Digital icon or digital road kill? asks Maple Leafs Sports and Entertainment CEO

Should the digital launch of about 50 new channels, including Leafs TV and Raptors TV, be considered a digital icon or digital road kill? That’s the question Richard Peddie, president and CEO of Maple Leaf Sports and Entertainment Ltd. (MLSE) and president of the Raptors, asked during a February 27 speech to the Broadcast Executives Society. He told broadcast executives that MLSE was ahead of the game in forming its own sports channel, and predicted that more sporting events will move from free television to pay-per-view or higher subscriber fee channels. Below is an edited excerpt of his comments. On behalf of Maple Leaf Sports & Entertainment, our owners, directors and management, it is a real pleasure to be here this afternoon to talk about our strategic thrust into digital sports. So what do you think it will be? Digital Icon or Digital Road Kill? So far, one can make a strong case for the road kill scenario…But hold on … wait just a second…how about ESPN in 1979? People said at the time, how could anyone fill up all that airtime on a TV channel devoted entirely to sports? …Now, why did Maple Leaf Sports take a bold chance on something as new and as risky as digital sports? Why did our owners invest significant dollars in digital sports instead of just signing a new defenseman? Why? Because our company’s vision is a very much a longer-term outlook…The major new business strategy we decided on was to build a multi-media digital platform…With regards to digital television, admittedly, our audiences are still quite small. But importantly, they are growing. Raptors TV just had its best average audience week ranking tenth overall in Canada and fourth in Ontario among digital channels… and that was after the free viewing period ended. Leafs TV audiences are also low, but half of the reason is because we are still not carried on ExpressVu. ...And finally, we are now generating incremental revenues from these digital initiatives. Already, we are selling merchandise, tickets and advertising. And this week, we will receive our first distributor cheques...So, Digital Road Kill or Digital Icon? The truth is, right now no one knows for sure...Now, before I conclude today, I would like to go out on a limb and make a prediction of what developments I see taking place in professional sports new media over the next ten years. …Today, around 40 per cent of the revenues generated by professional sports teams comes by way of the tickets sold to their games. Broadcast revenue on the other hand is closer to 20 per cent of revenue. That means...the thousands who watch our games on television are paying too little. So, prediction No. 1 this afternoon is that you are going to see a reduction of major league sports on free television. Simply because for Tier 1 professional teams to survive in the future, they will need to capture more revenue from their television audiences. One of the reasons we at Maple Leaf Sports like digital television is the fact that we now share directly, for the very first time, in the distributor’s sub-fees. ...Prediction No. 2 … more teams will follow our lead into digital. To date, the only team initiating a strategy like the Leafs and Raptors is Manchester United in the U.K. But I know that the world is watching to see how we are doing. On to Prediction No. 3…if unique, exclusive content is key to our new media ventures, we will have to better manage and protect that content. Therefore, I predict professional sports teams will still allow radio, print and television access to their teams…But in the future, whether it’s live press conferences or press releases announcing important trades or signings, the sports teams will use their digital services to first announce and air that news. Being first to break exclusive news will encourage fans to subscribe to the team’s new media services and, therefore, raise additional necessary revenue for our teams. And, finally, I believe Jim Shaw makes a fair point. I too predict that some of the new diggies will fail. In packaged goods, only about 30 percent of new products ever survive. And with a truer free market now starting to be introduced into the Canadian broadcasting scene, we could likely have a similar experience with the 55 new digital channels. However, I predict for every one that fails, two or three new ones will ultimately replace them.

Digital icon or digital road kill? asks Maple Leafs Sports and Entertainment CEO

Broadcast | March 1, 2002

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