Tuesday, August 13, 2024

NEW INC. MAGAZINE COLUMN BY HOWARD TULLMAN

 

Why Amazon and Netflix Made a Big Play for Sports

They're not sports companies by any means. But the smartest companies learn fast where their customers are heading and meet them there, with the right products to sell them. 

Expert Opinion By Howard Tullman, General managing partner, G2T3V and Chicago High Tech Investors @howardtullman1

Aug 13, 2024

 

The smartest players who are now winning in major markets are those whose primary advantage is learning faster than their competition--learning faster about the state of their marketplaces and swiftly reacting in real time to the changes they uncover.

You can't be it if you can't see it. That's why learning to manage the often-overwhelming flow of new data now available and turning that flood into useful and actionable information is a critical skill set in the global digital economy. Two of the most crucial things that smart entrepreneurs are incorporating into their plans are: (a) how to better determine and define the shifting needs and desires of their target customers; and (b) knowing who, what and where they are actually competing against in order to attract, win and retain those customers. The idea is that there may be incremental and sometimes even larger openings readily available in spaces adjacent to your current verticals seems obvious, but it's often overlooked.  Companies often ignore the chance to "slide to the side".

 Surprisingly, in many cases, the losing laggards are those who don't quickly appreciate that the scope and scale of competition has expanded beyond their traditional competitors to include new players, new offerings, alternative consumer choices, and adjacent markets that are readily accessible -- merely a click away. They're also missing changes in demand that have almost nothing to do with their current products or services. Their typical reaction as their revenues and profits shrink is to double down and do more of the same rather than shift their approach and strategies to adapt to the new realities and take a much broader view of the landscape. Often, the main barrier to an effective response is the locked-in reluctance to change what they've always done and what has historically worked.

The changes we're seeing these days simply aren't the kind that you can wait out or wish away.  

As more and more foundational products become commoditized or tired, often through externalities like changing tastes or attitudes rather than any fault of the providers, the most exciting opportunities and accompanying profits move elsewhere in the value chain. It becomes necessary for viable competitors to identify those new locations and quickly develop brand extensions, responsive products, enhanced or expanded services, and new delivery channels to meet the customers' emerging needs and to deliver the goods when and where they're now at. You've got to be there when the buyer is ready to buy - the markets no longer wait for providers to catch up.

Of all things, kids' "clothing" offers a very interesting and telling example and a very challenging look forward for the major apparel manufacturers. Right now, tens of thousands of game-playing teenagers globally are spending more time and money in front of their screens styling, outfitting and branding their online gaming avatars than they are on their actual clothing. Swifties and sneaker heads are obvious exceptions to the rule, but suffice it to say that none of the major luxury or sports brands (including teams) can afford not to be an active presence in these growing virtual worlds.

This is not only because there are serious dollars to be made in the gaming space (where the New York Times makes more money than on advertising) by marketing and selling this digital stuff. But also because this is a powerful and compelling way to grab mindshare and establish brand identities in the heads of millions of future consumers who will eventually "graduate" into the real world.  

A more major and important shift is happening as billions of dollars are rapidly moving away from classic entertainment vehicles and network TV toward anything and everything that has to do with sports, gaming and gambling. There's no longer any urgency, novelty or FOMO associated with the latest mediocre sequel, newly-cast, oldie-but-goodie, or CG-stuffed action film filled with nobodies. For every crazy breakout like Deadpool & Wolverine, there are several dozen films that never even make it to a theatrical release because the studios and distributors decide not to waste the marketing dollars on films that no one wants to see.

Sports remain a real-time offering while consumers worldwide have become convinced (in part because the industry itself has sold them on the idea) that there's nothing on television or in the movie theatres that you won't be able to see on your own device in the very near future. NBC's amazing efforts to completely slice, dice and fractionalize the Olympics and make everything available all day, in every way, and over every channel was a clear glimpse of the future of the on-demand streaming world. But the Olympics only happen every couple of years. F1 racing has become a must-have for corporate sponsors chasing tech bros and European soccer continues to explode as well, but these will simply be additional content generators which will further replace and displace traditional entertainment fare.

Amazon spent more than $1 billion to stream Thursday night NFL games. It certainly wasn't lost on them that in a typical, three-hour NFL game, the actual playing time is around 11 minutes. While Amazon is one of the few tech companies also still spending big on new entertainment series because of the power of the Prime package, we're seeing other large players like Netflix also spending vast amounts to make multi-year commitments to carry NFL games.  Even fake sports are hot: Netflix also agreed to pay about $5 billion for the rights to WWE wrestling.

It's a fairly fundamental calculation - you've got to go where the fans, and the eyeballs, are spending their time. As Coach Walz would surely say: fish where the fish are.