Pro Sports’ Dilemma: Ownership or Rich TV Rights Deals?

For the major U.S. sports leagues, changing viewer habits and lucrative TV deals are giving way to a happy dilemma: Do they forge a direct relationship with fans? Or do they lean on their media partners to help them win the streaming wars? Increasingly, the answer seems to be both.

The latest effort to split the difference debuted July 25, with the Roger Goodell-run NFL launching a streaming service of its own: NFL+. The live games it included weren’t new, per se (it took some preseason games and live audio from its former NFL Game Pass product and combined them with in-market mobile rights that it had previously sold to Verizon), but it nonetheless marked a major bet on direct-to-consumer from the notably conservative league, one that just signed new long-term rights deals with TV partners that total more than $110 billion. 

David Jurenka, senior vp of NFL Media, says the league views the service as an “innovation vehicle,” one that will evolve over time. The NFL’s effort to try and thread the needle (i.e., keep TV partners happy but build a DTC product fans will love) exemplifies the situation all of the major leagues find themselves in, with Major League Baseball, the National Hockey League, the National Basketball Association and Major League Soccer pursuing slightly different solutions to that challenge.

On the one hand, you have MLB and the NBA, both of which offer their own out-of-market streaming packages as well as various linear and streaming rights deals. You also have the NFL, which pulled together pieces of its distribution puzzle into NFL+ — hoping to fill a void for football fans on the go — while looking for a partner to take over its out-of-market Sunday Ticket package. There’s MLS, which in June opted to strike an exclusive global deal with Apple, counting on the tech giant to help the league grow. The NHL, meanwhile, shifted its owned U.S. out-of-market DTC service NHL.tv to Disney’s ESPN+ platform, betting that Disney’s reach will offset the severing of that direct relationship. 

A big reason leagues want that direct relationship is access to the fans and the ability to understand their consumption habits and what they are looking for. The leagues have millions of people watching on TV but were “really having no idea who those people are,” says Pete Giorgio, a sports consulting leader at Deloitte. “What they are finding is that, in the world we live in today, it is no longer OK for people to just watch your content; you need to build a relationship with those folks.” Adds NFL exec Jurenka, “Fan behavior or customer behavior is shifting to the direct-to-consumer model, so we are trying to meet fans where they are there.” 

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And leagues are trying to be strategic about those efforts, carving out games that won’t interfere with those lucrative TV rights. Hence the focus on out-of-market games or the NFL’s bet on mobile video and audio (targeting consumers who probably aren’t home to watch on TV, anyway).

“No medium goes away, right? Radio didn’t disappear when TV came, and TV isn’t going to disappear because you can stream on the internet,” says MLB chief revenue officer Noah Garden. “At some level it becomes complementary, and people are self-selecting which group they want to be in.”

But that doesn’t mean there aren’t difficult trade-offs to make. One of the biggest is around data. Owning that DTC platform can mean a gold mine of data for leagues, while outsourcing could mean losing out on that trove.” It’s something MLB knows well, having streamed its first game in 2002 and launched its MLB.tv streaming service in 2003, years before YouTube even existed. “The more information you have on your fans, generally the more things you can do with them,” Garden says. 

But critically, leagues are finding that they can still get some of that data, even if they give up some control. The NHL’s deal with Disney and ESPN is a perfect example. Before, hockey fans would subscribe to the league’s own service. Now it’s included in ESPN+, and many games also will stream on Hulu, with the league getting some data from Disney.

“We balanced those two priorities of direct-to-consumer information versus reach and access to a broader universe of sports fans,” says Stephen McArdle, executive vp digital media and strategic planning at the NHL. “And we felt that the reach and power that ESPN+ brought to the equation was enormously important to us.”

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Adds NHL executive vp media strategy and distribution David Proper, “The big issue for us is making sure we can get as much data as we can. That is probably the primary thing that we lose in doing a deal — not having the direct relationship with the consumer — which is something that we have made a very central part of the conversations we have with ESPN, about making sure we have the ability to cross markets to the consumer, so we have at least some idea of who our fans are.”

The marketing and production power of media partners can be a compelling pitch on its own, and, as was the case with the NHL, one that is powerful enough to shift league DTC strategies. It also was a key point for MLS in its decision to sell all of its rights to Apple. “In the discussions that we’ve had with Apple, with their integration, marketing, branding, technology and engineering teams, the amount of innovation and opportunity for us to build a fan base, which is the primary goal of this partnership, is really vast,” MLS commissioner Don Garber told reporters at a press conference June 14. 

And of course, having a partner also can help on the technical side of the business. “From an operational perspective, obviously, being a part of the ESPN+ infrastructure relieves some burden on our side,” McArdle says, noting that the NHL still operates its own streaming service globally.

The vast array of media deals and DTC offerings are not without risk. A July 21 report from Deloitte noted that 62 percent of sports fans surveyed were frustrated by difficulties in finding content, and more than half had missed an event they wanted to watch because they didn’t know where to watch it. But with MLB having firmly planted its foot in streaming, MLS’ big new Apple deal, the NHL pursuing deep partnerships with Disney and Turner Sports (games eventually will come to HBO Max), and the NFL focusing on mobile rights and a partner for its out-of-market Sunday Ticket package, all eyes are turning to the NBA, which is beginning to negotiate its next rights package (it currently has deals with Disney and Turner), which ends after the 2024-25 season.

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The league is said to be pursuing linear packages that will have a total value second only to the NFL (as much as $75 billion total), but the approach it takes to streaming will be the most closely watched. Does the NBA leverage the reach of its partners with League Pass like the NHL is doing? Or will it carve out something new for itself to sell like the NFL is doing? It is not expected to maintain the status quo. “Whether it’s entertainment or sports, fans are accessing their games in ways that are different than perhaps they did five years ago. That’s going to be even more dramatic in the years to come,” Garber says.

The question for leagues is whether they are best served going direct themselves or continuing to maintain robust partnerships with rights holders. For the foreseeable future at least, the partnerships remain supreme. “While the media has changed, I think the strategy will remain the same, and that is in broad distribution,” Garden says, noting that the definition of “broad” may evolve as consumers shift their viewing preferences. “In the old days, that meant you were going to be on NBC, ABC, Turner, Fox. In the streaming era, it could be Peacock or Apple.”

In the past, streaming may have been niche, but in a world full of “cord-nevers” and cord-cutters, YouTube, Hulu, ESPN+ or Apple may be the next broadcast partner. Or if NFL+ is a harbinger of things to come, it could even be the league itself. 

This story appeared in the July 20 issue of The Hollywood Reporter magazine. Click here to subscribe.