Blame it all on Mark Cuban, the outspoken owner of the NBA's Dallas Mavericks. In 1995, he was stuck in Dallas and wanted to follow his alma mater, the Indiana Hoosiers. So he co-founded AudioNet as a place to hear radio broadcasts online. AudioNet became Broadcast.com, which was sold to Yahoo in 1999 for an eye-popping $5.7 billion.
But what happened to Cuban's original multimedia empire? Yahoo did little to monetize all those audio broadcasts until last August, when Yahoo Sports launched a pay service called "College Broadcast," offering audio and some video feeds from more than 40 schools. Sports sites have had mixed results trying to sell multimedia content and inside stories online, while finding a gold mine in fantasy sports info and applications.
But that could change as broadband becomes widespread in the U.S. and overseas and displaced fans realize that their favorite teams are available for a small fee online. Online multimedia rights aren't anywhere near the stratospheric cost of TV rights, but sports leagues around the globe are waking up to the power of streaming games online, or sending highlights to mobile phones.
Major League Baseball recently dropped out of a deal with Real Networks, which had provided a pay service for nearly half its games.
MLB.com has been very strict about its rights to even a graphical depiction of its games. ESPN.com recently worked out a licensing deal for these live "Gamecasts." The Australian Rules Football league made a deal with telcom company Telstra for online video rights, and Telstra is pushing fans to subscribe to its broadband service in order to see online video for free.
And in the UK, sites such as the Guardian's offer "Goal Alerts" that send text messages to you when teams score in soccer matches. Plus, cellular companies have cut deals with English leagues to offer video highlights after goals are scored in an attempt to sell more third-generation phones. The British company 3 paid 30 million pounds in a three-year deal for these rights to the English Premiere League but didn't get the service launched until 18 months into the deal. Now, the EU is investigating sports rights deals with cell phone companies because of possible anticompetitive side effects.
"In the UK, some soccer teams have started their own [text messaging] services, which seems to be doing OK, especially SMS [short message service]," said Rafat Ali, who runs the PaidContent.org site from London. "Mobile video rights here, again in soccer, are sold for big bucks in the UK and Europe. But much like online music, the rights landmine in Europe -- where rules differ from country to country -- makes sure that no progress happens."
Fantasy football rules the roost
For the big American sports sites, fantasy sports leagues -- especially football -- have brought in the most subscription money. The Online Publishers Association found that paid sports content brought in only $14.4 million in the first half of 2003 for all sports sites it surveyed. But Sportsline.com alone says it made $12 million in fantasy sports revenues in all of 2003, which was up 36 percent over 2002 and consisted of 800,000 teams playing in 80,000 leagues.
The idea behind fantasy leagues is that people draft players from different teams to create their own team of professionals, who then score points depending on the stats they accumulate during the year. Sports services such as STATS Inc. and sites such as CBS Sportsline.com, SportingNews.com and ESPN.com have capitalized on selling detailed background info on players -- including injuries and inside info -- to give fantasy players enough information to have an edge.
Sites such as Sportsline.com charge for running most of their fantasy games (from $119.95 to $139.95 per league in baseball), while Yahoo will run your game for free, but charges for add-on statistics and live game updates.
"Football is really king -- it's the 800-pound gorilla of the fantasy business," said Joe Ferreira, vice president of programming and executive producer at Sportsline.com. "It's viral in nature. Someone starts a league and then invites friends to play, spreading it very quickly."
SportingNews.com started charging for online fantasy sports in 2001 with a 100-page PDF baseball draft kit for $5 each. After selling about 6,000 to 7,000 copies, the site expanded to other sports and fantasy products. Jason Kint, vice president and general manager of online for Sporting News, told me that subscription revenues now account for more than ad revenues at the site. According to Kint, SportingNews.com got 95 percent of its revenues from advertising in 2000, but only 40 percent from ads in 2003 after the growth of fantasy income. The company is privately held and does not disclose specific financial figures.
"If you put content behind a wall, then you're also possibly cannibalizing ad revenue potential," Kint said. "So we had to come up with new and unique products that people would pay for without hurting our revenue from advertising, which was challenging at times. But for the most part, ad revenues have grown."
While SportingNews.com charges for subscriptions for some fantasy products and insider analysis, it doesn't put general editorial or audio behind a pay wall. But Sportsline.com started a VIP service last year that echoes ESPN.com's Insider paid area.
John Kosner, vice president and general manager of leading sports site ESPN.com, said they put all their fantasy info behind the Insider pay wall, driving about 24,000 new subscribers last September. He said that total subscribers for Insider are now 200,000. ESPN.com doesn't do any a la carte charging, relying entirely on Insider for pay content revenues, which are still dwarfed by ad money, according to Kosner.
"Content that we viewed as premium, but that which wasn't substantially ad supported, we thought it made sense to move it to the Insider," Kosner told me. "A lot of recruiting information, for instance, has been intensely popular on our site, but has never been a strong ad vehicle. We moved recruiting info into Insider as a way to get value from something of interest to a niche audience. Another is Mel Kuiper's NFL draft coverage."
For $4.95 per month or $39.95 per year, Insider now offers wireless alerts, fantasy info and ESPNLocal -- aggregated Web content on your favorite team. This service is more customized than what is available with a Google News search, but not quite as deep as special pay packages on newspaper sites.
Packers win, Vikings lose
In that area, the Milwaukee Journal Sentinel's site has blazed a trail by charging for access to its Packer Insider site, now priced at $5.95 per month or $34.95 per year. It was yet another service launched in 2001, and netted 10,000 subscribers its first year, growing to 30,000 subscribers for the most recent football season. The site still has free Packers news, but the pay service offers loads of commentary and analysis, a special Weblog pointing to news around the Web, multimedia and even historical articles.
Pat Stiegman is vice president and editor of Journal Interactive, which runs Packer Insider, and explains the three keys to success for any other newspaper sites considering similar ventures: volume, frequency and exclusivity. He said that you must have new content up every day, even multiple times per day -- and even in the off season -- to make it worthwhile to the hardcore fan. Stiegman pegs the success of the pay site to the columnists who give objective information.
While the NFL and other sports leagues are trying to compete with online journalism and multimedia, Stiegman said they'd never be able to take on newspaper sites like his. Why?
"The function [of team and league sites] is to provide feel-good information about the team, and what our columnists provide is a much more objective analytical view of the team," Stiegman told me. "That's something the teams are never going to do. They're never going to get analytical about themselves. And that's where the opportunity is for the newspaper sites, because true fans want an objective perspective. Our most popular columnist on the site is by far the most severe critic of the Packers."
The Packers have a certain type of rabid fan base that is spread around the country and the world. But can the Packers Insider success be duplicated elsewhere? It depends. The folks at startribune.com started a premium Purple Plus section for the Minnesota Vikings during the '02-'03 season, but only got 700 paid subscribers before making it free again. Ben Welter, editor of Startribune.com, said the team started that year at 0-4, and the Twins baseball team was on a roll at the time, taking away interest.
"The number of teams that can support a successful premium product such as Packer Insider is small," Welter told me via e-mail. "Don't try to build a premium product around a team without a huge nationwide fan base, a rich history and a winning tradition that stretches to the present. The Packers and Cowboys fit that description; the Vikings -- aside from their huge fan base -- are a notch below. Your content has to be at least twice as good [as competing team sites] to induce fans to pay for it. Even then, your product might not succeed. The expectation that Web content should be free is extremely hard to break."
The Webcast potential
Though live or taped online Webcasts of sports hasn't generated serious revenues for anyone yet, the potential still has executives' mouths watering. MLB.com and Real enticed 150,000 subscribers to pony up for baseball game Webcasts last year, while independent sites continue to look at other niches to grab a foothold online.
Sportsline.com, for instance, ran a "[email protected]" feature on PGATour.com from the Players Championship at Sawgrass, showing streaming video of every player's shots on the 17th hole during the first two rounds (which weren't on TV). Sportsline.com's Ferreira sees that as a possible forerunner to sites offering online coverage of other early rounds of golf tournaments.
"One area that has a real big possibility is college sports and particularly college football," Ferreira said. "It's not a sport that's controlled by one organization. The NCAA controls the rules but each conference handles television rights, and not every single game can be covered by the major networks. So that's an opportunity for a school or conference to do something online that may have some legs to it."
Yahoo started its pay college Webcast service last fall, and Real offers a College Sports Pass in conjunction with the Official College Sports Network (OCSN.com), with 50 colleges signed up. The College Sports Pass costs $44.95 per year or $6.95 per month, and OCSN boasted it had signed up 63 percent more subscribers in the '03-'04 season than the previous season, mainly for college hoops audiocasts and video highlights.
Of course, walling off all that multimedia content could cause some cash-strapped fans to take matters into their own hands.
"Broadband will be among the most disruptive influences on sports online," said PaidContent.org's Ali via e-mail. "Either the leagues can capitalize on it, or will capitulate under the pressure. Too much control will mean fans will not be happy, and will take the matter into their own hands, through technology. I won't be surprised it these [peer-to-peer] networks start becoming full of game telecasts as well."