Leonsis: Appointment viewing becoming pass

By Ken Kerschbaumer

Ted Leonsis, owner of the Washington Capitals and AOL vice chairman, discussed the relationship between new media and sports during a featured interview at the SBJ Media and Technology conference.

Three years ago I came into daily management at AOL and it was an interesting time because the NHL was very broken and AOL was in a similar situation, he said. We were predominantly an ISP in a broadband world and we had to literally go from being a subscription business with an ad business beside it to an ad business with a subscription business beside it.

Today AOL, next to Google, is the fastest growing portal. This is not a small cyclical event, this is something that will go for the next 20 years because the new medium is better than the one before it and the consumer is so empowered that it s the preferred way to consume content, including sports content.

How big is the impact? Broadcast TV commercials are trying to make them look like YouTube videos. On the Internet there are big mega portals and then there is verticalization and specialization so I m sure there will be a YouTube of sports or the NHL so advertisers have an easier time of self-selecting, he said. Today a consumer is on the Internet between 18 and 22% of their day while advertising is only 6% of the budget. So there s a disconnect that we saw with cable. But it s starting to move faster and if we get 22% of the ad dollars that s another $40 billion and if you have a percentage of that it s incremental revenue [in the billions of dollars.]

A recent media metric, he said, showed that the top 10 players are down because of the blogosphere and user-generated content. As a result the big will fight for a smaller pie as syndication takes over.

With respect to copyrights and YouTube infringement Leonsis says he has been thrilled with YouTube as fans would post video montages of Washington Capital players. But the acquisition by Google, and Google s desire to cut checks for videos, becomes a quagmire of who owns the right and who gets the check. The team? The network? The musician whose music is used? The player?

Everything changed at YouTube from being about promotion and let 1,000 flowers bloom [to who owned the rights once checks started getting signed] and I think that s one reason YouTube sold to Google so that Google could figure those issues out, he said. And while big media companies are troubled Google has enough margin in their business to make nice.

The page view, he added, is the unit of life with optimization engines deciding to put sponsor banners or link, in an attempt to drive the value of pixels. It s why scale really matters and is part of the religious experience I had a few years ago, he explained. His leased car, needing two tires, drove him to search the Web for a local dealer.

I ve watched a million hours of TV and half a million hours of sports programming, and a hundred thousand commercials for tires and yet it was a machine that told me to buy tires and I couldn t wait to buy them, he said. And it struck me that the first part of my life was spent marketing to people to have them emote and that in the second part I would be a math major understanding the algorithms and marketing to machines. And that s a very different skill set and mindset and many of us don t have it. But algorithmic marketing is probably the most important development in marketing and distribution in the last 20 years.

With respect to the NHL Leonsis is encouraging the league to embrace the Net, in particularly blogging and other community-building features. There are now 25 bloggers who cover the Capitals everyday, a move that forced the local newspapers to have their reporters blog as well.

We now have bloggers in our press area and it s out of necessity but we re also building a network, he said. And I can see us selling advertising, building tools, and syndicating it out. I just want us to be on the forefront of that.

With respect to live sports on broadband Leonsis says news and sports are the two categories that are fairly Tivo proof. There s not a big demand for choice and control on sports, he says. We have a long-tail phenomenon for TV and movies but live sports does not have a lot of demand in that tail. My bet is that won t be a big business because we played last night and in 48 hours we play the Bruins.

The other shift, he says, will be moving away from upselling and subscriptions and making upsell features free, offsetting lost subscription revenues with new ad revenues.

The big change, however, is not the technology but the way technology is changing viewers. [While sports is fairly Tivo proof] its arrogant to believe that appointment viewing will work, he says. It s a pass concept and the new world is about consumer choice and control. Networks were designed to aggregate programming but now I want it when I want it.