Sports Drive IP Video Subscription Services
In his In-Stat/MDR report, Kaufhold isolates and examines four major categories of consumer video subscription services: sports video, movies and TV, general interest video, and other video services. Of these, general interest video from big providers like MSN and AOL will be the "dominant value driver for the next few years, until the other services catch up," he writes.
But the recent success of sports subscription services is particularly interesting, because it’s the one category where streaming is king. In sports, streaming no longer takes a backseat to downloading. Sports is one of the few content areas in which poor-quality streaming video is currently tolerated. When people watch a sports event, the excitement of the live experience is crucial to their enjoyment, and overrides other concerns.
"Online video is a breakthrough for the sports business," says Kaufhold. "It allows the sports teams to reach a fan base that may be scattered around the world and to deliver sports content to people who've never had access to that content before." He gives as an example, the last World Series. He says that when Japanese player Hideki Matsui was playing, thousands of businessmen in Japan were watching the game on PCs on their desks while they worked. They'd never before been able to get live video of American baseball games, and they obviously had the demand for it. (Banking on Matsui’s popularity in his home country and the preponderance of streamed video feeds, the Yomiuri newspapers, owner of Matsui’s former team, the Tokyo Giants, has even bought ad space in Yankee Stadium’s outfield wall.)
Sports teams don't have to make a lot of money from streamed video directly, because there are so many tangential benefits—particularly increased merchandising sales. "Sports subscription services allows them to touch their fan base more consistently," says Kaufhold. Major League Baseball has branded MLB.TV, a $59.99 subscription service that delivers live feeds of most major league games (excluding, significantly, games nationally broadcast on ESPN, Fox Sports, etc.) using the local network broadcasts from each team’s affiliated station. (You can also buy individual games for $2.99 each.) Streams are tailored for a variety of delivery bandwidths up to 350Kbps. MLB.TV also offers complete games and game highlights for download after the fact, free for subscribers or on a pay-per-view basis for non-subscribers. You can’t visit a team Web site without encountering a come-on for MLB.TV, and you can’t access an MLB.TV feed without going through a team site or MLB.COM with abundant opportunities for buying official team merchandise.
In the In-Stat/MDR report, Kaufhold also takes a stab at sizing the adult content segment of the online video subscription market. Due to its shady nature, this segment is difficult to get a handle on, Kaufhold admits, but he's concluded that it isn't as big a market as most people think. He says the market for adult content is already well supplied by DVD, satellite, and cable TV. He believes the poor visual quality of streaming and IP video has hampered this segment. Also, privacy problems are holding it back. Potential online adult video viewers know how easy it is for online activity to be monitored. "They know that their ISP knows every site they visit," says Kaufhold. "Most users of such content want their activities kept private."
That's not so with sports, however, where fans are only too eager to stand up and be counted. So look for these rabid sports fans to drive the streaming and IP video subscription market from now through 2008.