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Published on 08 October 2014

In further proof that there's opportunity in live sports beyond traditional TV, the NBA and ESPN have agreed to create a standalone streaming service with live games and surrounding content for those pro basketball fans that don't want to pay for cable packages to watch hoops.

Though Major League Baseball was the first major pro sport to stream its season online back in 2003, the NFL and NHL have taken divergent paths to the web in the years since. This week, the NBA and ESPN revealed they are looking to maximize revenues by adding online distribution.

Creating separate, standalone sports properties can be beneficial for both sides. Efforts to do just that come as little surprise given the gigantic price tags distributors are paying for live sports programming. The broader NBA deal spans nine years, is worth an estimated $24 billion, and also includes TV rights for games on Turner and TNT.

Last week, satellite TV provider DirecTV closed a deal with the NFL whereby it agreed to pay the league a 50% jump in rates to $1.5 billion a year for eight years to retain exclusive rights to NFL Sunday Ticket. It’s the out-of-market live game package which is beyond coveted and itself may feature a robust online-only (no dish required) service as well as a wireless version.

Live Sports Content is King

For those who somehow still don't understand the relative power of live sports, first look again at the price tags for these two deals. Then add in that AT&T announced that if DirecTV didn't retain the NFL package it was ground to determinate the one-time telco's $48.5 billion acquisition of the company.

Remember that Sunday Night Football was the most watched TV show in 2013, exceeding 20 million viewers several times. Throw in the overall success of regional sports networks (RSN) and you really should get the big picture.

Consumers want their live sports TV and are willing – despite complaints – to pay for it.

It's most all of the other non-sports programming they could pretty much do without.

The "Framework"

That's the beauty of the "framework" the NBA and ESPN announced they have developed to create a standalone streaming NBA service with some number of games and likely a ton of surrounding programming. The league and ESPN will likely co-own the enterprise.

Unlike NFL Sunday Ticket, however, the streaming NBA service is said to be a standalone offering meaning it can be bought without signing up for a traditional pay-TV programming package.

Specifics on the NBA OTT offering are scarce with many important items sketchy at this early date so it's tough to lay things out in black and white for TV viewers. But ESPN had already stated its intention to go direct to consumers with live sports options and could a pro sports league not look at distribution options beyond traditional broadcast and cable networks?

Opportunity Pounding

Now consider that the NBA attracts a much younger demographic – read "cord nevers," "wannabe cord cutters" and "cord nevers," and you have an offering that if constructed accordingly could attract pro hoops fans like shoppers to Black Friday holiday shopping deals.

At the same time, the NBA-ESPN duo has a potentially gigantic opportunity to attract a customer base not yet reached by pay-TV service providers – tweens, teens and "20 somethings" that would otherwise move into the ranks of "cord nevers" or "cord maybes."

Most don't pay for Internet or TV programming but would be likely to pay for something they truly covet, live sports, if they didn't have to pay for the countless other channels that are staples in overly large packages. And they're more than comfortable with web content sources.

Better still, if the NBA streaming service was combined with a few related sports channels (ESPN) for example, it could prove to be even a bigger draw. And for NBA fans looking to jump to a no-sports service like Netflix or Amazon, the resulting price could still be far lower than traditional pay-TV programming packages with their countless costs, RSN fees, broadcast fees, etc. etc. We really won't know until pricing and packaging data is announced.

Giving Broadband the Business

And all you need is a high-speed Internet connection and its game on!

Nothing powers the broadband economy like video. Cablecos and telco TV providers alike have reported higher sales of broadband access than TV subscriptions for quite some time now. Look for that trend to continue on, driven in part by widening availability of higher-speed Internet with the list of providers touting 1Gbps introductions growing by the month.

Cannibals?

One exec made mention of this NBA streaming venture not cannibalizing viewers from its other, traditional distribution methods and perhaps properties (ESPN). I'm certain some level of cannibalization is guaranteed here if the plan for the standalone OTT NBA service is for real.

However, if the OTT service is cut from the same cloth as NFL Sunday Ticket, and only offers out-of-market games, cannibalization would likely be minimal.

How the NBA and ESPN flesh out their standalone OTT framework remains to be seen but will be watched closely from this day forward. That's because those paying – or considering to pay -for live sports programming look to find revenues from increasingly expensive, long-term deals by expanding distribution channels and packaging.

Finding a balance where one method doesn't cannibalize others is the goal. But is it a realistic one?

For now, stay tuned.