The evolution of digital media strategies in Major League sports and the legal issues they raise
On September 27, 2018, NBA Digital, the digital arm of the National Basketball Association (NBA), announced1 that fans would be able to purchase the fourth (4th) quarter of live, out-of-market NBA regular season games for $1.99, through NBA League Pass, the league’s digital streaming package. The NBA, through a partnership with Turner Broadcasting’s B/R Live streaming service, as well as NBA.com and the NBA mobile app, is allowing fans the opportunity for the first time to purchase the fourth (4th) quarter of a single game on NBA League Pass, from the end of the third (3rd) quarter until the conclusion of the respective game.
The NBA is the first of the four major US professional sports leagues (Major League Baseball (MLB), the NBA, the National Football League (NFL), and the National Hockey League (NHL)) to allow fans to purchase a portion of an in-progress regular season game to watch on their computer or mobile device, although it follows similar innovations made in the over-the-top (OTT) market by the NFL.2
This article examines the NBA’s announcement and the wider evolution of digital media rights’ strategies in US Major League sports (especially in the NFL), before identifying some of the key legal issues that lawyers are dealing with.
The NBA’s announcement
As NBA Commissioner Adam Silver noted, this announcement with Turner Broadcasting (Turner) is only the beginning for NBA Digital:
It's a big moment, but it's also a small first step … The new micro-transaction offerings on League Pass will deliver more customized experiences to meet the needs of NBA fans … Instead of waiting to watch highlights after a game, fans will be able to enjoy a portion of a game in real-time.3
While the price for an entire game on NBA League Pass is $6.99, starting this month, fans will also be able to purchase the remainder of a game, at a reduced price, beginning each quarter until the conclusion of the game. In the future, the NBA envisions that fans will be able to purchase any portion of a game they prefer (such as a ten (10) minute increment) at a defined price: “We imagine a situation where a fan has dinner at eight o'clock and only has 30 minutes and can choose to buy a half-hour of a game,” Silver noted.
These purchasing options will also benefit gamblers, following the Supreme Court’s recent ruling4 in Murphy v. NCAA5, who may only want to purchase a particular half or quarter of a game, based on their individual wager. Additionally, Silver envisions6 dynamic pricing for certain games and quarters, based on specific matchups, “just like our teams do with their tickets.” This innovative approach may be just the beginning for Turner, which also holds the broadcasting rights to the NCAA Men’s Basketball Tournament, the UEFA Champions League, and recently, “The Match” between Tiger Woods and Phil Mickelson. As David Levy, President of Turner, noted7:
“These game-changing initiatives will provide fans with immediate access to live NBA action in more ways than ever before. From live games on TNT and NBA TV to these compelling options for NBA League Pass subscribers, fans will be able to customize the experience to best align with their viewing preferences.”
Innovative offerings from the NFL
Over the past few years, NBA Digital has also introduced a “Mobile View” option to NBA League Pass, additional types of subscriptions, and an offering to view in-arena entertainment.
However, in terms of the OTT market, the biggest innovations may be coming from the NFL. In December 2017, the NFL and Verizon announced8 a $2 billion partnership to offer streaming access to in-market and national NFL games, through the Yahoo Sports and NFL mobile apps, regardless of a user’s mobile network. Previously, only Verizon customers were given streaming access to in-market and national NFL games, even if other customers had purchased NFL Sunday Ticket Max, the NFL’s streaming service offered through DirecTV (in-market and national NFL games are blacked out in NFL Sunday Ticket Max).
The NFL-Verizon deal includes pre-season, regular season, and playoff games, including the Super Bowl, and provides access to fans nationwide. In addition, through Yahoo Sports and Verizon’s other apps, this agreement provides fans increased access to in-progress and delayed highlights, and jointly developed original content. In their press release9 announcing the partnership, the NFL and Verizon stated that Verizon’s platforms, including Oath (formerly AOL) and Yahoo, reach more than 200 million unique mobile and digital views per month in the United States. The deal is a win-win for both Verizon and the NFL, who are longtime partners, as Lowell McAdam, Chairman and CEO of Verizon Communications, noted10:
“The NFL is a great partner for us and we are excited to take its premier content across a massive mobile scale so viewers can enjoy live football and other original NFL content where and how they want it. We believe that partnerships like this are a win for fans, but also for partners and advertisers looking for a mobile-first experience.”
NFL Commissioner Roger Goodell echoed this conclusion, stating that11, “Our expanded partnership with Verizon is great for our fans … for seasons to come, live NFL action directly on your mobile device – regardless of carrier – will give millions of fans additional ways to follow their favorite sport.” While the NFL is the first of the major US professional sports leagues to not require a television subscription for in-market games, there are limits to the Verizon deal; free streaming is not allowed on smart TVs (TV users still need to purchase NFL Sunday Ticket Max or use a cable network app) and streaming for certain games broadcast on the NFL Network is not permitted over Wi-Fi or on a tablet (you need a mobile network and smartphone for such games).
With many younger fans are “cutting the cord” or never signing up for cable/satellite subscriptions in the first place, the NFL recognizes that it needs to adapt to the new digital landscape, with Brian Rolapp, the NFL’s Chief Business and Media Officer, noting that12, “If you don't get to that younger demographic, who aren't conditioned to go to the television, you do run the risk of losing them.” While Rolapp still believes “people will still want to watch on the biggest screen possible,” the NFL needs to be as flexible as possible in order to reach younger fans13.
The Verizon deal was the latest in a series of OTT partnerships by the NFL, including recent streaming agreements with Twitter and then Amazon,14 to stream Thursday night regular season NFL games. Under the terms of its recent deal with Amazon, for the 2018-19 regular season, Amazon is offering eleven (11) Thursday night games for free to its Amazon Prime subscribers, through its Amazon Prime Video app, and through its Twitch app, which is available on mobile devices, Xbox One, and PlayStation. Advertising on such NFL streams, which are subscription-free, is allocated mostly to the respective broadcasting networks who have produced the games (CBS, ESPN, FOX, and NBC), with Verizon or Amazon allotted the remaining advertisement slots.
Fortunately for the NFL, as they have had multiple broadcast partners (CBS, ESPN, FOX, and NBC) for years and were the first major US professional sports league to enter into OTT partnerships with the likes of Twitter and Amazon, they currently have the most experience among the major US sports leagues in allocating advertisement slots in the OTT market.
Overall, these streaming options dramatically expand the reach of NFL in-market and nationally televised games. Previously, only Verizon customers on the NFL mobile app could stream in-market and nationally televised games due to Verizon’s exclusivity in this area. Fans can now stream such games on the NFL mobile, Yahoo Sports, Tumblr, and AOL apps, through TV network apps (such as the CBS Sports and NBC Sports apps) on mobile devices, smart TVs, Apple TV, and Roku, as well as on laptops, desktop computers, and through the Safari browser on iPhones and iPads. During the first three (3) weeks of the NFL regular season, Yahoo set records for app usage, with compound growth week after week.
Both the NHL and MLB offer a closed-universe, subscription based streaming service, similar to NBA League Pass and NFL Sunday Ticket Max, with offerings available on smart TVs, Xbox, PlayStation, Roku, and Apple TV. However, neither league has yet offered an innovative approach to its streaming services, as the NBA has done with its Turner fourth (4th) quarter deal or the NFL with its Verizon deal; fans of both leagues may only purchase a monthly, yearly, or team-specific subscription, for a defined cost. However, with the recent changes to the NBA’s and NFL’s OTT packages, these types of innovations may soon be on the horizon for the NHL and MLB; provided no announcements have been made by either league to date.
The legal perspective
From a legal standpoint, such new partnerships in the OTT market pose challenges for attorneys representing all sides in such transactions. In crafting such OTT partnerships, the various parties need to address the following legal issues:
Whose Production is Used: The particular party producing the telecast of the specific sporting event needs to be decided (for instance, CBS produces certain NFL Thursday night telecasts, in partnership with the NFL Network, which are streamed through Yahoo);
Territory of Distribution: OTT rights are usually bifurcated by country, with Yahoo having NFL OTT rights in the U.S., but Sky Sports having NFL OTT rights in the U.K. for instance;
Whose Responsibility is it to Secure Clearances: Clearances need to be secured for athletes and the music used in the produced game, in order to distribute the telecast in the OTT market, with the league usually securing athlete clearances, but the producing partner usually securing music clearances for the OTT distribution;
What Warranties Are Being Issued: Between distribution partners, certain warranties are issued for in-game elements (such as a quitclaim or absolute representation), with the OTT partner having more leverage, usually delivering less robust warranties to the other party;
Licensing of Trademarks: Are trademarks being licensed royalty-free from the league or does a streaming partner need to pay royalties for the use of trademarks in the OTT market; and
Allocation of Advertising Slots: The advertising slots for each telecast need to be allocated among the various distribution partners, including a (usually small) allocation of advertising slots to the OTT partner in exchange for streaming the original broadcast partner’s telecast.
The NBA’s deal with Turner to offer for purchase streaming options to a single regular season game or a portion of a game (such as the fourth (4th) quarter) is innovative and revolutionary, not only for the NBA, but for the other major professional sports leagues. In addition, the NFL’s recent deal with Verizon to offer free streaming to in-market and nationally televised games highlights the creative solutions leagues are implementing to reach a younger demographic, which has grown up with and is increasingly used to viewing sporting events on their mobile devices.
These two types of approaches offer a roadmap for what the OTT landscape will look like in the future – not just for the US major professional sports leagues, but potentially for European soccer, college football, and Mixed Martial Arts (MMA), among others. Overall, innovation is increasing in the OTT market and this is great news for fans, who are receiving expanded access and availability to content, in preferred formats, at reduced prices.
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- Tags: Broadcasting | Commercial | Major League Baseball (MLB) | Major League Sports | Media Rights | National Basketball Association (NBA) | National Football League (NFL) | National Hockey League (NHL) | United States of America (USA)
Rich Brand is the Managing Partner of the San Francisco Office of Arent Fox LLP, and the Chair of the Sports Practice Group. Rich's sports law practice focuses on naming rights, sponsorships, media rights, acquisitions of professional sports franchises, arena/stadium licenses, executive contracts, concession agreements, suite and club seat licenses, and financings for teams and facilities. Rich has represented numerous professional teams, including the Atlanta Hawks, Brooklyn Nets, Charlotte Hornets, Cleveland Cavaliers, DC United, Inter Milan, Los Angeles Galaxy, Los Angeles Kings, Los Angeles Lakers, Los Angeles Rams, Madison Square Garden Company (the owner of the New York Knicks and New York Rangers), Memphis Grizzlies, Miami Dolphins, Miami Heat, New York Jets, Oklahoma Thunder, Phoenix Suns, Portland Trailblazers, San Antonio Spurs, San Francisco 49ers, Seattle Seahawks, Washington Capitals, and the Washington Wizards. Recent examples of Rich's experience include representing the University of Southern California and Fox Sports in a naming rights transaction with United Airlines, the Seattle Seahawks in a naming rights transaction with CenturyLink, the Miami Dolphins in a stadium naming rights transaction with Hard Rock, the Los Angeles Lakers in a naming rights and health provider rights deal with UCLA Health, Brooklyn Sports & Entertainment in an arena naming rights transaction with New York Community Bank, Inova Health System in a training center naming rights transaction with the Washington Redskins, and the Brooklyn Nets in a media rights agreement with YES Network. In one of the more prominent recent non-sports naming rights agreements, Rich represented the Transbay Joint Powers Authority in San Francisco in a transit center naming rights transaction with Salesforce.
Jennifer O’Sullivan is a partner in Arent Fox’s Sports group where she serves as a trusted advisor to sports leagues, teams, and media and technology companies. She specializes in the representation of professional sports leagues, teams, media and technology companies, investors, promoters, hospitality companies and sports, entertainment, and lifestyle agencies. Jennifer counsels sports and entertainment clients on issues ranging from mergers and acquisitions and other transactions to sponsorships, advertising, media matters, league formations and restructurings, and all forms of commercial agreements, including licensing, merchandising and promotional agreements, venue, vendor, and other special events agreements.
Associate - Arent Fox (Los Angeles)
Justin is an Associate in the Los Angeles office, where he works in the Corporate & Securities group.