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Now Reading: Disney, NBC look to sports betting, technology for new sports revenue
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Disney, NBC look to sports betting, technology for new sports revenue
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Disney, NBC look to sports betting, technology for new sports revenue
Trenden Music9 months ago4 Views
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- Disney, NBC look to sports betting, technology for new sports revenue
A version of this article first appeared in the CNBC Sport newsletter with Alex Sherman, which brings you the biggest news and exclusive interviews from the worlds of sports business and media. Sign up to receive future editions, straight to your inbox. The NBA is back, and this season it comes with added interest for the sports business world. That’s because the league has two new media partners – NBC (back after a 23-year absence – more about that in this week’s On The Record) and Amazon Prime Video. NBC Sports is paying about $2.45 billion per year for 100 regular season games – some exclusive to its streaming service Peacock and others that will air on NBC – plus the All-Star game and playoff coverage. Amazon is paying about $1.8 billion for 67 regular season contests, six play-in tournament games, and one third of all first- and second-round playoff games. The economics are pretty staggering and are raising questions about NBCUniversal’s ability to recoup its investment. The Wall Street Journal reported this week that NBC is projected to lose between $500 million and $1.4 billion annually in the “early years” of the 11-year agreement, citing people familiar with the matter. But the longer-term forecast may not be that bad. All traditional media companies monetize their sports investments in multiple ways. The most direct methods are advertising and cable or streaming subscription fees. The Journal reported NBC “has been able to generate an average of about $130,000 per 30-second commercial for its regular-season games” – much higher than TNT’s previous $50,000 average rate. TNT lost its package of NBA games to NBC and Amazon beginning this season. The higher advertising rate is helped by broadcast TV’s bigger reach than cable TV. NBC isn’t just in every traditional and digital cable bundle, which still reaches about 65 million U.S. households. It’s also available for free via digital antenna. NBC is also banking on the NBA bringing new subscribers to Peacock, its flagship streaming service. Peacock recently raised its prices and now costs $10.99 per month with ads or $16.99 per month without. Sports are also the primary reason why NBC can continue to raise retransmission fees when it has carriage negotiations with the biggest pay TV operators (Charter, DirecTV, YouTube TV, etc.). The numbers get a little fuzzy here, but it’s a major reason traditional broadcasters pay billions for the NFL and NBA. While millions of people cancel cable TV each year, networks that have must-see sports have historically been able to raise rates in the face of cord-cutting because rabid fans want to see their favorite teams and players. What traditional media hasn’t been able to pull off yet – but could help offset the cost of live sports – is to develop a new significant revenue stream off the rights. Decades ago, ESPN realized it could jack up cable subscription fees during those pay TV operator carriage negotiations because of the value of live sports. In the 1980s and 1990s, ESPN began generating hundreds of millions and then billions of dollars through cable fees – money to which the broadcast networks didn’t have access. This allowed ESPN to outbid broadcast networks for major sports, paving the way for ESPN’s sports rights domination that continues to exist today. In modern times, Amazon and Apple appear to have a significant leg up in developing new revenue streams based on sports rights. Amazon’s data suggests owning live sports rights “brings new Prime members in, and the existing base is getting more value out of their membership,” Prime Video’s head of global sports and ads Jay Marine told me earlier this year . In other words, a sports fan that signs up for Prime becomes aware of Prime’s other benefits – expedited shipping, Amazon Music, etc. That new user then begins purchasing goods and services through Prime, adding to Amazon’s overall business. “It becomes a very accretive model when you get that working,” Marine said. For Apple, owning sports rights is helpful to the stickiness of using Apple devices. There’s a connected viewership experience between Apple phones and the Apple TV device. Apple TV comes preloaded on phones, allowing for easy access to Apple sports rights, such as MLS and, beginning in 2026 , Formula 1. There aren’t obvious answers to what a significant new revenue stream could look like for traditional media companies and Netflix, who still rely on advertising and subscription fees. Sports betting is one possibility. Just a few weeks ago, NBCUniversal announced a partnership with DraftKings to integrate the betting platform into NBC Sports. Amazon followed a day later with a FanDuel integration announcement of its own. Prediction markets Kalshi and Polymarket could theoretically follow with further partnership deals if they continue to barnstorm their way into sports betting (more on this in Contessa’s Corner further down in the newsletter). But it’s also possible new revenue streams could develop through AI or technological development that aren’t yet known — maybe a wearable technology takes off that requires live rights. An early example of something in this vein is Cosm’s deals with traditional media for access to live sports so it can showcase games in dome-like venues. Perhaps media companies can invent a new distribution mechanism, a la regional sports networks, to monetize the rights differently. The dead-on-arrival Venu streaming service was an attempt at leveraging sports rights to invent a new digital distribution platform. The most likely way forward is to use the media rights as a funnel to integrate and promote related businesses. NBCUniversal’s Golf Channel – soon to be part of Versant – has done this with GolfNow, its tee-time reservation company. Integration and promotion from Golf Channel has made the business highly profitable, according to executives familiar with the business. To be sure, it’s a leap of faith to think a new revenue stream could rival subscription and advertising by the time most major sports rights deals are up in the next 10 years – but it’s not impossible. Paying up for sports rights keeps companies in the game. History has shown that sports deals that appear to be giant overpays at first blush look like bargains by their contracts’ end. The NFL signed a big media rights deal in 2021, and Commissioner Roger Goodell told me a few weeks ago he already thinks the league left a lot of money on the table. I’d argue that without sports rights, it’s pretty difficult for a TV-focused media company to justify its standalone existence at all. Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC. Versant would become the new parent company of CNBC upon Comcast’s planned spinoff of Versant. On the record With Monumental Sports & Entertainment founder and CEO Ted Leonsis … A jam-packed On The Record for this week. You get three interviews for the price of one. First, I promised you the full interview with Apple’s head of services, Eddy Cue, last week. You can watch the full conversation here . Cue breaks down why MLB has been a “test” for Apple’s future sports aspirations and explains why Formula 1 is appealing to the company. Apple announced a five-year rights deal for F1 races in the U.S. just a couple days after our conversation. You can listen here and follow the CNBC Sport podcast if you prefer the audio version. Second, if you listen to Cue as an audio podcast, I frontrun that interview with a conversation with John Tesh , the composer and recording artist of, for my money, the best sports theme song ever written: “Roundball Rock.” Tesh talked to me about re-recording the song – only to have fans strongly reject changing the original at all. He also gave me a brief lesson on the business of licensing sports theme songs, an explanation of why the song is so popular, how the SNL “Roundball Rock” sketch gave the song new life with a younger audience, and how negotiations with NBC Sports got a bit sticky last year – something I reported on at the time. I highly recommend you listen to the Tesh interview if you can – it’s an enjoyable 20 minutes. And finally, CNBC’s Scott Wapner sat down with Monumental Sports & Entertainment founder and CEO Ted Leonsis, the controlling owner of the NBA’s Washington Wizards, the NHL’s Washington Capitals and the WNBA’s Washington Mystics, to discuss global expansion, going public and soaring valuations. Wapner and Leonsis spoke at a CNBC Sport’s Owner’s Box dinner, an intimate gathering that brought together top sport investors and league executives for a live interview. If you have an idea for a future Owner’s Box event, shoot us an email. In the meantime, you can watch that interview here . Contessa’s Corner It’s been a landmark week for news out of the gaming… er… prediction market world. Kalshi and Polymarket are doing a victory dance with a first-of-its-kind deal with a professional sports league. They will be the co-exclusive partners of the National Hockey League, with a multi-year deal that allows the platforms to use NHL trademarks. “It’s a seminal moment for prediction markets,” Kalshi CEO Tarek Mansour said on “Squawk Box” Wednesday morning. He clearly views the deal with one of the big four professional sports leagues as a stamp of approval. “A league like the NHL partnering with us is a strong sign that prediction markets are here to stay.” Keith Wachtel , president of NHL Business, told me from a league standpoint, it’s about fan engagement and reaching new fans, who may come to the prediction market for something other than sports — say, a wager on who will die in the hit HBO show “White Lotus” — but then find some excitement in making a trade on whether a star hockey player can score a hat trick. “The prediction market goes beyond sports,” Wachtel said. “We’re looking at a vastly broader audience.” It’s that broader audience that DraftKings has its eye on. As I reported earlier this week, DraftKings bought prediction platform Railbird and its licensed exchange and plans to launch a DraftKings prediction app in the coming months. In August, FanDuel announced a prediction partnership with CME Group to offer event contracts on a wide range of markets – including gold, cryptocurrency and the S & P 500. But what neither FanDuel nor DraftKings has specified is their intentions when it comes to sports and prediction markets. The two sportsbooks dominate the market share of U.S. legal sports betting, but multiple state gaming regulators have threatened to yank the gaming license of any operator that also offers sport prediction markets. Many states are suing or taking other legal actions against the prediction markets, which are regulated federally by the Commodities Futures Trading Commission. But sports gambling falls under state authority, not federal. The American Gaming Association issued a scathing criticism of the prediction platforms’ deal with the NHL, calling into question the platforms’ integrity standards as well as the risk that users as young as 18 years old can engage. (Most states require sports bettors to be 21). In its statement the AGA said, “Over the past seven years, the legal U.S. sports betting market has proven that a transparent, accountable, and regulated system benefits everyone—fans, leagues, states, and most importantly, consumers. Undermining that success with backdoor gambling schemes masquerading as ‘financial products’ is reckless and shortsighted.” On top of all of that, the nation’s tribal leaders argue the prediction markets violate their exclusive right to offer gambling on tribal lands. If DraftKings enters the sports fray on its forthcoming prediction platform, it likely would offer sports only in states like California and Texas, which have not legalized sports gambling. It could also geo-fence its platform to keep it from being offered on tribal lands. Still, a federal judge in Nevada this week set a court date of November 19 to hear arguments from Kalshi and Robinhood, following his ruling that Crypto.com’s sports prediction trades are actually sports betting. The NHL says it will pivot if the courts eventually rule against the sports offerings. The NHL’s decision is a departure from other leagues. The NFL said before this season started that prediction markets mimic sports betting and there’s potential for price distortion or manipulation. Major League Baseball has also expressed concerns about the impact on sport integrity. Hockey says it’s satisfied with the guardrails, and Mansour told CNBC the NHL will get a suite of its customer and market integrity measures. CNBC Sport highlight reel The best of CNBC Sport from the past week: That full Tarek Mansour interview on “Squawk Box” can be found here , along with our stories on the NHL deal and DraftKings’ acquisition of Railbird. By the way – if you don’t think this is a big deal, sports are driving about 90% of prediction market volumes on Kalshi, according to a Piper Sandler analyst note released Wednesday. “Should the CFTC allow sports contracts to proliferate, we think a significant amount of online sportsbook volumes could potentially migrate onto regulated US exchange venues in the coming years. If CME gets the clarity it is looking for, we’d expect them to announce 24/7 trading in sports contracts very soon after,” Piper Sandler analyst Patrick Moley wrote in the note. Dick’s Sporting Goods is building out its line of megastores known as House of Sport. The company is betting on experiences from rock-climbing walls to batting cages. CNBC’s Courtney Reagan has more from a House of Sport store in Pittsburgh. Warner Bros. Discovery is open for a sale. I reported Tuesday that Paramount made multiple offers to acquire the entire company – all rejected, of course. Now we wait to see if a deal gets done, or if WBD moves ahead to split the company into two — and then sells its studio and streaming business to the highest bidder. The NFL approved a 10% minority stake sale in the New York Giants to Julia Koch , valuing the team at $10.3 billion, according to CNBC’s Mike Ozanian . The NFL had its annual fall owners meeting in New York this week. The big number: 33% One-third of all broadcast TV viewing last month was live sports, according to Nielsen’s monthly “The Gauge” report. That’s up from 11% in August. Of course, the primary reason is the start of college football and especially the NFL. As Nielsen wrote in its report, “15 telecasts this month—all NFL games, across CBS, FOX and NBC—outpaced last month’s most-watched telecast, with September’s biggest audience more than doubling it.” Quote of the week “The one word answer from the fans was, ‘Nope!'” — John Tesh told me he re-recorded “Roundball Rock” this summer in Nashville with a full orchestra to freshen up the theme for NBC, and when he put it on his Instagram, fans roundly rejected it. “The fans were like, ‘No, no, we want the OG version.’ And I actually built a video which was ‘pick your mix.’ And so I had a picture of the OG version and a picture of the orchestral version, and it went back and forth from one theme to the other, back and forth. Then I had people vote, and the orchestral version got, like, I don’t know, maybe 2% of the votes.” The version on NBC is the OG version. It’s not only the OG version, it’s actually the original demo, Tesh told me. Around the league The NFL has a new idea for the Pro Bowl – play it during the week of the Super Bowl. The flag football game between the AFC and the NFC will be held Tuesday, February 3 in San Francisco. The NFL has struggled to figure out what to do with the game for years and may “become more internationally focused” in the runup to the 2028 Summer Olympics in Los Angeles, where flag football will be a sport, ESPN reported. NFL owners unanimously approved players participating in the 2028 games. Amazon has locked up the global rights for its Black Friday NFL game, the company announced Wednesday. YouTube’s Week 1 game in Brazil between the Kansas City Chiefs and Los Angeles Chargers drew an international audience of 1.1 million viewers, but that game was at night (8 p.m. ET) – a difficult time-zone sell for European and Asian fans. The Black Friday game between the Philadelphia Eagles and Chicago Bears takes place at 3 p.m. ET. Broadcaster Robin Roberts ; ex-broadcaster and my former co-worker Olivia Walton (hi Olivia!); and Amy Griffin , the founder and managing partner of G9 Ventures and recent best-selling author , are now minority investors in the New York Liberty, valued at $450 million.
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