Sports Score Big Online

On Mar. 31, half a million fans jammed a dozen stadiums from San Diego to Cincinnati to kick off the American rite of spring called Major League Baseball. Bob Bowman wasn't one of them. The CEO of MLB.com, a wholly owned subsidiary of MLB, instead watched seven live video streams of different opening day contests on the computer at his office in New York City. True, the quality of PC video didn't rival big-screen TV. But what the computer did offer was unparallelled access: At the click of a mouse, fans around the globe could get live baseball on demand, plus searchable highlights, condensed game footage of key plays, and replays of classic games. "Even those of us who love the game can't watch it every day on TV," says Bowman. "You can on the Net. It was made for baseball." Fans seem to agree. Despite a stiff charge of $79.95 for the season or $14.95 per month, 20,000 people have signed up for the fledgling MLB.TV service in just its first two weeks -- only 5,000 shy of the total Bowman had forecast for the entire season. It's a nifty addition to the 1 million subscribers who pay to access live streaming-audio broadcasts either through Real.com or MLB.com. Add to that the $20 million that Seattle media company RealNetworks (REAL) has coughed up to nab exclusive online audio and video rights to MLB content, and a raft of top-drawer online advertisers, and Bowman's 170-member team is earning an operating profit. "BREAKTHROUGH DECISION." Bowman isn't the only happy online sports exec these days. From fantasy leagues to live footage, online sports is rapidly changing from an afterthought freebie and marketing tool to a stand-alone business that provides small but significant incremental revenues from paid content to professional and college sports leagues. The take was about $40 million in 2002, up more than 100%, according to Jupiter Research subsidiary comScore Networks. Forrester Research figures that advertising on sports-themed Web sites should add an additional $2.4 billion in 2004, with sports-related e-tail tallying $4.7 billion more. Forrester estimates that by 2004 as much as 15% of the typical pro franchise's total revenue stream will come from the Web. Even if those numbers turn out to be optimistic, no one disputes that sports is rapidly becoming a powerful force online. Witness the recent decisions by megaportal Yahoo! (YHOO) and online market leader America Online (AOL) to offer premium sports video. "We are at the tip of the iceberg with MLB's breakthrough decision to provide lots of games live," says Merrill Brown, senior vice-president at RealNetworks. BROADBAND BOOST. That's true for several reasons. The cost of streaming video over the Web has dropped dramatically as the price per bit of high-speed data transmission has plunged because of excess network capacity. Moreover, with about 30 million U.S. households now connected to the Net via broadband, video to the desktop is no longer confined to big corporate networks. In fact, the MLB.TV service won't even work on a narrowband connection. The U.S. now has about as many broadband connections "as there were cable-TV connections in 1980 when that business started to boom," says Drew Reifenberger, executive vice-president of Turner Sports Interactive, which produces official Web offerings for NASCAR and the PGA Tour. The arrival of broadband has coincided with a trend toward more innovative use of sports footage and information. Race fans willing to pay not only get to check out the real-time audio broadcasts at NASCAR.com but also the telemetry feeds of technical and performance info of their favorite cars as they hurtle around the track. The feeds show brake, throttle, and GPS location data. FLEX-TIME. Or fans can pick a car and listen to the two-way radio traffic between its driver and pit crew, in real time. "This has been around for 30 years. But previously, fans could only get it the one or two weekends you went to the track and were within radio range, explains Reifenberger. "Now they can have it every weekend." Unlike TV sports, which require a couch and a living room, online sports have proven far more flexible and all-enveloping. Bowman says 50% of all MLB viewers visit the site during business hours. And millions of NASCAR fans check out qualifying rounds on Friday afternoon from the office. "To believe that NASCAR is a one- or two-day a week sport isn't accurate," argues Jeffrey Pollack, director of new media at NASCAR. "There's something going on every day of the week." Tens of millions of fans not only watch real games but play in fantasy sports leagues composed of teams chosen and managed by Web-surfing fans. Most serious sports sites have such leagues, including ESPN.com, CBS Sportsline (SPLN), and Yahoo Sports, which claims 10 million players in its fantasy football league. According to Yahoo Sports General Manager Brian Grey, participation in his site's leagues grew 40% last year and are on track to do as well again this year. "Our growth has been amazing," gushes Grey. WALLET-OPENERS. Fantasy-sports enthusiasts are relatively insensitive about price, paying anywhere from a few dollars for simple statistics to $100 a season to play in a league. Adds John Bruel of sports-marketing and research consultancy Avila Partners: "Sports-fantasy leagues have had better than 20% conversion rates from free users to paying customers over the past couple of years. Normally, when a site goes from free to paid it falls off the cliff. But today, millions of people are paying $20 or more for the right to have a team in the league for any one of these sports." Sports fans are proving far more willing than the overall Internet populace to open their wallets. More than twice as many visitors to NASCAR.com buy tickets and retail goods as compared to visitors to nonsports sites. MLB.com's Bowman says 60% of visitors to pages selling live audio end up buying some type of access. The league has raised prices each year from $9.95 in 2001 to $14.95 in 2002 to $19.95 today. Sports Web sites have a long way to grow before they start to cannibalize TV audiences -- and threaten the huge rights fees that fund most pro sports. And when quality viewing is more important to fans than convenience, they still opt for TV. According to comScore Networks' reports, for example, Internet traffic drops off precipitously during the Super Bowl telecast. ...THEY WILL COME. Even so, the leagues remain cautious: The National Football League hasn't offered the same type of live online content as the other leagues, analysts theorize, because it feels it has more to lose by angering its TV partners than it has to gain by picking up more Web visitors. Most online-sports execs see no reason to slow down, however. "I go to bed each night wondering why I only have 150,000 paying customers when there are 70 million NASCAR fans," says Turner Sports Interactive's Reifenberger. At the rate the paid audience for Web sports is growing, he might not have to wonder much longer