Say this much for Los Angeles Clippers owner Steve Ballmer: he’s never been afraid to look silly.
The former Microsoft CEO probably looked very silly to a lot of other NBA team owners when he reportedly turned down a $60 million-per-year offer from Fox Sports to keep Clippers games on Prime Ticket, one of Fox’s two regional sports networks (RSN) in Los Angeles.
NBA teams make a huge amount of money from RSNs; the L.A. Lakers’ local TV deal with Time Warner Cable SportsNet, for example, is worth $150 million a year. If Ballmer were simply holding out for a deal closer to what his neighbors are getting, that would be one thing, but the report indicates that Ballmer might forego cable entirely and launch an online streaming service dedicated to the Clippers. That’s a bold move for a team that has only recently found success in the NBA, and one that a lot of long-time NBA owners would find foolish.
Ballmer is no fool, though. He’s clearly paying attention to the pay TV market, which has lost some of its luster this year. ESPN and other cable channels are losing subscribers at an accelerating pace, and big media companies’ stock prices tumbled throughout the month of August on fears of cord cutting. This particular report from Bloomberg Business might be informing Ballmer’s initial rejection of Fox:
Wells Fargo analyst Marci Ryvicker downgraded Rupert Murdoch’s 21st Century Fox this month, saying it’s unlikely that Fox’s regional sports networks will be included in skinny bundles entering the market.
“This can end up being a real problem,” Ryvicker wrote.
This problem would not be limited to the Los Angeles market, either. Fox owns 22 RSNs throughout the U.S., and thanks to Fox’s insistence on remaining tied to the cable bundle, cord cutting threatens Fox’s ability to cover the multi-million-dollar rights deals of every basketball, baseball, and hockey team signed to one of those RSNs. Ballmer might be looking at these trends — including Time Warner Cable’s huge losses with SportsNet LA and the bankruptcy of CSN Houston — and considering an alternative to a long-term deal with an RSN.
That alternative could involve looking for — or perhaps creating — Clippers fans outside of Los Angeles.
Back in the 1980s, Ted Turner used cable to turn Atlanta TV station WTBS into a national “Superstation”. WTBS carried Atlanta Braves games and boldly declared the Braves “America’s Team”, a moniker that stuck as cable grew. Ballmer might be looking to do something similar with the Clippers, but instead of using cable, he’s looking to the new TV paradigm — streaming video delivery over the internet to set-top boxes, smartphones, and anything else with a screen. Sales of set-top boxes and streaming sticks are growing, and they’re expected to get a further boost next week, as Apple announces a new 4th-generation Apple TV on Sept, 9, while Amazon might introduce a new Fire TV at the same time. (Roku also might get in on the act with a Roku 4 announcement, though that remains a rumor.)
Perhaps Ballmer envisions creating an L.A. Clippers app that works with all these new set-top boxes, plus tablets, smartphones, game consoles, and even those rarely-used smart TVs. Perhaps this app could offer a full season of Clippers games, including playoff games, for either a monthly or an annual fee. Access to that app wouldn’t be limited to Los Angeles, either, meaning it could reach Clippers fans across the entire country.
The question, then, is how many Clippers fans would be willing to pay for this, and how much would they be willing to pay.
This is where Kevin Kelly’s famous “1,000 True Fans” theory comes into play:
The gist of 1,000 True Fans can be stated simply:
A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author – in other words, anyone producing works of art – needs to acquire only 1,000 True Fans to make a living.
A True Fan is defined as someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. They buy the t-shirt, and the mug, and the hat. They can’t wait till you issue your next work. They are true fans.
In order to make this Clippers app idea work, though, Ballmer will need a lot more than 1,000 true fans willing to shell out upwards of $100 a year to watch the Clippers on their Rokus and iPads. In fact, he’ll probably need a million true fans to make what he can get right now from Fox Sports.
Of course, if there are indeed a million true Clippers fans somewhere in America, Ballmer can sell them more than access to live games and exclusive behind-the-scenes footage. He can sell them merchandise, too, or VIP access to their favorite players, or discounted tickets to certain fans’ local games when the Clippers are on the road. These are sales and marketing opportunities that don’t exist with Prime Ticket, and they could be the hook that lures basketball fans into the app in the long term.
It would be a huge risk for Ballmer and his team, but it could represent a huge opportunity as well. If it succeeds, it could lead to a major paradigm shift in how all sports teams handle their TV and streaming rights in the future. If it fails, Ballmer could end up looking silly by leaving so much money on the table. Keep in mind, though, that we’re talking about this guy:
Being afraid to look silly is clearly not in Steve Ballmer’s DNA. He’s not afraid to fail, either; Microsoft launched Windows Vista and Windows 8 under his watch. Keep a close eye on what he does next with the Clippers. It could be a game-changer.