Countless World Cup fans are scrambling these days to find options to watch the tournament at work. Many of them end up on the website of ESPN3, which is streaming 54 of the 64 games live in HD with a bitrate of up to 1.8 Mbps.
However, a number of users won’t be able to access ESPN3’s stream at all: The website only shows its programming to customers of affiliated ISPs. Got your Internet through AT&T, Comcast or Cox? Then you’re good to go. Signed up with Earthlink, Sonic.net or Time Warner Cable? Sorry, you’re out of luck (for other options, read our article Where to Watch the World Cup Online and on Your Phone).
ESPN3 VP Damon Phillips told me during a phone conversation yesterday that the site is available to about 70 percent of all broadband households. It’s struck licensing agreements with more than 60 ISPs, which pay ESPN in order to get their customers access to ESPN3’s programming.
It’s not a new model — ESPN3 used to be called ESPN360, and it has been in the business since 2005. And it’s obviously inspired by an even older business model, one that has dominated TV for decades: “We treat this like a TV network,” explained Philips. TV networks ask cable providers for licensing fees, and customers end up paying for various bundles of these licensed channels.
ESPN even renamed its online venture to ESPN3 earlier this year to make it sound more like a traditional TV network. Philips thinks that the World Cup is somewhat of a coming out party for the site, with many users stumbling across it for the first time, or at least for the first time since the name change. “This event has definitely raised awareness,” he said. ESPN3 wants to use this demand to strike more licensing agreements with ISPs, and in fact provides potential would-be users with a form that makes it possible to “Tell (your ISP) what you think” and “Demand live sports online 24/7!”
Some ISPs, however, want to have nothing of it. Dane Jasper, CEO of the Bay Area-based DSL provider Sonic.net, for example, thinks that ESPN3’s approach is all wrong. “I do not believe that the industry should accept a model that attempts to duplicate linear TV on the Internet,” he writes in a blog post today that he shared in advance with us. He continues:
“The Internet should not accept this model. If it were carried to its logical conclusion this model would have every site charging the ISP, who would pass on the costs to all customers, whether they want the content or not. (…) End-users should be empowered to subscribe to the pay services that they themselves choose, rather than being forced to pay for services they may not want.”
Jasper isn’t alone with his criticism. Broadband Reports noted late last year that some smaller ISPs were contemplating lawsuits, and there also some high-profile holdouts. Time Warner Cable and its Roadrunner subsidiary haven’t signed up with ESPN3, and neither has Cablevision. For many, it might be a simple business decision. Customers are unlikely to switch if you’re the only cable ISP in a local market.
A smaller provider like Sonic.net could more easily lose customers to competing DSL providers like AT&T, but Jasper still calls ESPN3’s business model “ridiculous,” adding: “Content creators have an opportunity to reach customers directly, and that’s the path they should take.”
Philips, unsurprisingly, disagreed when I talked about such criticism with him. “We believe that the affiliate model has relevance online,” he told me.
Related content on GigaOm Pro: New Business Models For Pay TV Services (subscription required)