The former Microsoft CEO vows his NBA team will break new ground by keeping digital rights to themselves and creating an “over the top” streaming network to complement the usual TV game broadcast.
Inside sports business
Former Microsoft CEO-turned NBA owner Steve Ballmer certainly knows how to captivate an audience.
Ballmer was his usual high-octane self last week at the GeekWire Sports Tech Summit at Safeco Field, enthralling conference-goers with blunt, entertaining answers to moderator questions. And the biggest of those questions has a nationwide audience of sports and television executives watching just as intently to see what the Los Angeles Clippers owner does next.
The Clippers’ local television deal with Fox Sports Prime Ticket expired June 30. Ballmer, 60, has yet to indicate the team’s TV plans but says one thing is certain: Whoever lands any new regional sports network (RSN) deal won’t be getting the digital rights that typically go with such packages.
No, Ballmer vows the Clippers will break new ground by keeping digital rights to themselves and creating an “over the top” streaming network to complement the usual TV game broadcast. For those unfamiliar with the term, “over the top” — OTT in digital parlance — refers to programming streamed directly to the Web without the use of a cable or satellite platform.
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The Clippers have partnered with Second Spectrum to create an Internet-based network that will provide content that could include player-specific cameras, in-game highlights and statistics in real time. Rather than doing the traditional game broadcast, the network is expected to serve as a “second screen” complement to the RSN play-by-play coverage.
“The real opportunity, if you will, is to augment reality as people are watching the game,’’ Ballmer said. “Can you put yourself in the position of (Clippers power forward) Blake Griffin? What does it look like? What does the game in question look like in real time from his perspective?’’
Ballmer added that the additional screen could provide percentage probabilities in real time about whether a specific player will take a shot or make a pass. Users also could choose replays from a highlights package, or even specific camera angles from which to view the game.
Though the OTT offering would be on an authenticated basis — meaning available for an extra cost to viewers already having a cable or satellite TV subscription — it marks a decisive shift in content control back to the team.
“There’s no capitalism working right now in sports,’’ Ballmer said. “Teams sign these agreements, they go for a long period of time and nobody actually has any incentive to work on it. The team has no incentive because its money is going to be the same in any event. The broadcaster has a long-term contract with the cable company — they have no incentive to work harder. And the cable company is basically taking a bundle of stuff and sticking it out there.”
Ballmer said the OTT venture can return things to a “capitalist” focus on new opportunities and change. And few will argue that changes loom for the TV sports industry.
OTT has become a crucial buzzword as cable “cord-cutting” among younger generations of viewers threatens the sports TV model now carrying teams and leagues financially. Viewers are increasingly put off by escalating cable TV subscription rates — largely attributable to massive rights fees for sports programming — and have switched to cheaper Internet streaming of their favorite shows.
The dilemma facing sports teams is clear: If viewers keep dropping cable TV, those massive rights fees paid on RSN deals of 10, 15 and even 20 years no longer would be worth it. And that would impact the ability of teams and leagues to keep landing huge TV deals currently sustaining their industry and hefty player salaries.
Ballmer is feeling some of that squeeze.
When he bought the Clippers two years ago for $2 billion, the idea behind justifying the price was that the team’s TV rights would be worth well over $100 million annually. But the best offer from Fox during negotiations was a reported $60 million per season.
That’s a major shortfall and why — even if his new OTT venture is only to complement traditional live game broadcasts for now — the sports world is wondering how far Ballmer ultimately will take his streaming network.
Ballmer recently mused about abandoning the local TV model altogether and becoming the first major U.S. pro team to live stream all games directly to an Internet audience. He has since toned down such talk — that financial gamble perhaps currently being too much for even him to stomach.
After all, Fox had paid $25 million per year to put the Clippers in 5 million homes, so the $60 million annual offer represented a 140 percent increase. To match that, the Clippers would face the daunting task of signing up at least one-tenth of the TV audience to Internet subscriptions of roughly $12 per month — including the offseason.
The Clippers are thus expected to soon renew their deal with Fox. Still, if this “second screen” plan finds an audience, there’s no telling where it could lead.
Ballmer told the GeekWire summit that bypassing TV networks and live streaming the games OTT is something that could eventually happen.
“In a contract situation, if we’re not going to get paid what we want to get paid by the RSN, then we can do that, and that’s a great thing,’’ he said.
For now, the more plausible route is Ballmer and the Clippers taking baby steps via this “second screen” venture to determine what viewers want in an OTT experience. And more important — whether they’ll pay enough to break the current TV mold.