The Nfl's Digital Media Strategy

The NFL's Digital Media Strategy

Problem Statement:

This case presents us with the NFL's situation in 2009, when comes the time to decide how to best increase the value of a content property that is already far more profitable than any other at the time. Specifically, should the NFL keep working with an exclusive Wireless partner, multiple Wireless partners, or altogether 're-bundle' the Wireless rights with the television rights for existing TV partners to buy them? This paper will demonstrate that the preferable strategy here is to keep the Wireless rights separated, offer them preferably to carriers, and, to preserve the value of the content, incrementally reach a model where the mobile space is addressed similarly to the television space: with multiple partners.

Preparation Questions:

1.What is the NFL Media group's general strategic direction? What are the key drivers of its success to date? And what are threats?

Throughout the case we can see that the general strategy has been to differentiate between various content formats, using exclusivity on premium content properties to sell them separately to different media partners at a high price, and non-exclusively airing the other forms of content to provide a rich and continuous NFL experience. This unbundling of the content properties has been instrumental in the strategy to drive up the overall value of the NFL's content and brand. One key threat (for example addressed with the "blackout" policy) is cannibalization. It requires a thorough understanding of which NFL experiences are substitutes, and how that threat can be mitigated by differentiated content accessibility.

2.The NFL pursues both exclusive and non-exclusive partnership in the digital space. What are the advantages and disadvantages of each?

Exclusive Partnerships:

Exclusive partnerships present the advantages of driving up the value of the property, and gives the content owner better control, as it is easier to monitor how one partner handles the corresponding license rights than several partners. However, an exclusive partnership by definition limits the visibility and consumption of the property to the partner's market share. Additionally going from and exclusive deal to several non-exclusive deals can devaluate the property, and is therefore a transition that should be handle carefully.

Non-Exclusive Partnerships:

Non- Exclusive partnerships however allow a broader access to the NFL fan base. The challenge with non-exclusive deal is to effectively increase content visibility to as many eyeballs as possible without decreasing the value of the content properties. This is due to the fact that when a content provider has exclusivity rights, it can leverage that differentiation point to increase its value proposition and and drive more viewers or subscribers to its service.

But non-exclusive deals are sometimes necessary to cater to the demand of one's brand followers. In 2007, the fact that only Direct TV subscribers had access to the NFL Network and its 8 "Thursday/ Saturday" live games became a problem. The millions of fans locked-out of the experience constituted an unexploited yet valuable revenue opportunity, and had the potential of a negative brand impact. Eventually, in 2009 the NFL stroke a deal with 4 top cable providers, without devaluating the Direct TV deal. In fact that deal went from $700 million a year to $1 billion a year1. We could therefore argue that the key to transitioning from exclusive to non-exclusive partnerships is to create a situation where providers are more concerned with the missed opportunity of not being able to distribute the content than with the exclusive nature of the deal, or more generally increase demand for the property.

3.When it comes to the wireless market, the NFL can work with broadcasters and/or carriers. What are the advantages and disadvantages of each type of partners?

Broadcasters:

Working with broadcasters presents the advantage of preserving a $4 billion relationship built on a complex content accessibility scheme. This could be critical in the wireless space, as wireless carriers do not function by territory, and their content distribution could therefore cannibalize the the experience otherwise made possible through television only. However, NFL content presents the specificity of a preferred televised experience2, which should largely mitigate the cannibalization effect. Furthermore, the major problem of working with broadcasters in the wireless space is that it is unclear how they would handle wireless content distribution. They may well limit it (formats, schedule, territory) in order to preserve their main revenue driver, television. Additionally, we could question their ability to be the best possible partner in terms of content delivery and quality, in a space that is not their core business.

Carriers:

The advantage of working with carriers in the wireless space is that they are the more likely to deliver a satisfactory small screen experience. Additionally, there overall market penetration of 91% of the US population in the cell phone business constitutes a strong existing client base that will gradually migrate to smart phones. The only problem with carriers is their fragmentation of the market. Sprint's position in the smart phone segment isn't made clear in the case, however we know that the four top cell-phones providers are AT&T, Verizon, T-Mobile and