Steve Ballmer Shrugs Off $60 Million TV Offer For Clippers Games, Considers Streaming Instead
from the tick-tock dept
It was really only a matter of time. As cord-cutting continues as a trend and the cable TV market as we know it today struggles to stay relevant by grasping at major pro and college sports broadcast deals, the injection of a tech-industry giant into the sports ownership arena meant that the chance of streaming for sports could only increase. Truthfully, When Steve Ballmer bought the Los Angeles Clippers for $2 billion, he wasn’t the first tech celebrity to own an NBA team. Mark Cuban, after all, has owned the Dallas Mavericks for some time now. But Ballmer has been quite progressive in a traditionally conservative league in pushing the Clippers forward into modernity. Given the state of the team’s business practices when he made his purchase, there was always going to be a lot of heavy lifting to do. Still, it seems that Ballmer isn’t going to let that keep him from considering some very big ideas.
And one of those ideas appears to be transitioning the broadcast of games away from the television model to a streaming model. The New York Post reports that Ballmer has turned down a $60 million per year contract offer from Fox and is mulling over plans for an over-the-top streaming network instead.
If he follows through on the plan, Ballmer, the former CEO of Microsoft, would be the first owner of a major US sports team to deliver games direct-to-consumer via a Web-based service and not through traditional cable or satellite companies, sources said.
Clippers games are now aired to roughly 5 million Los Angeles-area homes through Fox Sports’ Prime Ticket regional sports network in a deal that runs through the 2015-16 season. Prime Ticket currently pays the team a rights fee of $25 million a year — and offered a 140 percent increase, to $60 million, but the billionaire Ballmer turned it aside.
There are hurdles to be jumped over to make this work, of course. Production of the games is a job currently done by the networks, meaning Ballmer’s service would need to come up with its own crews, commentators, and production values. That said, it feels silly to suggest that he isn’t capable of that jump. More difficult would be creating a subscription model for the broadcasts, which is what the link above seems to think is the plan.
While he may have the technological smarts to pull it off, Ballmer may find it hard to earn more than $60 million in revenue a year from a single sport streaming RSN, experts said. The Clippers would have to sign up around 10 percent of LA’s 5 million households and get a pretty high price for the service, those people said.
“If it costs $12 per month, multiply that by 12 months in 500,000 homes, it would add up to $72 million — but then you’d have to produce the games and market the product,” said one.
And that’s if Ballmer can give fans a reason to subscribe during the five-month off-season. If he can’t, revenue would only come to $42 million.
And? The Clippers’ deal with Fox currently stands at $25 million per year. Even under the notion that a $12/month subscription is the model, surely some percentage of fans would sign up. But, actually, I don’t particularly understand why a subscription should be necessary to start with. Instead, free the product and let it grow in a streaming service that would be watchable on any internet-connected device. This means smart TVs, devices hooked up to regular TVs that can stream content, phones, computers, tablets, etc. If the accessibility of the games means that more viewers and fans can get the stream for more games than they could under the broadcast product, the advertising premium should see a correlative jump as well.
That extra revenue ought to make up for the lack of a subscription, I think. Meanwhile, you become the team with the most accessible product on the market, allowing the fanbase to grow. They might end up being America’s basketball team, leading to even more revenue. Either way, streaming might be a win for Ballmer’s Clippers.
And another nail in the cable coffin.