THE RIGHTS ENVIRONMENT

Today’s sports programmer must understand these distribution options in order to navigate successfully through the complicated rights environment created by the growing interconnection of interactive and traditional media. As the Darwinian realities of the Internet economy become more pressing, the pressure toward proof of sustainability will require more independent Internet content companies to prove their financial viability. The survivors will need to be well funded, with a clear path to profitability and a strong strategic alliance among broadcasters or delivery providers. As consumer demand for interactive television grows, broadcasters will need to integrate facility with interactive media as a production requirement to their programming portfolio. As such, they will not only create production models that integrate interactivity but they will need to negotiate for rights to do so. In the not-too-distant past there was a proliferation of Internet companies actively bidding for interactive programming rights, resulting in ever increasing rights fees. Because many of them have been forced under by changing economic conditions in the industry, only a select few players are left in the field to compete for rights that have become increasingly more difficult to “monetize” (i.e., develop sufficient revenues to offset production and rights fee costs). The remaining players are those most closely linked to the broadcasters either as wholly owned subsidiaries or through equity purchase.
This broadcaster–Internet connection is integral to understanding the future direction of sports programming in a convergence world. Today, the rights to premier sporting events command enormous sums for the ability to televise, promote, and sell on-air advertising in connection with the event. But because interactive coverage on PCs attracts different audiences (at times) and competes for an audience at other times, broadcasters can’t support these costs of rights and production without complete exclusivity. Thus, the integration of media is necessary because of the desire to package advertising sales and to retain the audience within a closed network of coordinated storytelling, sponsor benefit, and cross promotion.
Separation of rights is inefficient and ineffective. Although many rights holders may seek to retain their own interactive rights so that they may determine their ultimate value as a revenue source, the trend is to couple the interactive rights with the event broadcaster. In the recent example of the United States’ rights to the Olympics, NBC paid the International Olympic Committee (IOC) $4 billion for the combined TV and U.S.-based interactive rights. NASCAR, on the other hand, divided its TV rights among several broadcasters, one of whom, AOL/Time Warner (Turner), acquired the interactive rights pursuant to a separate arrangement for the astounding sum of $100 million over six years. Many rights holders look at this deal with envy, but the truth of the deal is that, in fact, it’s actually a promotion and advertising deal with an assumed value equation. The day of the huge interactive rights fee without a broadcast partner is over.