Google TV hasn’t exactly been setting the world on fire. The Motorola Mobility acquisition will help Google’s set-top television business—but it only goes so far. Even the acquisition of Hulu won’t turn the online search titan into a perennial competitor to traditional television networks.
Hulu itself is facing smaller margins; its streaming entertainment business is facing contract renegotiations in which its content partners will be demanding a significantly bigger portion of the profit. As Google looks to fulfill mobile ambitions, tablet product goals and lofty aspirations to take on the entire cable industry, it will need to conquer coveted market segments and command the attention of highly-desired advertising demographics.
For that, there is one thing, and one thing alone that will make Google a dominant player in the entertainment space: live sports. They’re the most watched events on television, pretty much the only place you can guarantee televised advertisement will actually be viewed these days, and worth a fortune. Right now, traditional television companies hold all the cards, and (for good reason) they will continue to band together to keep Google out of the game.
That’s going to change in the next few years. While Google wasn’t interested in buying pro and college sports licensing rights a decade ago, or even a few years ago, as its verticals continue to sprout, its appetite for broadcasting properties should as well.
Hopefully, Google’s competitors saw its expansion coming. They should have. In 2007, Google hired Aaron McNally to be manager of TV ads. Television executives may remember McNally, who used to work at DirecTV: he’s also the executive from News Corp. who, after FOX’s NFL rights acquisition in the mid-90s, worked to broadcast football worldwide (it worked). Act two will be worth much, much more.
“Sports would be a huge advantage for Google” over its network television competitors, acknowledges Max Wolff, chief economist and senior analyst for Greencrest Capital, who covers Hulu. Even when the competition isn’t banding together to stifle Google, the search & advertising king of the Web’s ambition often seems to run afoul of the government—another factor Google will have to prepare to combat with its television industry plans.
Sports leagues have an obligation to keep the local fans entertained, lest they incur the wrath of the DOJ, FCC and other federal agencies, so Google—even after acquiring rights to games that it will broadcast through its own products—may find itself having to lease those very same rights back to the traditional strategics that are being slowly squeezed out of the television business altogether.
2012 will give the strategics, the “Kabletowns” of the industry, time to prepare a defense. Then, the licensing wars kick off. The following year, 2013, will be a bellwether year for televised rights negotiations: Major League Baseball’s deal with FOX for playoffs rights expires then, and if Google can step in and swipe those rights, they will also have access to regular season games, one can expect. Hopefully this will mean an immediate end to the “Reign of McCarver,” as those of us who lament his seemingly unending term have come to call it.
The biggest television rights deal of the next decade is in 2013, as well—the National Football League’s deal with FOX, CBS, NBC and ESPN, currently worth more than $3 billion annually, will be up for grabs—and this does not factor in the $700 million the NFL also makes via its DirecTV partnership. It is virtually impossible to underestimate the value of NFL broadcasting rights; snatching NFL programming for Google TV could prove the one and only haymaker that the online titan needs to throw. In a new century, football is the new national pastime.
In 2014, another big football deal will be up for grabs—this one being the Bowl Championship Series. The NBA’s rights deal will be up for grabs in 2016 (if there is an NBA still, then) and the NHL just signed a long-term rights deal that will probably be blamed for pushing some more of its franchises into bankruptcy (well played, Commissioner Bettman). As for NCAA hoops, well, let’s just say Google TV’s spring break will probably come every March. CBS and Turner have locked up the contracts for basketball virtually into perpetuity.
Of course, by 2016—or later—some of these pro sports franchises and leagues could be running to Google begging them to stream their live content. But if—and when—Google lands Hulu, it won’t be their biggest online entertainment acquisition, not by a long shot.