From MLB to NFL: How 10ms Network Latency is Transforming Sports Broadcasting

Today, I’m delighted to welcome Steve Canepa, managing director of IBM. I’ve known Steve for many years. He brings 25 years of experience helping large companies, multi-billion dollar enterprises, do transformations. He led complex acquisitions and really drove innovation at IBM, right? So I’m excited to learn from Steve. I’m sure it will be information to all of you. Steve, first question, why did you agree to do this podcast? 

First of all, great to see you, Vijay. Always good to be together. And I think that’s a pretty easy answer, which is I always look forward to speaking to you. I know the good work you guys do in the industry and the fact that you’ve always been on the front end of transformation, which is where I like to spend a lot of my time. I think we’ve reached a point, especially kind of under this broader topic of monetization, where customer experience and monetization are really deeply related for firms in the industry because they’re thinking about how they create value. So. I’m looking forward to the discussion.

Yeah. Thank you so much. Thanks again. Really. I appreciate it. But there’s been, you know, acquisitions and my dearest and acquisitions in the industry, notable one being, you know, Warner Brothers Discovery. I know you’ve been involved with the media industry from your UCLA days. I remember you and I talked about, you know, how over the last 30 years, how we have seen this whole industry change a few times over the last 13 years. What are your thoughts on what’s driving this some activity?

Well, you know, there’s been different waves over time. At first, there was a big focus on studio aggregation in the sense that if you could reach clients in multiple channels, that would be good. The reality is most of the legacy media companies didn’t evolve fast enough to a platform company so they could really get the value of those different connect points. And more recently, you know, we saw the telecommunications and media vertical integration. So AT&T, Warner was a perfect example of that. And there once again, you know, DirecTV also, we’ve seen where that premise of value realization proved to be much more challenging than maybe they originally thought. I think now we’re in a little bit different phase where media companies are rethinking where does Synergy really lie operationally? And we’re starting to see a little bit of unbundling of some of those activities. I think a fundamental driver to that has been this wave of personalization. It’s come across the industry that was really driven, I would say more from the outside in by the large technology companies than it was driven by the media companies. Just this last weekend, you know, the NFL is a great example. They just kicked off the season this week. We saw, you know, a game on Thursday night. We saw a game on Friday night. We saw a number of games. There’ll be Sunday night game. There’s Monday game. Almost all of those were on different distribution platforms. And I think part of the challenge that we’ve now reached is from a consumer standpoint, the complexity has grown so dramatically that it’s going to cause another phase of rethink amongst the leaders in the industry trying to sort out how they do that. We saw that with Fox, in fact, you know, where they tried to pull together now a consortium around the rights that are owned by three of the players in the industry. So I think we’re going to continue to see the models of all.

Right. Were talking about different business models, monetization models. We also on Netflix really changed the industry with the subscription UOD model. And then they brought in the advertising at a later point. We also see now tube play advertising models, the growth of fast channels, etc. And mixed in all this with the transaction UOD, EPFLV, etc. So what’s your view on how these companies should be thinking about these various types of monetization models? 

Yeah. If there’s one thing that’s constant in the industry, it’s change. And having lived through a number of these phases, first, probably starting back in the mid-90s when the analog to digital phase happened. If you think about the dynamics, kind of the forces that shaped the industry, you never bought an album based on what music label put it out. You didn’t go to a theater to see a movie based on what studio produced it. You wanted to see that brand or that band and you wanted to connect with that content. And then when we went in the kind of 2010, we went from the next phase from digital, which now opened up, digital opened up all kinds of new distribution models, which you just talked about, including mobile and social, it got introduced. Then we went to kind of personalization 2010, where it was all around analytics, machine learning. You know, the hyperscalers came in at scale and we had A-B testing at scale so we could personalize things. So there’s been a shift kind of in the form the content takes. But if you think, if you abstract a little bit from that, through that entire like complex transformation, there’s three ways to make money in the industry. You either sell something to someone, you get them to spend time with your content that you can monetize in some way through advertising or other mechanisms. Or you leverage the fact that they’re interacting with your content because that activates their social network or that activates them as a marketing force to create momentum for your product. And those three kind of methods have been here as we’ve gone through all these different iterations. So I think the industry is constantly trying to figure out in a world where digital sits at the center of it, things like recommendation engines have popped up. What are the things I can do in each of those three dimensions to monetize, to create more capability? The other thing that I think has had the biggest overhang on the industry is in those transitions I just highlighted. You have more content, you have more distribution choices. But the reality is all of us as consumers have the same amount of time as we’ve always had.

Right.

So if you do the math, it leads to fragmentation of audiences. And that’s why sports, as an example, continues. You see, you know, we see the skyrocketing. Right, In sports, but even sports, back to the point I made a moment ago. Now the distribution is so complex for the average consumer, that’s becoming, I believe, non-sustainable in the current environment that it’s in. So these forces are continuing to act on the industry. And I think staying very clear of thought, like how you create a unique value prop for a customer. I mean, the one thing we learned through all the work we did with all the media, these, the telcos, was every consumer now comes into an interaction with an expectation that that consumer experience is going to be is good or better than their best experiences they’ve had with other brands. And when you encounter something less than that. Right. You face switching costs, you face, you know, churn, et cetera. So finding this balance between compelling customer experience and then the right balance of how you’re going to monetize in those various alternative methods, I think is kind of where we are today. Right. 

That’s great advice, Steve. And it’s really the expectation of consumers has changed. And even generationally, you know, if you look at the new generation of consumers, like your kids, my kids, they don’t know what it means to call somebody to get something. Right. It’s all through interaction, via an app, et cetera. So the expectation has changed. And the type of experience they expect is also changed. If companies don’t change the way they do things, they may lose an entire generation of users. That’s one. And the other one is also equally important. Right. It’s really optimizing. You know, what’s the value you’re providing? What’s the value you expect from the consumer? Right. Really finding that balance, which everybody is trying to do is a great advice. There’s been a lot of talk about AI in general, AI, ML, generative AI. You know, what do you think? How much of this is hype versus reality? What impact it’s going to have on this industry?

Yeah, I think it’s equal parts hype and reality probably at the moment. I believe the trough of disillusionment is coming closer and some of these great ambitions are going to prove a little bit more difficult than maybe some folks thought. I think the lens you have to put over it to analyze it or to think about what real meaning it has is kind of the value chain of the industry. So production, distribution, marketing. If you think in terms of those core elements of the business, obviously, back to my point on fragmentation, digital created enormous new volumes of content because it was easier to do it. I remember projects with Pixar back in the early 2000s where we created open architecture with Linux and allowed digital effects to be created anywhere in the world then. I was on digital domains board at the time. And the reality was that changed not just the technology in industry, but the business model in the industry. And I think in production. We’ve been using AI in tools, you know, whether it’s tone analyzers or whatever in color correction. It’s not that using AI in the production process is new. It’s the other part of the equation, which is now you can produce dramatically more content and higher quality content than you could in the past. Maybe through a prompt, maybe you don’t even have to be, you know, an artist per se to do it any longer. So that has massive, I think, ramifications. And I think that’s going to drive both legislative and regulatory questions to come out but also to think about how do I put that to productive use in distribution? You know, we’re just getting better and better. The two core pillars, I think, in the AI world are do I understand my content as well as I can? And do I understand my audience as well as I can? I mean, just this last weekend with the US Open, we’re using gender of AI to actually take all the digital content from the matches, separate that into slugs and then put automated commentary that the GenAI platform we use, our Granite model creates. So you can scale and personalize now in a whole nother order of magnitude for your audience members, because you can actually automate and generate quality content, quality commentary that meets the brand requirements of an organization like the US Open. So there’s both good and bad to watch there. And in marketing, same thing, like understanding audiences now and how audiences act, summarizing interactions with audiences so that you can analyze them and then respond to them. Lots of good things are happening. I just think that what we haven’t really, you know, gotten the full impact from is the implications for some of these models with regards to what data is used, how reliable is that data? What governance do we put around the use of this technology? Do we make sure bias drift, you know, misinformation isn’t propagated across environments? If you’re running an enterprise at the end of the day, you have a trusted relationship as a brand with your customers. And so any technology you deploy. I believe has to live up to that trusted brand expectation. And I think that’s where we’re going to see a lot of perhaps winners and losers as we go forward. 

Yeah, it makes a lot of sense steve. So when you look into the future, what are two to three trends that people need to watch out for? Or, you know, that big on, you know, the transformative things that you see next?

Yeah, I would say in some of these I know you’re working on as well, to the trends that we’ve talked about, I think interoperability amongst these different distribution platforms and different business models is going to become increasingly important. Just like in the old days, think about the studio world where theatrical was a very staged distribution. You know, first you release it in theaters and then you released it into, you know, pay-per-view windows. You licensed it onto broad distribution. Ultimately, you got to a home video window. There was a very structured industry distribution methodology. And to your point, now you’ve got content you can subscribe to. If you don’t want to pay quite so much, you can have advertising wrapped around it. There’s also some, you know, a little bit more mature models creating. But I think what’s really necessary to attack this issue of complexity for consumers is how do I get smoother interoperability between platforms and models from a consumer standpoint? Because I think the firms that start to focus on that are the ones that will be better. The second one that kind of underlies the discussion we were having on GenAI is being able to certify content is going to become increasingly important. I think especially if you look at the amount of consumption time that’s now spent to your point, the next generation, as much of that is spent on social or, you know, other interactive content than it is spent on what I would call, you know, kind of traditional production content. And so knowing the quality and the actual credibility of the content that’s being consumed. I think to more and more bigger, bigger pieces of that audience base is going to raise in importance. And then finally kind of underlying it all is just this notion of data and privacy. The ability to know, you know, we’ve kind of learned this from the back end, if you will, of this big social curve. And what I think even the younger generations now coming into the mix or have a little bit different attitude about their willingness to trade their personal data to someone for information or access to content. And I think the firms that figure out how to maybe get that equation right will be able to help create models that respond to, you know, that growing need.

You have great insights there Steve. So, you know, picture the technology where we had this medium and family company or a telco or large service providers, right? So, so much change happening and people are, you know, confused as to what’s the right strategy or do I need to do it in-house? Do I need to find the best players in the market? And, you know, you see trends both ways. What advice would you give to an IT or technology buyer at this big company, with millions of big companies?

Yeah, it’s still kind of a great honor of mine to have the opportunity to meet with those kinds of firms all over the globe. And to me, this notion of brand and trusted brand, I think is critical. The other thing I tend to spend a lot of time thinking about, learning about, discussing is I feel like we’ve really entered a new era. So, you know, the whole hyperscale era, which really was built on the back of media content, whether it was, you know, Google and YouTube or Microsoft and the network or Amazon and Netflix. That provided scale, that provided workflows, you know, all the other things enable it to happen. I think we’ve entered a new era. And that was defined really about kind of computing storage. Like, how do you do computing storage in a cloud more efficiently? And what does that mean to my business model? But there are implications for go-to-market too, big implications. I think this new era is about compute plus connectivity. You know, with the emergence of 5G, if I’m an enterprise, it brings me three critical things. Bigger bandwidth. So I’m no longer limited in the amount of content. We saw this over those generations I talked about. You know, first we, music got addressed because music was lower bandwidth requirements and video got addressed. And now we’re well past video and we’re moving towards 3D and holistic, you know, capabilities. So data bandwidth growth, critical, because that allows you to do more things at scale. And you no longer have to kind of trick the audience member by pre-staging things out in the network, which is kind of how distribution was done. The second is really about latency. So now with, you know, less than 10 milliseconds of latency, I can change the nature of interactions. I’m no longer bounded by proximity in the way that I think about what I can do for someone either in an enterprise setting or consumer setting. Huge implications. And then finally, the ability to actually dedicate. These network slices to specific use cases means I with confidence know that I can deliver that interaction. And if you think of almost any application you’re running nowadays, whether it’s content oriented or not, is basically has a network in the play somewhere. It’s communicating with applications that are either as a service or other parts of the architecture. So this compute plus connectivity paradigm, I think gives an opportunity to enterprises to rethink how they create more value for their customers in the consumer space, you know, with consumers.

That’s helpful to hear. And so you’ve seen the analog traditional transformation, for example, cable industry, you know, and then, you know, you’ve seen transformation happening now. I remember speaking to an analyst in 2009 or 10, you know, we used to sponsor these OTT conferences. And so he, you know, came by, he’s a well-known analyst and still active in the industry. And, you know, he was telling me that, oh, look, this will never be a news, it’s all OTT business. And, you know, one dollar is safe to never be broken. You know, we are today, that was just 15 years ago.

Yeah. 

Things have changed, but there’s also talk about, okay, fragmentation, you know, bundle blocking, but now again, one of the things we created, hit to your coin, the consumer, you know, now he has to go to different places to find the same thing, you know, maybe on different days, different places, right? The NFL being, for example, you know, under so many OTT services, you know, and then, you know, I probably have, I have a count of that many, right? So.

Well, you know, it’s kind of, it’s kind of funny because I think you and I both, we think a product market fit constantly, right? Product market fit, product market fit. How do we refine? How do we make sure that we’ve got a differentiated value prop? And when we’re working with clients or partners, we think the same way. But the analogy, when you were saying that, the analogy that always comes to my mind is like every so often in each of these different phases, you’ll hear, oh, I want to do this. I want to do that. I want to do that. I want to do that. I want to do that. I want to look in my fridge and have my fridge tell me what food I can cook, you know, or what meal I can make. And I always come back to, I don’t know if there’s, it used to be ordering a PC pizza on your television. Remember in the early days of addressable television, you know, the whole idea was, oh, you’re going to be able to order a PC on your, a pizza on your, you know, for delivery from your television. And I was like, you’re solving a problem that consumers don’t have. So, you know, I think to what you were saying there, the notion of solving real problems that have real, are you using these breakthroughs in technology or in innovation to solve a real client problem? I think that’s a great way to think about it.

Right. Now that’s fantastic. You know, sports rights in general have become more complex now, right? And if you think of U.S. Alone, the rights become complex. Then you add global angle with various sports, it’s become more complex. And the sports also have become a necessity for a lot of these players.

Right.

Because if you remember that sports is the reason Bundle couldn’t broken was the one of the reasons. Right. So now how does this companies it’s become a necessary evil and they’re really expensive too. Right. You have to have sports and, you know, Apple is coming in, Amazon is coming in and, you know, even Google always coming in with YouTube. Right. And then the smaller players, they have to have these rights. And so, you know, what’s your view on what’s happening right at the moment and then some sports rights and sports monetization.

Yeah, I think you’re exactly right. I mean, sports have a couple of things going for them. One is there’s a finite amount of kind of top tier sports franchises and leagues in the world. And sports still has the ability to pull together a live audience, which in this world of, you know, fragmented content and all these distribution choices, aggregating a big audience still gives you a great opportunity to monetize. So we’ve seen, you know, dramatic expansion in the cost of sports licensing. On the flip side, though, and I think this weekend was a perfect example. You know, the NFL launched their new season this weekend. I’m a reasonably big NFL fan, but we saw a game on Thursday night. It was on one distribution platform, Friday night, a different one, and actually coming from Brazil, which was a kind of a breakthrough moment for the NFL. They’re trying to, you know, get international awareness, much like the NBA did. I mean, if you watch the NBA in the basketball in the Olympics, you saw the amazing talent now from all over the world. It’s no longer a fait accompli that the U.S. Is going to win. They’re going to win the gold medal in basketball. And then you think about Sunday and all the games they played, you know, Sunday night, different platform, Monday night, different platform. I’m a consumer now, and I want to consume the NFL because I’m a big fan. I’ve either got to pay for all these different subscription services or I forgo my relationship. What happens if that game happens to be one of those teams that I tend to follow really well? So I think we’ve reached a moment of complexity in this marketplace that runs the risk of beginning to tarnish the overall brand owner. In this case, the NFL we’ve seen some interesting thigs, we’ll see how it plays out. You know three of the major rights holders have said that they’re gonna aggregate a new, you know, distribution platform by friends at Fox or in the middle of that. We’ll see how that plays out but I do think there’s a real issue now with consumer complexity and I keep my affinity with the NFL as a brand and when on any given week the teams that I may want to watch the most are going to be on a platform that I don’t happen to subscribe to at the moment. And even as a Sunday ticket holder, I can tell you, I just went through an experience yesterday where getting my Blu-ray player app, even though it, you know, appeared to be the right app and everything wouldn’t function with my television set. And I ended up spending an hour of one of the games on the call with a call center, trying to sort out why the ad as advertised application wouldn’t load. So this complexity, I think is a real challenge for the industry right now. And I think sports we’re going to find on the forefront of it because there is so much at stake in the navigation of these sports rights.

Yeah. It goes back to the user experience, making it a reality. Making it frictionless, painless. I mean, it sounds painful what you run through, you know, which means that, you know, they have to make sure that it’s working on all devices as promised, you know, and make sure that it’s easier for the consumer to navigate and get the content. It’s, you know, great advice. Thank you so much, Steve, for joining us for this podcast. I really appreciate it. I know how busy you are and I really appreciate your time.

Yeah, it’s my pleasure to be with you. Great conversation. Look forward to getting together again soon.

Yeah, absolutely. Okay. Thank you, Steve.