Reports indicate that internet giants such as Google, Facebook and Amazon are eyeing opportunities in streaming live sports. Amazon has already signed a deal with the National Football League that will see it stream some games.
With the internet giants venturing into sports streaming, some of the established sports broadcasters who are threatened include 21st Century Fox, Time Warner, Comcast, CBS Corporation and Walt Disney which owns ESPN and ABC. Challenges for the networks have been mounting since there has been a decline in viewership numbers.
Winners and losers
While streaming of sports content is likely to be a boost to the earnings of the internet giants and consequently cause their share prices to appreciate, the television networks are likely to be the losers in this. A couple of sports broadcast contracts are expiring in the coming five years and this includes Major League Baseball and National Football League. National Basketball Association broadcast contracts are expected to last until the 2025 season while the contract with the NCAA College Basketball will end in 2032.
What puts the internet giants at an advantage is the fact that they have massive amounts of cash sitting around. In 2017 the combine yearly free cash flow for Alphabet, Facebook and Amazon is expected to be $50.8 billion and this is expected to double in three years’ time. This leaves traditional television networks at a disadvantage as their combined yearly free cash flow for this fiscal year is estimated to be $23.3 billion. In three years that figure will have risen by nearly $7 billion to reach $30.2 billion.
This will result in a big gap between the resources the internet giants possess and what the traditional TV networks have as they will not be able to compete fairly in bidding wars that are bound to ensue.
“Winter is coming. The post-sports world will be ugly for television,” says Scott Galloway, a marketing professor at New York University, citing a common phrase on Game of Thrones, a show on Time Warner’s HBO.
Examples of the changes that are bound to take place can be seen with Amazon. In the current season of the National Football League, Amazon has obtained the online streaming rights for ten Thursday Night games. These games will also be broadcast on CBS, NBC and the NFL Network. Sports streaming is a natural extension for Amazon as it already airs original programming and other video offerings for its Amazon Prime Video subscribers.