More than 22% of North American households today actively follow sports on the Web. Just as the onset of online brokerage upset the balance of power in the investment world, the Internet will disrupt the broadcast network monopoly over the delivery of sports entertainment. In a recent Report, Forrester Research, Inc. (Nasdaq: FORR) predicts that new Web technologies will allow professional sports leagues to create and deliver innovative broadband sports programming directly to fans, effectively shifting power away from the networks and redefining the model behind the business of sports entertainment.
The traditional delivery of sports programming found broadcasters — including television and radio at both local and national levels — at the center of the exchange between marketers, professional leagues, and sports fans. The Net-driven sports power shift, however, moves professional leagues to the center of this once broadcast-centric value chain. As bandwidth improves, league sites, team sites, and the sites of Web partners will provide a non-network distribution alternative — not only for content but for merchandise and tickets as well.
“By 2004, the sports power shift will dictate new roles for the major players in the sports marketplace: professional leagues, broadcast networks, marketers, and fans,” said Mark E. Hardie, senior analyst in New Media Research at Forrester. “For professional leagues like the NFL or associations like the PGA, the Internet will become more than just another distribution channel. It will be an opportunity to exploit whole new revenue streams.”
The sports power shift will be fueled by advances in technology, including increased broadband access; widespread use of email, chat, and instant messaging tools; and the proliferation of analysis software and hardware developments. By 2003, more than 27 million households will have broadband access to the Internet, which will be necessary for viewing high-quality streaming video highlights. Meanwhile, firms like AniVision and Trakus are commercializing military technology to create features like auto-racing graphics and golf tournament ball positions for video-poor Web fans.
In the Web world of sports entertainment, leagues will no longer license exclusive distribution rights for an event to a single network. “Instead,” said Hardie, “several entities will share the task, offering their own unique experiences on television, the Web, or on wireless devices.”
As viewership fragments, marketing dollars and eCommerce will follow eyeballs. By 2004, Forrester projects that advertising on sports-related Web sites will reach $2.4 billion, with sports-related eCommerce climbing to $4.7 billion. For a typical league like the NBA, online revenue streams are predicted to contribute as much as 15% of total revenues in 2004.
“The sports power shift will force brand advertisers to abandon one-size-fits-all mass-market advertising in favor of cross-media targeted campaigns,” added Hardie. Not only will sponsorship packages include prominent presence on sports-related sites, but on-air advertisements will point audiences to archival highlight footage, promotions, and eCommerce opportunities on the Web.
For the Report “The Sports Power Shift,” Forrester surveyed 50 professional sports teams and evaluated their Web sites. Many team sites are currently generating modest amounts of revenue through online ad sales, ticketing, and merchandising, and by offering paid subscriptions for premium content. The median team site revenue today is $100,000 — dominated by online advertising — and teams expect that site revenues will grow tenfold to $1 million by 2004.