At the unroofed Arrowhead, a month before Taylor Swift was due to arrive in Melbourne, she braved temperatures of minus 20 – the fourth-coldest game in National Football League history – to support her boyfriend Travis Kelce who was playing for the Kansas City Chiefs in a game leading to the finals.
But the real significance of the event was that it was the first NFL game to be “streamed”. The audience could be digitised and advertisers would know who they were marketing to.
In this case the streaming channel was Peacock, which competes with Disney, Amazon, Netflix and many other streaming services.
The starter’s whistle was blown, and the streaming services would begin buying global sports content to add to their movies and other services.
After Arrowhead, Amazon wasted no time and soon after paid an undisclosed sum to the NFL to stream a similar game next season. Amazon was already paying $1bn a year for the exclusive rights to Thursday Night Football.
Amazon is betting heavily on sports broadcasting to boost its Prime membership which is a linchpin to its retail business. Amazon Prime has some 200 million subscribers worldwide and can make NFL global.
Its retail rival Walmart realised the danger and has entered the streaming business, while Disney, Warner Bros and Fox have combined to create a new sports streaming service to include their current live sports programming and additional content.
US providers of top sports content are going to become much richer. But in Australia, the reverse may take place.
Australia’s anti-siphoning rules will protect free-to-air dominance of sports television. But the swing to a digital market will impact their cash flows, and they may not be in the financial position to keep increasing the amounts they pay for Australian sports.
As I set out in my last commentary under the heading “The looming decline of free-to-air TV”, the great weakness in the free-to-air model is that the content can’t be digitalised to enable advertisers to know exactly who is watching.
Increasingly the streaming networks and other services can provide that detail for advertisers, enabling marketing to be targeted much more accurately.
And in future years, marketing competitors from left field will emerge. For example, electricity companies will have incredible data on the consumption patterns of their customers. Netflix is the first of the streaming companies in Australia to wake up to the power of the consumer knowledge that will come from electricity marketing and has teamed up with AGL in Australia.
Telstra understands the power of linking electricity to mobile phones and went very close to entering electricity marketing but pulled back because it would also need to be a generator.
In the Telstra electricity planning stages its chairman was John Mullen who is now chairman of Qantas, whose frequent flyer programs are one of Australia’s best consumer knowledge based databases.
As I have pointed out previously, Qantas has no equity capital and uses the frequent flyer program as a way of providing a form of equity capital.
Mullen’s knowledge of electricity marketing strategies will enable him to advise on how to transform the digital power of Qantas frequent flyer.
Of course the use of all these data banks are subject to privacy rules, but normally subscribers to a service receive a special benefit – sometimes lower fees – if they agree to receiving advertising and promotion material.
At the moment, the combination of the anti-siphoning rules and the consumer power of Australia’s top sports content makes it so valuable that free-to-air television networks will continue to spend vast sums to retain the content.
But as we saw in the latest Nine half-yearly report, free-to-air television revenues have started to crack under pressure from the new competition.
Sports like the AFL and Rugby League will need to realise that in coming years, the competition for the overall free-to-air advertising dollar will be intensified by rivals’ ability to deliver exactly what the advertiser wants.
As the free-to-air model depends on top sport money, they will not cut back, but the ever-exploding revenue days are coming to an end.
There is a real danger for the local sports codes that overseas sporting codes like the NFL will take younger Australian audiences via Amazon to Netflix and the other global streaming services that market in Australia.
The power of these networks has been highlighted before a Senate committee looking at complaints by free-to-air networks over the alleged better placement of the global streaming services on new television sets.
SBS managing director James Taylor stated: “It is frankly scandalous that these massive global tech firms can unilaterally insert themselves as gatekeepers between Australians and their free Australian content, trusted news and information.”
I am not in the business of taking sides in that matter, but all parties and particularly the free-to-air channels need to make sure that their concentration on this dispute does not divert their attention from a much bigger development – the digitalisation of audiences.
Leaving aside sport, increasingly the Australian advertising business is going to be dominated by the ability of advertisers to deliver a particular audience. The advertisers will not care greatly which medium is used.
Accordingly, digital subscribers to newspapers will become much more valuable if the right data is collected and the privacy issues are overcome.
Once sporting codes realise the fact that their audience value is limited via free-to-air’s lack of digitisation, there will be increasing controversy.
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What happened at Arrowhead stadium at Kansas City on January 13 was a signal of the fundamental changes looming in global marketing and eventually in the revenue base of Australian sporting events.