This story emerged three weeks ago, and I have been wanting to write about it since. It is significant but too small for a newsletter.

On April 16, the National Basketball Association (NBA) and Microsoft announced a new multi-year collaboration. One of the key pieces of the collaboration is:

Microsoft and NBA Digital — co-managed by the NBA and Turner Sports — will create a new, innovative direct-to-consumer platform on Microsoft Azure that will use machine learning and artificial intelligence to deliver next generation, personalized game broadcasts and other content offerings as well as integrate the NBA’s various products and services from across its business. The platform will re-imagine how fans engage with the NBA from their devices by customizing and localizing experiences for the NBA’s global fanbase, which includes the 1.8 billion social media followers across all league, team and player accounts.

The partnership is particularly focused on personalization: “a more personalized fan experience that tailors the content to the preferences of the fan, rewards participation, and provides more insights and analysis than ever before.”

I read this and thought, “wow, they are centralizing data feeds like they centralize telecast feeds”. But, a key question I have not seen asked is why the NBA would be centralizing its data feeds in 2020, or why personalization is important to the future of the NBA digital broadcasts.

An interview by Stratechery’s Ben Thompson with NBA Commissioner Adam Silver and Microsoft CEO Satya Nadella filled some of the details. Silver highlights two pain points:

  1. first, young fans are “watching a lot less conventional television and the programs they watch, they often watch for shorter periods of time”; and,
    second, their direct-to-consumer relationship is currently limited by outdated technology.
  2. Specifically, Silver believes “we’re fairly limited in terms of artificial intelligence, understanding what fans really want, customizing the program to their needs, customizing highlights especially.”

So, centralized data feeds and personalization solve for what is currently a “fairly limited” customer relationship. The challenge is what this solution means for the future of fan engagement with the NBA.

There is something about this explanation which invites the question, “So what?” Meaning, it feels like something is missing in these descriptions of the pain point in both the press release and Adam Silver’s explanation.

Dallas Mavericks owner Mark Cuban has been answering that question separately in his own interviews: first, because audiences are watching less linear television, “we’ve gone from a bandwidth-constrained environment on paid TV to a non-bandwidth-constrained environment”, and second, “There’s a delta between a satellite feed and a cable feed and even a good stream—and that’s an issue for gambling on some level, maybe 5G changes that with low latency”.

First, Mark Cuban speaks to solving for something he calls “aggregate audience”: “You might have one [stream] where you have Twitch-like announcers; you might have two of your favorite YouTubers that are doing another stream; you might have your traditional broadcasters doing another stream; you might have a players-only doing another stream”.

Second, the NBA needs to solve for lag in streaming particularly for sports betting with “a unique paid-TV feed that’s geared toward prop bets, gambling”. Last October The NBA announced a deal with leading US sports betting operator William Hill giving it the right to use official NBA betting data and league marks across its mobile platforms and in its sports books throughout the United States.

The NBA’s deal with Microsoft helps to facilitate solutions for both of these problems in a robust way, as CEO Satya Nadella explains:

Essentially what [a product called PlayFab, which came out of Xbox] does is just like our DevOps was a thing, LiveOps comes out of game development. So in the context of the NBA, of course let’s say there’s the game itself, but around the game you can build all these other scenarios, whether it’s in the second screen, whether it’s the social dimension, and all of that is software driven based on what you are watching, what you want and who you are and whom are you watching with.

So, in essence, Microsoft’s Azure cloud computing is solving for multiple viewing experiences across platforms for aggregate streaming audiences, and in particular for sports betting (Note: both for gambling and for fantasy sports).

What is difficult to discern here is the impact because the onus is on execution here. The NBA has to be careful that in solving for aggregate audiences that it does not kill the value of its $24B broadcast deals through 2024-25 (something I wrote about in late March). As I wrote then:

Digital experiments [the NBA] is running on the side with Twitch and other vendors give them a taste of what other models are out there, but again, there is nothing in digital yet which offers revenues close to what they make from RSNs.

So beyond the $24B, the economic impact of this deal on streaming is currently opaque and speculative for aggregated audiences. It is clearer for sports betting: since last summer, the NBA has been pursuing deals “that require sportsbooks to pay either a percentage of handle to the league or a fixed fee.” That means taking some cut of a market that is expected to be valued at $8B by 2025.

But even that business relationship still has to be sorted out. Microsoft Azure ensures a strong opening hand for the NBA.