's really nothing from a trajectory perspective, that's any different than it was last quarter or the quarter before all metrics are pointed up our usage continues to be great, our mix of users continues to be great. We added a few more -- this million more subs, more MAAs, everything advertising we -- in this quarter was just at the tail end of the quarter we started selling advertising beyond sponsorship of which in the fourth quarter, it's all beyond sponsorship and that is going spectacularly well. So we're really pleased with Peacock, it's way ahead of where we expected to be at this point, and every month, every quarter it gets further ahead.
Meaning, if there was meaningful growth from the Q2 figure of 54 million sign-ups and over 20 million monthly active accounts, NBCU did not want to share it. Nor did it discuss its Summer Olympics ratings , which reflected its lowest prime time audience since 1988, or its challenges streaming the Olympics on Peacock.
The implication is that NBCU may not understand consumer intent across both linear and streaming as well as ESPN does, and the reality is it does not have a similar scale across both platforms.
As for meeting advertiser intent, its challenge is the NBCUniversal One platform, which I wrote about back in March in Amazon, NBCU, The NFL, & Addressable Advertising. It had just presented "One21" to advertisers and marketers. I wrote:
Effectively, the pitch is that NBCU can deliver a robust technological alternative to competitive solutions like Amazon Advertising, while offering a different and broader portfolio of audiences to target (615MM people across Comcast, NBCUniversal and Sky). Simply put, its pitch is CTV/OTT plus linear plus digital video delivery.
The One platform was launched in 2020. So, relative to Hulu's 14 years of evolving its ad tech in real-time on the marketplace, NBCU One is a relative startup.
This does not discount the quality of NBCU's inventory or the ad tech (NBCU One leverages both Comcast-owned FreeWheel for ad delivery and third-party platform Operative for more precise buying) or NBCU's ad sales team (+7.2% revenue growth across linear and Peacock in Q3 2021).
But, the point is, Disney and ESPN have superior consumer-facing and advertising-facing offerings to NBCU's for meeting both viewer intent and advertiser intent around Premier League games.
Sinclair's RSNs Have Two Problems
Sinclair has two problems after last week:
It has less distribution for its RSNs after last week's agreement with Dish dropped its RSNs; and,
It only has the direct-to-consumer rights for four MLB teams, according to its Q3 earnings call
In terms of user intent, that creates two problems:
Sinclair's RSNs are unable to reach viewers who intend to watch their favorite MLB, NBA, and/or NHL teams via TV or streaming; and, in turn
Local advertisers on Sinclair's RSNs are unable to reach valuable target customers, either via live broadcasts or "filler content" (which I wrote about last week)
Meaning, Sinclair is flying blind in terms of who its customers are and will be for DTC; and, even if has some understanding of those customers that it inherited via Fox RSNs, it is building up from ground zero to win them over.
The other problem Sinclair faces is something I highlighted in A Short Essay on The Connected Future of Make-Goods & RSNs:
...thinking about the pain point of non-live, "filler" content in sports goes hand-in-hand with thinking about the pain point of advertising on RSNs. Pluto TV is proving, in real-time, that there are better solutions for local advertisers if RSNs became part of the EyeQs, NBCUniversal Ones and Disney Selects of post-cord-cutting streaming distribution.
Without RSNs, local advertisers may be better off buying directly from NBCUniversal One, ViacomCBS, Disney, Amazon, YouTube, Roku... the list is growing and Sinclair is losing ground to them the longer it takes for them to get a DTC offering to market.
Advertiser intent is increasingly seeking non-linear solutions, and it is easier for advertisers to access inventory via Demand Side Platforms focused on OTT and Connected TV. Sinclair's solution lately has been to partner with third-party platforms like Operative and Oracle Moat.
Even if it solves for consumer intent in DTC, Sinclair seems unprepared to compete for growing and evolving advertiser demand for OTT and CTV inventory. In other words, four MLB teams will not aggregate online audiences at scale.
Examples from NBCU & NFL, ESPN & NHL
We got a sense of what cross-platform viewership looks like for NBCU in a recent Tampa Bay Buccaneers vs New England Patriots match-up on NBC's Sunday Night Football:
Final same-day ratings from Nielsen have the game at 26.75 million viewers on NBC. An additional 1.3 million people watched on Peacock and digital and mobile properties for NBC Sports, the NFL, the two teams and Yahoo Sports, per Adobe Analytics. That’s the largest digital audience for any NFL game on NBC (not including Super Bowls).
NBC was able to attract over 5% of its linear audience for Sunday Night Football online. We do not yet know how well they have been monetized (though we do know it has sold 85% of its in-game inventory for Super Bowl LVI).
As for ESPN, we have more insight into how the NHL is performing on linear than we do on streaming, as Jabari Young reported for CNBC:
The networks said the NHL averaged 884,000 viewers for ESPN’s doubleheader on Tuesday, and Turner drew roughly 669,500 viewers for its Wednesday national slot. Both figures are up from the NHL’s average for its last two season openers.
Disney has not shared any ESPN+ broadcast numbers. Rather, CEO Bob Chapek could only say "we are particularly pleased with the NHL's direct-to-consumer performance on ESPN+ and Hulu."
In both cases, the implication is that advertisers are better off purchasing linear inventory to reach consumers of live sports because the audiences are larger.
But, that has not played out in NHL Ad Sales.
Sources told FrontOfficeSports that ESPN expects more than $100 million in NHL-related ad sales this season, with "significant demand across ESPN, ESPN+, and Hulu". Also,
* A dozen official league partners have come aboard, including Apple, Verizon, and EA Sports.* Lexus, Fidelity, and Subway are among presenting, in-game, and studio sponsors.* Expedia will present 25 games on ABC and ESPN; New Amsterdam Vodka will present 75 games on Disney’s streaming platforms.
Advertisers are showing a clear intent to reach viewers across Disney streaming platforms. But, so far, viewers are showing a clear intent to consume the NHL on linear.
Meeting advertiser demand requires a sophisticated cross-platform advertising solution that Disney owns, but which NBCU is in the early days of building.
Conclusion
Financial analysts speaking at Sports Business Journal’s Media Innovators conference applauded a decision by ESPN not to put its NFL content on streaming because "The bundle is still pretty big and it’s not going away anytime soon". They also worried "the streaming plan CBS and NBC are using will accelerate the demise of the cable bundle."
In other words, their point is that the user intent to watch live sports will always be met first, and best, by linear. But, they did not say that advertiser demand for the NFL - and other sports - increasingly will not always be met first, and best, by linear.
I wrote back in March in Amazon, NBCU, The NFL, & Addressable Advertising that Amazon:
Ad targeting seems to be inevitably more important to the future of both linear and streaming broadcasts, and NBCU is positioning itself to meet advertiser demand for both streaming and linear inventory. The burden will be on their NBC One platform to prove to advertisers that ads can be served across platforms, with a greater burden to prove it can target linear ads nationally.Whereas Amazon’s narrower, CTV/OTT streaming-focused value proposition means an advertiser will be able to buy CTV/OTT inventory elsewhere within the Amazon ecosystem, and not just a portfolio of different types of inventory.
Ultimately, how advertiser demand evolves for NFL games on Peacock and Amazon seems to ultimately rely on whether OTT/CTV ad targeting and linear TV ad targeting evolve in parallel, or whether advertisers begin to value CTV/OTT ad targeting more than linear TV.
The 2021 Fall Impact Study, Buyers Perspective on 2022 Media, Planning & Budgeting by the IAB confirms that advertising budgets - the real measure of "advertiser intent" - continue to shift to digital, across various channels (which includes OTT/Connected TV), with traditional media projected to lose 6% in 2022, mostly from linear TV.
Returning to the Premier League bidding, I wrote in September:
Growth will be a necessary condition for any deal with EPL, both because growth will be a necessary condition for ad sales and sponsorships and because without growth, a $2B deal becomes costly to the EPL brand in the U.S.
So both advertisers and the Premier League will be seeking growth across platforms, and both are looking less to linear for that growth.
In that light, ESPN's success with the NHL suggests that it will be the winner of the Premier League rights, as growth also offers good optics for the league across platforms.
NBCU's success with the NFL on linear and Peacock has some wins, but it is has the blemish of the Tokyo Olympics on its track record. NBCU will retain the rights if the Premier League owners simply want the $2B, and are forgiving about Peacock's obvious and growing weaknesses.
My guess is advertisers who buy Premier League inventory from NBCU generally will follow a similar logic.
That said, my hunch based on the evidence is that ESPN will win.
For similar reasons, I think Sinclair's $9.6B bet on 21 RSNs ultimately will fails because Sinclair is not in a place to serve either consumer intent or advertiser intent across linear and streaming platforms.
[1] I write about Dotdash often because it defines this problem simply - user intent - but with a sophisticated, data-driven tech and operational back-ends. It has also been successful: it has a Compound Annual Growth Rate of 32% since 2018, and $264MM in revenues over the last twelve months.