Tech Companies Move into Streaming Live Sports

We hear a lot about the exploding budgets that tech giants are spending on original content as consumers continue to cut the cord. In the last few years, some of the same players have started to add live sports to their platforms. We wanted to dive into some of these deals and compare them with existing TV contracts for NFL, NBA, and eSports. First, let’s establish the players.

Amazon – Amazon owns Twitch, the leading gaming streaming platform. Twitch started out as an exclusive video game streaming platform but has added traditional sports in the past few years. Twitch offers eSports, the NBA G-League, and beginning in 2018, Thursday Night Football.

Oath – Oath is a subsidiary of Verizon Communications. In June 2017, Verizon completed its acquisition of Yahoo and placed it under the Oath umbrella. Oath offers NFL games streamed on Yahoo Sports and go90. Verizon also manages the streaming of games through the NFL app.

Tencent – Tencent, the Chinese tech giant, has a contract with the NBA to stream games in China.

Twitter – Twitter was one of the first tech companies to stream games, winning the first NFL contract for Thursday Night Football in 2016.

YouTube – YouTube has also been competing in the live sports streaming space. They are taking a different approach, first by launching YouTube TV to stream traditional broadcast networks, and second by partnering with networks to simulcast games as opposed to negotiating exclusive rights.

Disney – Disney owns ESPN on the broadcast TV front, as well as BAMTech, a spinoff of the digital arm of the MLB. Disney recently announced ESPN+, a streaming service for live sports shown on its network channels.

Traditional Broadcast Television – FOX, CBS, and NBC offer a broad range of live sports to their viewers. These parties negotiate streaming contracts with the leagues. Lately, these contracts have included some rights to game streaming.

Methodology. In order to figure out what these companies were paying for, we broke out the contract price by year, looked at the number of games the contract included and found or estimated the number of viewers. This gave us a price per viewer per game for each contract. A few notes about the estimated average number of viewers:

  • For TV viewership, we used Nielsen’s average minute audience when available.
  • For streaming viewership, we used average audience numbers. Total impressions is a much higher number, but not accurate for viewership.
  • We tried to be as accurate as possible for the total number of games in a season. For the NBA, this number can change as the playoffs are a best-of-series, and not a set number of games.
  • Some TV contracts include streaming rights. It’s hard to quantify the exact effect that the additional streaming rights have had on contract negotiations.

It’s also important to realize the average viewership numbers aren’t always an accurate representation of each game, nor what the contract is worth.

  • For example, an average of 14.8M NFL fans tune in to a game. According to Nielsen, 36.5M viewers tuned in to the NFC Championship Game in 2017. The NFL TV contract doesn’t break out regular season and playoff games, and it’s easy to understand that airing playoff games is much more valuable.

First, let’s look at TV contracts for the NFL and NBA.

Looking at the above chart, it’s clear how valuable the NFL has become for broadcast television and ESPN in particular. These contracts are in the billions of dollars annually for the ability to broadcast games. Cost per viewer per game differs based on the contract. Despite including post-season games (and the Super Bowl), the contract for FOX, CBS, and NBC appears to be the most cost-effective, despite ringing in at the highest dollar amount.

When it comes to streaming rights to NFL games, Verizon, Twitter, and Amazon have all been involved.

Verizon has paid a much higher price per year, as well as per viewer per game, than Twitter or Amazon. They have, however, been able to stream all games during the season on either Yahoo Sports, go90, or NFL Mobile. An interesting change to Verizon’s latest contract is that they are opening up streaming to non-Verizon customers. Previously, you had to be a Verizon customer to have access to the stream on any of the apps. Verizon seems more interested in increasing their viewers for selling advertisement spots than it does in earning market share in the carrier space.

Amazon has taken a similar open stream approach to their Thursday Night NFL deal. Last season, Amazon offered Thursday Night Football to its Prime customers only. Beginning this fall, Amazon will stream the games to not only its Prime customers but to anyone on Twitch as well. This move signals Amazon’s confidence that bringing more people to the Twitch site will boost Twitch’s notoriety. According to Streamlabs, Twitch’s average viewership in Q1 was 953K. This puts Twitch in the same ballpark, and by some measures, ahead, of CNN and MSNBC for daily average audience.

While the NFL remains the contract king for professional sports, the NBA has negotiated contracts with Amazon and Tencent for streaming NBA games. While the NBA, like most major professional sports leagues, offers its out streaming service for fans to watch games, they understand the importance of their content reaching different tech platforms.

In an attempt to boost international exposure, the NBA negotiated a contract with Tencent in 2015 to stream games during the season. Despite China being on the other side of the world, an average of 2M fans tune in to each NBA game. During the 2017 NBA Finals, Tencent saw an average of 12.2M unique viewers per game.

We also wanted to look at the first streaming contracts for the three franchise eSports leagues we wrote about in our franchise economics note. While there is no TV comparison, the cost per viewer per game is on par with TV contracts for traditional sports but lags behind streaming contracts for traditional sports.

Who else might attempt to add live sports to their platforms?

Facebook – Facebook recently announced an agreement with the MLB for exclusive rights to 25 games this season on its platform. Last season, they simulcast some Friday afternoon games. Facebook has big ambitions in the live sports space. Adding live sports would be a great way to increase engagement on the Facebook Watch platform.

Netflix – Reed Hastings has stated before that Netflix won’t do live tv, nor live sports. Today, Netflix is focused on continuing to strengthen its original content. With Amazon, Netflix’s biggest rival today, making a big push into live sports, it will be interesting to see if Netflix breaks away from its tradition of original and on-demand content.

Apple – Apple has made an effort to incorporate live sports streaming onto its Apple TV platform, but to this point, has not negotiated any exclusive rights to stream any games. Apple will likely focus on building out its original content offerings in the near future before it explores negotiating streaming contracts.

What does this mean? It’s clear that tech companies are willing to make large investments in original content, and we expect this to extend into professional sports. This is good news for professional sports leagues, as their product will be able to reach more people. While cord cutting continues, more and more people are able to access the internet each day. As professional sports leagues seek to expand internationally, having partners who can reach these parties will be important.

Traditional network television and cable television giants might be in trouble. Live sports are one of the most compelling reasons for cable television subscriptions. as these products are available at a lower cost and through a more easily accessible platform, cord cutting will further accelerate. This is good news for tech companies, who can increase engagement on their platforms and attempt to reach new users by adding more live streaming content.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Fortnite Launches Ranked Play, Commits $100M to eSports

Fresh off of Fortnite’s first foray into ranked play on May 17th, Epic Games has committed $100M in prize pool money for Fortnite competitions in the 2018-2019 season. The ranked play ‘Solo Showdown’ game mode was available to players from May 17th through May 21st as a limited time mode (LTM). Players were given points in each of their first 50 matches in the game mode, earning 100 points for a win, down to 25 points for finishing in the bottom 25% of a match. Winning 50 games in a row (a near impossible task) would earn a player 5000 points.

At the conclusion of Solo Showdown, vRxthless came out on top, with 4881 points out of a possible 5000. For their performance,vRxthless earned 50,000 V-bucks, Fornite’s in-game currency worth about $500.

Despite Fortnite’s popularity and financial success, there is still not a large eSports presence for Fortnite, or the battle royale game mode itself. NewZoo, a gaming market researcher, tracks hours watched on Twitch and Youtube. Below are the hours for April 2017.

Fortnite and PUBG, the two most popular Battle Royale games, are seeing a lot of success for total hours watched. On the eSports side, however, Fortnite and PUBG are far behind multiplayer online battle arena (MOBA) games, Dota 2 and League of Legends, as well as first-person team-based shooters (FPS) game, Overwatch, and CS:GO. This makes sense, as Battle Royale games are relatively new, and there isn’t much structure in place as it relates to eSports.

Seeing the success that Fortnite has had overall, and their introduction of ranked gameplay, it’s clear that they are gearing up to further develop eSports around the game and the genre. On Monday, Epic Games announced that they will provide $100M in prize money for competitions. We think eSports popularity for Fortnite will help bring eSports more mainstream. The Battle Royale game mode will bring a unique format to eSports competitions, as multiple teams will compete in a single match, which is different than the typically head-to-head team matchups for MOBA and FPS games. Fortnite’s financial commitment reiterates their belief in the long-term outlook for eSports surrounding the Battle Royale game mode.

While other game developers are adding Battle Royale game modes to their existing franchises, we don’t think that they will generate the same authentic interest that Fortnite has. Over the past few months, Fortnite has become a cultural sensation, as demonstrated by its total viewership hours and presence on social media platforms, sports celebrations, and pop culture references. While adding Battle Royale is a positive move for existing developers, it will be hard to replicate the same level of success that Fortnite has achieved.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Nvidia Posts April Results; Continues to Advance Frontier Tech

  • Nvidia reported April earnings after the close today. Shares of NVDA are down 3% in after-hours trading given the company missed Datacenter revenue by a fraction of a percent. High growth stories have high bars to clear, and the company failed to exceed expectations in the Datacenter segment. Keep in mind, shares of NVDA have appreciated 20% in the past month.
  • That said, the Nvidia story is intact, and remains one of the best-positioned tech names for the next decade, as its products are a foundational part of the future of technology, based on their use in data centers, autonomous vehicles, virtual and augmented reality platforms, cryptocurrency mining, gaming and eSports.

What’s New? First, we’ll start with the bad news. Nvidia’s Datacenter growth has continued to slow, growing at 71% y/y vs. 186% y/y growth a year ago. Analysts expected Nvidia’s Datacenter to reach $703M in Q1, while it only reported $701M in the segment.

In addition, Nvidia offered more clarity around the impact that cryptocurrency mining is having on its business. Nvidia’s OEM and IP business grew 148% y/y due to the addition of cryptocurrency mining specific products. Despite stronger than anticipated impact from cryptocurrency mining, Nvidia does not expect this tailwind to continue. Nvidia shared that it believes OEM and IP to be 1/3 it’s Q1 level going forward.

Our GPU prices are normalizing, allowing gamers who had been priced out of the market to get their hands on one. Cryptocurrency demand was stronger than expected but we were able to fill it with crypto-specific GPUs. – Nvidia CFO Colette Kress

Earnings and model recap. Nvidia reported Apr-18 revenues of $3.21B vs. Street at $2.89B (up 66% y/y), and EPS of $2.05 vs. Street at $1.46. Updated model here.

What’s Next? We are still believers in the Nvidia story and want to reiterate our belief in three key catalysts for Nvidia’s growth.

1. Gaming – Demand for core gaming business products remains strong. Tonight’s call highlighted the impact that the Battle Royale game mode has had on the gaming market.

Bottom line, Fortnite is a home run, PUBG is a home run… Battle Royale is incredibly social and sticky. More gamers play, and more of their friends join. It’s a positive feedback system. – Jensen Huang

Gaming demand remains strong for Nvidia. Jensen shared positive feelings that Nvidia would be able to continue to fill channel inventory of graphics cards, helping normalize the price for gamers.

2. Datacenter – Companies are adopting artificial intelligence in order to remain competitive. Nvidia’s datacenter business saw triple-digit growth for the seven consecutive quarters, and 71% in the April quarter. A big part of this growth is due to the expanding use of artificial intelligence by companies, specifically deep learning. On tonight’s call, Jensen expressed his pleasure with Nvidia’s Volta architecture, with it being the first GPU designed specifically for deep learning. Volta architecture chips shipped to cloud customers in the last quarter. While the Volta chips have been used internally for qualification, for the most part, they are beginning to open up to external cloud customers.

3. Automotive – The market for autonomous vehicles will be bigger than most people think. Nvidia’s opportunity in the automotive space is bigger than many anticipate. As stated in our Auto Outlook 2040, we expect 90% of vehicles on the road in 2040 to have level 4 or 5 automation, which would require a platform such as Nvidia’s DRIVE PX. On tonight’s call, Jensen Huang re-iterated his belief that everything that moves will be autonomous, or have autonomous capabilities. This includes cars, taxis, agriculture, and pizza delivery equipment. Jensen shared that he anticipates driverless taxis to go to market in 2019, with autonomous cars going to market in 2020 or 2021.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Feedback Loup: Star Wars Holochess

Now you play chess in AR just like R2-D2 and Chewie. On Wednesday, Star Wars Holochess was released as an additional game mode on the Star Wars Jedi Challenges iOS app. This version of Holochess uses ARKit and allows users to play the game right on their smartphone. Holochess, officially known as ‘dejarik’ in the Star Wars universe, is a chess-like augmented reality game where players compete against an opponent with holographic monsters on a game board. Holochess was one of the early mainstream examples of augmented reality in the media, first appearing in 1977 in Star Wars Episode IV: A New Hope.

Source: StarWars.com

Holochess was previously available with Star Wars: Jedi Challenges, but the hardware was required to play. It’s now available on the App Store, but it’s apparent that it was ported over from the headset version. The experience isn’t perfect, and the controls aren’t very intuitive, but for Star Wars fans, the novelty of playing Holochess on your table is enough to download the app.

The game’s visuals are crisp, the creature models look good, and each has their own animation (faithful to the films) for both doing damage to an enemy and eliminating one. However, the user can’t change the size of the board or choose its location once it’s been placed. In order to get a closer look or read descriptions and stats for creatures, the user must physically get closer to the board with their phone. The creature in the center of the picture below is an example. Its name, number of hit points, and damage dealt are all displayed but very difficult to read and there’s no way to make it more legible short of peering closely.

If anything, this edition of Holochess is an example of the high expectations we have for augmented reality being met with the harsh reality of what the technology is, or is not, capable of today. Yes, it’s true that you can now play Holochess in your living room and don’t need to travel to a galaxy far, far away, but it’s not something you will spend hours playing. This is not the Star Wars AR experience you’re looking for. For that, you’ll have to buy the headset and controller from Lenovo, which allows you to have full on lightsaber battles in your living room, among other things.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.

Victory Royale! Fortnite is Exploding

  • Epic Games’ Fortnite has exploded in popularity over the past few months for four reasons.
  • 1. It’s accessible to all (free to play, compared to similar games that cost $60, and easy to play, different than most complicated console games).
  • 2. It’s fun (Battle royale style).
  • 3. It’s high-quality (frequent gameplay, weapon, and skins updates).
  • 4. No pay-to-play advantage (keeps level playing field. Most games make money selling play advantage).
  • We believe these four factors will result in Fortnite being a top 5 game for the next several years.

Fortnite 101. Fortnite is a battle royale game, where 100 players parachute onto an island with the goal of being the last one standing at the end. A “storm” serves as a boundary that closes in at set intervals, shrinking the playable area and forcing players closer and closer together. Players begin with no equipment and must scavenge around the island looking for weapons and supplies to give them an advantage over the opposition. Fornite has screamed to the top of gaming titles recently and is the number 1 most viewed title on Twitch as of this writing.

Easily accessible to all. Fortnite is an extremely accessible game in a number of ways. For one, it’s free, making it easy to convince friends and family to try it out versus console games that usually run about $60. This is a major reason for its fast ascension to cultural phenomenon. When gamers see their friends playing a game or want to try a new one, they often must consider if it’s worth the investment. With Fortnite, users are able to play the online multiplayer without any upfront cost.

Another facet of its accessibility is the graphics and visuals. The aesthetic of Fortnite is cartoony and a little silly, which makes it much easier for parents to get on-board and expands the audience of the game to a younger demographic. There is no gore, no dead bodies lying around and the weapons feel less like instruments of destruction and more like they’re made by NERF or SuperSoaker. PlayerUnknown’s Battlegrounds (PUBG), the first major battle royale title, has a much grittier, more realistic aesthetic that is targeted to an older audience. Fortnite looks and feels like it’s directed at kids, but has enough complexity and a high enough skill ceiling that it keeps older, more competitive players interested as well. It’s an example of the old adage, “easy to learn, difficult to master.”

Furthermore, it’s playable across platforms. It is available on PS4, Xbox One, PC, and iPhone, with Android support coming soon. Fortnite also supports cross-platform play, so players on the PC can play with their friends or family who play on Xbox (though PS4 and Xbox players can’t play together, Sony is blocking the option). This is the first time that this has been possible for any video game and could prove to be a major milestone for online gaming.

It’s fun, battle royale’s rise. Battle royale games are a relatively new phenomenon. One of the keys to Fortnite’s meteoric rise is that this genre is inherently fun. The longer the game lasts – and the closer you get to victory – the higher the stakes and the higher the stress. The exhilaration of being one of the few remaining players is a significant factor in the game and the genre’s popularity. Ultimately winning a game, emerging as the lone victor out of a hundred other players is an incredible feeling not found in other game modes. While Fornite was not the first game to embrace this format it was one of the earliest and brought its own unique spin by allowing in-game building of walls, ramps, and roofs. The building mechanic adds another layer to the game for players, giving them the ability to quickly reach previously inaccessible locations and create cover or an escape route under fire.

High-quality game. Fortnite’s battle royale format and accessibility would be non-factors if it weren’t for the fact that Fortnite is a high-quality product. The game is still in early access (i.e. it’s not a finished game), so there are some kinks here and there, but the Epic team is committed to the product and is visibly working hard to make sure the game is running smoothly and keeps players engaged. They have continued to add new weapons, equipment, locations, and other features to the game free of charge so one can continue to play and get the full experience without paying a cent. Fortnite brings in revenue is by selling cosmetics for players to personalize their in-game character, and a 10-week ‘Battle Pass’, essentially a subscription that gives players more challenges to complete and cosmetics to unlock during that period. The game looks good, feels good, and is free. It’s not a tough sell to get people to try, and once they do they are hooked. Below is an example of two of the latest in-game character skins that can be purchased.

No pay-to-play advantage. While it’s hard to say how much the approach to in-game purchases contributes to Fortnite’s success, it is starkly different from how some major publishers approach in-game purchases. Electronic Arts has been successful with in-game purchases, especially with their FIFA games, but also faced notable backlash from the way the in-game purchases for Star Wars: Battlefront II were setup. EA allowed players to spend money to unlock items that grant a competitive advantage over those who elect not to spend extra. Fornite takes a different approach, offering its 10-week Battle Pass and limited-time character skins, items, and emotes, which are completely cosmetic and provide no competitive advantage. Some of these items are only available for purchase in a 24-hour window before they disappear from the store, driving users to get the items they like while they can. Despite the game being released for free, and in-game purchases providing no competitive advantage, Fornite earned $126M in revenue in the month of February alone. Since then, Epic Games has launched Fornite Mobile, which has reportedly reached $1.8M in revenue per day. Needless to say, their unique in-game purchase strategy seems to be working.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.