Finally, a Killer App for Broadband

Someone has finally found the killer app for broadband. That’s right—broadband’s killer app has been located and it is sports-on-demand. The real question is: What took so long?

by Mark Kersey ARS Inc. Broadband & Cable Industry Analyst [September 18, 2002]

Contrary to the labor problems that have plagued the sport for the past 30 years and nearly led to yet another players’ strike, a bright spot for Major League Baseball has been its embrace of the Internet and technology in expanding the sport’s presence online.

MLB.com first rolled out fee-based baseball content before the start of the 2001 season and now boasts 150,000 paying subscribers to its live audio game broadcasts and an additional several thousand to 20-minute condensed game video streams launched in early 2002.

On August 26, MLB.com took it a step further with the first live broadcast of a full baseball game over the Internet. The game between the New York Yankees and Texas Rangers was free of charge to the 30,000 fans who logged in to watch it (although they were required to submit credit card information to verify that they did not live in the local markets of the two teams). Major League Baseball will of course charge for this service when it is launched commercially next year, but the impact is clear: Someone has finally found the killer app for broadband.

Undelivered promises
To recap, we in the industry have been hearing about the promise of video-on-demand (VOD) for years now, and it always seems like the kind of technology that is still “a year or two away” (similar to voice over DSL). Granted, the cable companies have been rolling out television-based VOD throughout the past several months, and there are several Internet-based VOD services such as CinemaNow, Intertainer, and MovieFly. However, I personally have always questioned the desire of users to huddle around their 15-inch computer monitors for two hours while watching a movie that they probably could have picked up at their local Blockbuster for the same price.

Sports-on-demand. (We’ll call it SOD—think athletic field turf—for now, not to be confused with SVOD, or subscription video-on-demand, which is an entirely different story.) With a few notable exceptions (such as ABC's Monday Night Football or ESPN’s Sunday Night Baseball), traditional sports programming is inherently regional and not easily obtainable for out-of-towners. Ohio transplants seeking refuge in the sunny environs of San Diego generally do not get to watch a Cincinnati Reds baseball game, for example, unless the Reds happen to be playing the San Diego Padres or are one of the week’s few national games on ESPN or Fox.

Fans could choose to subscribe to a premium sports package such as MLB Season Ticket purchased through their local cable TV or satellite provider; however, those premium services force customers to pay for a myriad of games in which they may have very little interest just for the privilege of watching their favorite team. SOD solves that problem by enabling fans (at least theoretically) to purchase access to individual games or a season package of their favorite teams’ games or some combination of other games. This service would be of particular value to sports fans on the West Coast, where college football games shown by the networks that begin at noon Eastern Time are usually not shown, unceremoniously pre-empted by Saturday morning cartoons.

The SOD experience
Moreover, the Internet is the perfect place to offer SOD, because although viewers still must watch their SOD video streams on a smallish computer monitor, I would argue that sports—especially baseball, given its more methodical (some might say slow) pace—are more adaptable to such a format given that most fans would gladly choose a less-than-perfect viewing experience over not being able to see their team at all.

The accessibility factor of Internet-based SOD is by far its greatest asset and is in stark contrast to Internet-based VOD sites offering streams of popular movies such as A Beautiful Mind that can easily be rented from the local video store. If the whole point of the Internet is to offer users a content experience that they otherwise could not easily obtain, be it from an art museum on the other side of the world or a baseball stadium on the other side of the country, it is clear that the availability issue makes SOD—at least for now—an experience best offered through the Internet.

Additionally, Internet-based SOD makes sense for the professional sports leagues themselves (Major League Baseball, the NFL, NBA, NHL, NASCAR, etc.) given that they can control the broadcasts through an intermediary such as RealOne, thereby avoiding the pesky rights issues that dominate the business of 21st century professional sports. Indeed, the limited Internet SOD that has been available up until now (through content providers such as Intertainer and Quokka) has been almost entirely non-mainstream sports such as professional snowboarding, parasailing and other so-called "extreme sports." While there are certainly fans of these types of sports out there, they are dwarfed in number by those who regularly watch NFL, MLB, NBA and college football games.

Delay of game
So why has it taken so long for mainstream Internet SOD to become reality (if only in beta stage)?

One could certainly point the finger at broadband adoption rates that have never lived up to the forecasts of the late 1990s as the main culprit. Why would MLB.com or anyone else invest the resources necessary to develop a compelling product if there aren’t any broadband users to take advantage of it?

Of course, the broadband service providers would argue that the lack of truly compelling content has held back broadband adoption rates (and they would be at least partially correct in making such assertions), but we could continue this chicken-and-egg debate endlessly. The question remains, why has SOD taken so long to develop, considering that it is merely an extension of long-existent offerings such as the aforementioned live audio game broadcasts developed five years ago by Broadcast.com and others?

The answer, it would seem, lies at least in part with the "everything should be free" mentality that dominated online content until the last year or so. In the golden era of Internet prosperity, the notion that people would actually pay for online content was practically anathema and was largely relegated to business-related services and publications such as the Wall Street Journal Online.

The average consumer, it was believed, would not pay for online content from certain providers if others offered it for free. Such thinking does not translate well to the world of professional (and even college) sports, where enormous licensing fees are either supported by advertising dollars (i.e. broadcast networks ABC, CBS, NBC and Fox), premium fees charged to consumers (i.e. heavyweight boxing matches on pay-per-view), or some combination of both (i.e. cable networks like ESPN and Fox Sports Net). Professional sports executives had little incentive to develop SOD in the face of such uncertainty regarding fee-based Internet content.

Content with free content
Fast forward to the present. The dot-com crash has largely wiped out the idea that advertising alone can support online content. Many of the startups that drove Internet innovation in the late 1990s have disappeared and broadband itself is now dominated by a handful of rapidly consolidating service provider goliaths (ARS research shows that the ten largest broadband service providers collectively control 83 percent of the market).

Many content providers that formerly offered their services for free have converted to a fee-based business model, generally at the behest of shareholders who are now demanding profits. With such fee-based models becoming more prevalent every day, MLB.com has decided to step up to the proverbial plate (sorry, I couldn’t help myself) with SOD, a logical step following its success with live audio game broadcasts and more limited success with the condensed game videos.

It should be pointed out that Fox Sports Net has also jumped into the SOD foray, offering limited webcasts of Big XII conference college football games that began last weekend for roughly $25 every three months (just over $8 per month) through partner RealOne’s SuperPass service.

Now all we need is for the content providers to figure out the right way to package SOD and for the broadband service providers to provide consumers with reliable cable modem and DSL connections so as to prevent the SOD streaming video from coming across as something of lesser quality than your average home movie.

SOD busters?
Some in the industry are clamoring for the Federal Communications Commission to raise the bar as to what qualifies as "broadband" from the current 200 kilobits per second (Kbps) to not less than one megabit per second (Mbps), although such action does not appear to be on FCC Chairman Michael Powell’s agenda in the near-term.

TechNet, a high-tech industry trade group based in Silicon Valley, is pushing for every household in America to have a fat 100Mbps broadband pipe running to their house by 2010, a goal that may be a tad aggressive but would certainly solve today’s broadband connection quality issues.

Fiber-to-the-home will continue its slow but steady growth as well, and it is likely that a decent percentage of U.S. homes will have that 100 Mbps connection over time. Ultimately, we at ARS believe that as the demand for content that can only be viewed with a broadband connection increases, broadband service providers will have little choice but to enhance the quality of their products so that a more steady and consistent video stream can be maintained.

Limited exposure
Internet-based sports-on-demand is only the first step, however, in the convergence of the online world with traditional entertainment media. Various companies including Microsoft and SonicBlue (purveyor of ReplayTV) are in the process of bringing the power and ubiquity of the Internet to the living room in the form of broadband-enabled entertainment devices that combine the computing capabilities of a PC with entertainment functions such as digital video recorders (DVR).

Additionally, the ultimate goal for any sports junkie (or tech geek) is video-on-demand via high-definition television (HDTV). Such technology would take advantage of the ultra crisp picture provided by HDTV and would alleviate the need for viewers to huddle around their small computer monitors while watching their video programming on-demand. HDTV adoption is currently much smaller than broadband penetration, however, so it seems unlikely that SOD via HDTV (digital SOD?) is in our immediate future.

For now, sports fans around the country and indeed the world can look forward to additional limited rollouts of Internet-based SOD over the next few months, thanks to the hard working folks at MLB.com and Fox Sports Net.

The broadband killer app has finally arrived.

And I for one say that it’s about time. Let the games begin!

— End