Ever since YouTube streamlined the process for allowing anyone to easily post and watch videos online, the barrier to entry to provide and consume video has become incredibly low. Traditional television outlets have embraced online video to some extent, offering access to their most popular shows within a week, or sometimes a day after they originally air. What’s more, Internet-only services like Hulu Plus, Netflix, and Amazon’s Prime provide an extensive catalog of shows available on demand. One of the few remaining holdouts regarding online access to broadcast television is in the arena of live sports. Organizations like the National Football League (NFL) tightly control broadcast rights for live events, while other organizations, like World Wrestling Entertainment (WWE) and the Ultimate Fighting Championship (UFC), control access to their live events through pay-per-view broadcast. Both of these models, however, threaten to be up-ended by the new and novel approaches to content delivery.
WWE and the Digital Only Approach
A shake-up in the delivery of live sports can be found in this February’s launch of the World Wrestling Entertainment’s WWE Network. The WWE Network is a subscription-only streaming Internet video service that broadcasts professional wrestling events that were previously only available on cable and satellite television. The $9.99 a month subscription provides subscribers with access to WWE’s pay-per-view events, network original series, as well as a catalog of vintage wrestling programs from the past four decades.
Led by the veteran wrestling promoter Vince McMahon, the WWE online delivery approach is off to a strong start. Following the recent Wrestlemania 30 event in New Orleans on April 6, 2014, the WWE Network announced it had signed up approximately 667,287 subscribers and projects to hit 1 million subscribers by the end of the year. That 1 million threshold was required for the service to be profitable according to an AdWeek interview with the company’s Executive Vice President of Digital Media, Perkins Miller.
Not everyone sees the value in the online-only approach. Detractors argue the WWE will cannibalize its own pay-per-view profits, and is squandering its most valuable assets at $9.99 a month. Dana White, president of the Ultimate Fighting Championship, criticized the WWE Network in a Fox Sports interview:
…when I look at [WWE’s Vince McMahon’s] model… he’s basically taking everything in and devaluing it. Saying everything we do is worth $10. That doesn’t make sense to me. If he pulls in 2 million subscribers, he’s crushing it. So it’s a risky move.
White stated that he has no plans for abandoning the pay-per-view model for the UFC. Those plans could change, however, depending on the success of the WWE. With Wrestlemania 30 grossing $10.9 million, the WWE Network is making a strong case for digital, Internet-only distribution and is challenging the status quo for traditional pay-per-view events.
Aereo and a new approach to local broadcast television
Aereo is doing its own shake-up of live sports and broadcast television generally. Aereo is one of the most recent upstart companies offering disruptive online access to live TV. Based out of Long Island City, New York, Aereo provides a service that allows subscribers to view live and time-shifted streams of over-the-air television on Internet-connected devices. Like the traditional “rabbit ear” antennae approach to accessing over-the-air broadcast television, Aereo provides each subscriber with his or her own antennae. The difference, however, is that the antennae is not located on top of the subscriber’s television or on the roof of a house. It is located in one of Aereo’s data centers and is connected to cloud-based digital video recorders (DVRs). This allows subscribers to watch live broadcast television on their smartphones, tablets and desktop computers, and access those shows later using an app that connects to their DVR in the cloud. Broadcasters are calling foul, however, claiming Aereo is breaking the law.
The broadcast networks ABC, CBS, NBC and Fox sued Aereo in federal court for copyright infringement. The networks argue that Aereo’s service is tantamount to a public performance, and therefore requires retransmission consent from the content providers. This argument is based on the 1992 Cable Television Consumer Protection and Competition Act, which requires cable companies to obtain retransmission consent from broadcasters for retransmitting their content. The initial suit filed by broadcasters in 2012 requested an injunction against Aereo to prevent it from launching its service in New York City. The lower court denied the injunction, citing a 2008 Cablevision case which held that cloud-based streaming and DVR services are legal. The district court’s ruling has been upheld on appeal. The United States Supreme Court heard arguments for the case this month, and is expected to issue a decision this summer.
In advance of the Supreme Court’s decision, the NFL and Major League Baseball filed a joint amicus brief with the Court warning that should the lower court’s ruling be upheld, providers of sports content would be forced to leave broadcast airwaves and migrate to cable television. Such a move would seek to recoup lost retransmission fees, which networks charge cable and satellite companies for the right to broadcast. These fees serve as an important source of revenue for networks and affiliates, estimated at $3 billion across the industry. By allowing unlicensed access to broadcast content, networks and professional sports associations stand to lose a great deal of money.
While the fate of Aereo remains uncertain, the company has clearly raised the ire of traditional broadcast gatekeepers. It serves as a reminder that no traditional models are safe from disruption; including that of the live sports broadcast.
Conclusion
Whether live streaming DVR’d sports games from the cloud, or tuning into a tablet for the latest pay-per-view-style wrestling event, technology is disrupting the traditional model for live television, particularly in sports. While the legal and economic viability of these new approaches has yet to be determined, they are threatening to upend existing models and are making waves throughout the industry.
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