Hoop Dreams, Internet Streams

Mar 20, 2006  •  Post A Comment

When CBS Sports President Sean McManus acquired digital rights as part of a $6 billion, 11-year deal with the NCAA in 1998, they weren’t worth much. Now he might be sitting on a gold mine.

With millions of fans flocking to the Web to watch March Madness on Demand on the opening day of the men’s college basketball tournament, the future for streaming video has arrived.

“If this platform can grow like we think it can grow, it could be a significant contributor of revenue to the company,” Mr. McManus said.

When Viacom Inc. was split into two parts late last year, the new Viacom with its cable networks was considered the growth company, while the new CBS Corp. was seen as a mature venture, so any new sources of growth are important for CEO Leslie Moonves.

“I think when you look at how Internet advertising is growing so quickly, I think it could be a significant revenue stream for us,” Mr. McManus said. “And the

good news is it doesn’t cannibalize in any way the sales or the viewing for the primary vehicle, which is the CBS telecast.”

CBS SportsLine, the network’s Web outlet, said that last Thursday, March Madness on Demand served up 268,000 simultaneous streams to viewers at one point, an Internet record for a live entertainment or sports event. During the first 24 hours, CBS said, more than 2 million users entered the site’s “waiting room,” where registered viewers were sent before being able to watch games.

People were watching on TV too. CBS said its coverage of the tournament on Thursday 5.0 national rating and 12 share, the best since 1997 and up 6 percent from last year.

Mr. McManus said he will judge the success of the online venture, which is supported by advertising, by whether or not there’s significant growth in revenue from the previous year, when it was offered as a subscription service.

Others are already calling the webcast a success for digital media.

“Online video is really coming to be a major force,” said Mark Egan, group account director for Media Contacts, the interactive arm of media buyer MPG. The new medium provides advertisers with new ways to reach consumers during an event like the NCAA Tournament, he said. “The dirty little secret is that people do a lot of their shopping when they’re online.”

All of the advertising positions in the webcast are sold out, said Ken Laguna, VP of sales for CBS Digital Media.

Presenting sponsors Courtyard by Marriott and Dell led a list of 20 advertisers, including Procter & Gamble, State Farm, RadioShack, Hyundai, Nike, AIG, Sony, Lowe’s, Honda, Lexus Universal, National Car Rental, Discover Boating, Michelin, Harley-Davidson and Coca-Cola.

“I think that this is going to be really important as more and more of these opportunities arise,” Mr. Laguna said. “If we can get some positive momentum with live streaming of events and coordinate with CBS, I’m excited about our future possibilities here.”

Generating Dollars

CBS sold ads in packages ranging in price from about $600,000 to just over $1 million, and the network didn’t bend on prices, Mr. Egan said: “They wouldn’t give me what I wanted.”

The prices for the webcast ads per thousand viewers reached are “a little more expensive” than they were on the broadcast network, Mr. Laguna said, declining to provide specifics. “We’re happy where we’re at,” he said.

He has good reason to be happy. According to TNS Media Intelligence, March Madness generated $467.7 million in ad spending in 2005. Thirty-second spots on last year’s championship game on CBS cost $1.03 million, representing a cost per thousand of $54.61, only slightly lower than those for the Super Bowl and the World Series.

This year, sales are brisk on CBS as well. “We’re very close to our goal,” said John Bogusz, executive VP of sports sales and marketing for CBS Television Network. Revenues were up about 10 percent, with demand driven by new advertisers coming to the event, including Microsoft, Cisco, Nissan, Lowe’s and CompUSA. Spots for the championship game were still available, and Mr. Bogusz said CBS is asking about $1.2 million for them, up about 10 percent from last year.

The webcast appeared to perform smoothly on Thursday. CBS SportsLine said it would be able to handle more than the 175,000 that AOL had for its Live 8 webcasts. (Yahoo said it had 335,000 uses simultaneously for live video of the Space Shuttle Discovery returning to Earth on July 13, 2005.)

When the games first began streaming, the March Madness on Demand online “waiting room” swelled to more than 100,000 users. It took about an hour for capacity to ramp up to accommodate the crowd.

At midday Thursday, about 10,627 users were in the waiting room at CBS SportsLine. The waiting time was about three minutes. Later in the day just 95 people were waiting and users could begin watching in just over a minute.

Other networks may not be able to replicate any success CBS has with March Madness on Demand if leagues venture into webcasts themselves.

“I don’t see a lot of organizations like the major leagues or other rights holders selling the rights to a network,” Mr. McManus said. “The leagues are inclined to want to control these rights themselves. This and the Olympics are unique in that the broadcast network completely controls the revenue sales and production of the digital rights.”

Rights holders might opt to form partnerships with broadcasters in the future. “The network brings something in terms of the sales packaging,” he said.

Mr. McManus said the popularity of CBS SportsLine’s NCAA package is providing a boost to CBS News, which he also runs.

“Our CBSnews.com is doing incredibly well,” he said. “That’s become extremely successful for us, and we look at it as an alternative to cable news.”

The site features live streaming video and stand-ups and reports produced just for the Internet.

“Cable television is basically linear, and this you can customize. If you want to watch the Saddam Hussein trial or a presidential press conference or custom-pick the videos and the rest, this is to me a much better way to get the news than watching a linear cable broadcast,” he said.