“One day, Google will buy the NFL,” an executive at a big digital advertising firm said to me late last year, referring to the rights to broadcast America’s National Football League. At a meeting a few weeks later, an analyst at an asset manager made essentially the same point: Why doesn’t Google just buy the rights to the English Premier League?
Rights to the NFL cost some $1.5 billion annually and to the EPL abut £760 million ($1.15 billion) per year. With over $65 billion in revenue last year, Google could easily afford to buy the rights. Indeed it has supposedly been in talks to do just that in the past, and now hosts an NFL channel of clips and interviews (paywall) on YouTube.
But making money from live-streaming sports will be harder, according to James Gautrey, the analyst mentioned above. Gautrey, a technology analyst at Schroders, ran the numbers to see if Google really could afford to buy up the rights to the English Premier League and show it for free with an ad-supported business model.
The short answer is no. Or at least, not without charging users.
According to Gautrey’s calculations, advertisers would have to pay roughly 13 times as much if Google wanted to match Sky’s revenues on a per-game basis, without charging subscription fees. That “seems something of a stretch,” writes Gautrey, “Hence the solution seems to be either a partnership model with existing TV players, or some combination of lower subscription pricing subsidised by more effective, targeted ads,” he adds.
Any sport in a storm
Why would Google want to buy rights to a broadcast a sports league anyway?
First, it would be a spectacular way of making a statement of intent. Google (along with Facebook and pretty much every other online media and technology company) knows that video is moving online. That’s partly due to shifting user behavior, and partly at the urging of the companies themselves. Scooping up a massive sports franchise is a good way to establish yourself.
More importantly, nothing has quite the same pay-off. People can record live television and watch it later—while skipping through the ads. But a live sporting event is pretty much the only thing that can guarantee an audience willing to sit through ads. Few people watch a football game the following day.
There is precedent for it. Between 2010 and 2013, YouTube live-streamed the Indian Premier League, a cricket tournament, albeit on a five-minute delay.
Moreover, broadcast advertising is ripe for disruption. Even as print and radio have lost share of the global advertising market over the past decade, television has chugged cheerfully along. Video ads are much more powerful than print or radio ones. As people consume ever more video content online, and as targeting capabilities get better, advertisers will start to shift online too.
Web giants must prepare for this future by loading up content. Facebook is doing it by persuading publishers to make videos for the site. Google is striking deals and considering subscriptions. Amazon produces its own shows now and Apple just struck a deal with HBO. Sooner or later, someone will buy up the rights to a sports event. When they do, that will be the beginning of the end for traditional television.