|Sprint sees wireless phone screens as the next big premium subscription outlet for video content.
Last week’s announcement that Sprint had secured the National Football League with a five-year $600 million deal, was just the latest salvo in the high-stakes game to appeal to the 180 million cellphone-carrying Americans with entertainment programming.
The deal gives the No. 3 cellphone service provider two of the nation’s top four sports sponsorships. Sprint, which acquired Nextel Communications in a previous $35-plus billion deal, inherited rights to Nascar and the Nextel cup. That means Sprint has the lead in targeting football's 165 million fans on top of Nascar’s 75 million fans, not to mention the millions of young consumers touched by its exclusive deal with the U.S. Ski & Snowboard Association running through 2008 and its long-running National Hockey League deal. Only Major League Baseball and the National Basketball Association are out of its fold.
"We believe the mobile phone is the third screen," following TV and the personal computer monitor, said Tom Murphy, Sprint's vice president of sponsorships, calling it the ultimate on-demand device. "We want to provide our customers with unique, exclusive content ... and to deliver what our customers want," he said.
But what will the content look like?
The deal gives Sprint exclusive rights to NFL game highlights and live updates. Sprint also will carry NFL Network programming, and its flagship show, Total Access. As part of a video-on-demand service, only Sprint customers will have access to NFL Films' library of Super Bowl highlights and other packages. Sprint and the NFL also, in an industry first, will jointly produce original content.
Additionally, the deal taps into the Fantasy Football phenomena, with Sprint customers having the ability to access real-time stats and highlights. Other more common mobile phone applications, such as the ability to participate in polls, including Pro Bowl and Super Bowl MVP selections, and download ring tones, wallpapers and other product related to NFL events, are included in the NFL/Sprint package.
In the traditional media arena, Sprint will be the presenting sponsor of the NFL season opening kickoff event in Boston and Oakland Sept. 8, a sponsor of the Pro Bowl Selection Show and the Pro Bowl Skills Challenge, as well as for Pro Bowl and Super Bowl MVP balloting via text messaging.
Sprint does not expect other advertisers to be integrated into the deal, but the NFL is open to the idea. "The advertising model is evolving," said Chris Russo, the NFL's senior vice president for new media. "In time we will explore how other advertising and promotions" can be woven into mobile phone content.
Industry observers question the value of Sprint’s NFL deal, arguing that most cellphone users don’t have the capability of accessing video or other programming using their current hardware.
Mr. Murphy estimates that 80% of phones now available to consumers are capable of video. Sprint itself has almost a dozen models capable of downloading Java applications. But his best business case for the sponsorships can be found in Sprint's bottom line: Sprint has one of the highest ARPUs, or Average Revenue Per User, in the business, $65 for the first half of 2005, of which 10% or $6.50 was contributed by consumers downloading video or buying ring tones or wallpapers, text messaging or ringing up bills for other so-called data services.
"We know what (providing content) can do," said Mr. Murphy, adding the NFL also has come to recognize the importance of the growing mobile, on-demand channel offered by wireless phones. Sprint's vision, he said, is to create a premium subscription outlet similar to an HBO.
That's important as the marketing battle for cellphone customers undergoes a marked transformation, from centering on issues like which carrier has the most reliable coverage and/or the lowest price for talk minutes, to the more lucrative issue of which carrier offers the best entertainment and content.
Providers have discovered that offering content is encouraging consumers to upgrade their hardware. But at the same time, marketers are keeping a watchful eye on what kind of programming subscribers are accessing.
The success or failure of Sprint’s sports deals could influence whether marketers begin to produce their own short form programming on cellphones.
While the NFL deal may be good for Sprint, not every expert in the wireless space would agree it is good for the future of wireless, or even for the NFL. One executive with a vested interest in seeing content move freely among all the carriers called the Sprint/NFL deal "backwards looking" and noted the NFL is limiting its content to 40 million Sprint subscribers, a fraction of the nation's cellphone subscribers who could be willing to pay for content.
He also believes that content owners should sell through multiple cell-phone carriers as premium content, picking up a share of each customer download in a model similar to cable's HBO. "A year from now, the NFL will kick itself in the ass for being in a proprietary partnership," he said.
Not exactly, Mr. Russo said. "Our view is that in the early stages (of the development of a new media), it is important to work with a carrier committed to building a great service," he said, citing the NFL's backing of specific companies in new media arenas such as the NFL's 1994 signing with DirecTV in offering the NFL Sunday Ticket and with Sirius Satellite Radio two years ago.
Of the $600 million Sprint is spending on the deal, about $200 million is for the rights to the NFL archive and programming content. Sprint is committed to spend another $100 million in advertising buys on two NFL media properties, NFL.com and the NFL cable network. Additionally, Sprint has agreed to buy $300 million in media on NFL games on other media outlets.
While Sprint has broadcast live Major League Baseball audio programming, it will not be allowed to provide NFL football games live on its mobile screens due to the NFL's deals with its broadcast partners.
However, ESPN Mobile, a new ESPN mobile phone slated to launch later this year, purchased rights to live Monday Night Football games as part of an earlier $1.1 billion deal and can provide live mobile TV coverage of those games. Sprint still wins through that deal: ESPN Mobile, an MVNO, or mobile virtual network operator, will be operated over Sprint facilities and its success will still contribute to Sprint's bottom line.