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Sports stars on digital platforms

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This year’s Super Bowl drew an average of 528,000 streaming viewers per minute, according to Fox Sports, making it the most viewed single sports event delivered online to date. According to a study released this week by Adobe, more than one in four of those streaming viewers were likely watching the game, or at least part of the game, on a mobile device.

According to Adobe’s U.S. Digital Video Benchmark study, which analyzed 22.5 billion online video starts and 574 million authenticated (i.e. TV Everywhere) streams and surveyed 400 U.S. sports viewers about their viewing habits, 37 percent of authenticated TVE streams are live sporting events. Sports video streaming in 2013 was up 640 percent over 2012, compared to 440 percent year-over-year growth for all streaming content.

Overall, mobile devices accounted for 73 percent of TVE streams in the fourth quarter of 2013, up from 67 percent in 2012. For big annual sports events like the Super Bowl mobile devices account for 27.9 percent of all streams; for ordinary, regular-season games, mobile accounts for 19.5 percent of streams.

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The popularity of sports on digital platforms is not surprising in itself; live sports has the sort of urgency that propels people to want to watch it in real time, but it’s also very chunkable, into highlights, that lends itself to viewing on the go. But its rapidly growing share of streaming activity, whether live or chunked, makes you wonder how long it will be before sports is driving the economics of TV Everywhere just as it does on traditional pay-TV platforms, or what it’s impact on the development of mobile video will be.

According to an analysis done in 2012 by then-Sanford Bernstein analyst Craig Moffett (now with MoffettNathanson) sports programming accounts for more than half the programming costs associated with the average cable or satellite bill. ESPN and ESPN2 alone, which collect an average of $4.69 and $0.62 per subscriber per month, respectively, from operators according to SNL Kagan, account for 20 percent of the cost.

The biggest factor driving the cost of sports programming, for both consumers and pay-TV operators, is the skyrocketing price of sports rights. In 2011, Fox, CBS and NBC agreed to pay the NFL $27.9 billion for broadcast rights through 2022. This week, CBS ponied up another $250 million in a one-year deal to carry eight additional games on Thursday nights.

In 2012, Fox and Turner signed an 8-year deal with Major League Baseball worth $7.4 billion, while ESPN locked up broadcast rights to the college football playoffs through 2025 for $470 million per year.

For both the networks that air it and the pay-TV providers that distribute it, big-time sports is must-have programming. At a time when more than a third of all TV viewing is time-shifted, sports is still overwhelmingly watched live, when the commercials are harder to skip. Access to live sports also keeps people subscribing to pay-TV in an era of cord-cutting. But the rising cost of sports programming is distorting the rest of the ecosystem.

The high cost of sports rights is one major factor behind broadcasters’ push for higher retransmission fees from operators, leading to more, and more intense standoffs, such as last summer’s dispute between CBS and Time Warner Cable (which was only resolved once the NFL season began). Higher retrans and carriage fees associated with sports channels are prompting pay-TV operators to try to squeeze other, non-sports channels, such as the current dispute between DirecTV and The Weather Channel, turning carriage fees into something of a zero-sum game. The sports-driven increase in pay-TV subscriptions is also bringing louder calls for regulators and lawmakers to offer channels on an a la carte basis in hopes that it would save consumers money.

At CBS, the network’s new deal for Thursday night NFL games is forcing it to shift around the rest of its schedule, with as yet unknown consequences for the ratings of those other shows.

As sports takes up a bigger slice of OTT and mobile platforms, it’s not hard to imagine similar dynamics emerging. Right now, Netflix streaming makes up over a third of all broadband traffic during prime time. That volume has sparked a spate of disputes — both real and imagined — between Netflix and various ISPs and broadband network operators, which have turned Netflix into a poster child for net neutrality advocates. At its current rate of growth, though, it won’t belong before sports streaming starts to run into the same sort of turbulence.

Sports streaming on mobile platforms is also the major factor behind carriers’ growing interest in “sponsored data,” in which content providers pay for bandwidth, as AT&T recently introduced. That’s raising fears that mobile platforms could become pay-for-play, allowing large rights owners, like sports leagues, to crowd out smaller content owners.

If you’re a sports fan, you may be fine with that. But if you’re not, you may find yourself paying the same sort of “sports tax” for broadband and mobile service as pay-TV subscribers currently pay.