Digital giants are poised to disrupt the status quo of live
sports broadcasting with implications for inflated rights, editorial
presentation and new partnerships.
The value of live sports - often considered the last
preserve of linear scheduled television against the rise of on-demand -
continues to soar. But audience behaviours have changed and many viewers are
moving away from large cable packages. Traditionally, viewers have been happy
to pay for TV packages to ensure they are able to watch their favourite sport
or team. Competition from broadcasters anxious to attract and retain sports
fans, especially younger ones, within their subscriber base has already driven the
value of premium sports rights to alltime highs.
Now cash-rich internet players are muscling into the sports
arena and making the future of live broadcaster packages uncertain. These
social media networks and tech giants are fuelling disruption and further
fragmenting the sports broadcasting arena. “
For both traditional broadcasters and their new internet
competitors, a new battleground is emerging and once again sports content is at
the heart of it,” declares Comcast Technology Solutions (CTS) in a white paper
on the topic. “The winners will be those most able to acquire, deliver and
generate value from premium sports content for a new generation of fans.”
This is especially the case for the relatively small number
of sports events and brands that have genuinely global appeal. The exclusivity
of those rights is a major factor in driving subscriptions. Ofcom’s 2017
Communication Market report found that over half of UK homes subscribe for
original content while Recent Ampere Analysis research identified a large and
affluent group of sports fans which can, and do pay, a significant premium to
watch their favourite teams and competitions. For example, 18% of BT
subscribers cited sports as a motivation for choosing the service.
Now, OTT providers are focusing on streaming live content in
attempt to boost subs. “With sports fans so overwhelmingly eager to pay to
access their favourite competitions, there is tremendous scope to further
monetise sports on TV,” says Ampere’s Alexios Dimitropoulos. “The challenge will
be to balance the enthusiasm for niche competitions, particularly evident among
younger viewers, with the demand for big ticket events such as the Champion’s
League. Online services have a chance to maximise this demand, with an expanded
offering of sports events, and that’s why we’re seeing Facebook, Amazon and
Twitter make their first forays into this space.”
Naturally this drives prices up. For example, last year Fox
bid $2.5bn to keep out Facebook’s $600m offer and secure 20/20 Indian IPL
cricket for Star India for the next five years. The threat of a bid from
Silicon Valley ahead of the latest EPL auction led UK incumbents to circle the
wagons. A carriage deal announced at the end of 2017 permits Sky and BT
customers to gain access to all Premier League matches without being forced to
choose to buy TV packages from either or both. By reducing the rivalry to
obtain the best games package in the EPL auction meant the pair were able to
reduce the overall cost this time around (with Sky paying on average £1 million
(16%) less per match for the period 2019-2022).
Exclusive sports programming remains, as Rupert Murdoch
famously declared a decade ago, “the battering ram” on which to build and
secure a pay TV business. “EPL are the crown jewels and securing them enables
protection on growth, provides resources to ramp up OTT and broadband
offerings, and allows both BT and Sky time to grow other genres such as
exclusive dramas, to lessen the impact of sport,” says Stuart Ferreira-Cole,
commercial director at digital TV designer Ostmodern.
Yet no technology giant has become the main video partner to
a major UK or US sports league, in part because of a reluctance among leagues
to pull games off mainstream TV and award full rights to an online provider. In
the US, rights to the most lucrative league in the world, the NFL, remains the
preserve of broadcasters Fox, NBC and CBS, who collectively paid $27 billion
over the eight-year period 2014-22. While public service broadcasters have long
ceded control of sports rights, their national reach and cultural status
remains attractive to federations. Properties like Wimbledon, FIFA World Cup,
Match of the Day, the Grand National, London Marathon and Olympics will remain
a staple of BBC or ITV coverage for as long as their audiences dwarf those on
pay TV or OTT.
The English Cricket Board’s decision to return a portion of
test coverage to the BBC from 2020 after granting exclusivity to Sky in return
for a substantial fee is another example. Nonetheless, Facebook, Twitter,
Amazon, Google and Snapchat have all dabbled in live sports over the past
couple years either winning rights (such as Amazon’ serving of ATP Tennis
events from 2019) or working in partnership with a broadcast rights holder,
such as BT Sport streaming the 2017 UEFA Champions League live and free over
YouTube to broaden viewership and thereby also appeal to (or appease)
advertisers, or NBCU’s pact with Snap to live stream clips of the Winter
Olympics).
Additionally, the NFL and the EPL are keen to test the water
by tendering digital packages for NFL Thursday Night Football and mid-week
Premier League games in the UK where multiple matches are played, and
potentially streamed, simultaneously. Facebook and Twitter’s business models
currently rely on advertising and will look to serve in-stream and live ad
breaks to recoup the cost of content licensing fees – in addition to the
broader strategy of using video to keep more people on the platform and generate
ancillary advertising income. Twitter has a more established video advertising
capability for premium content, building on the launch of Twitter Amplify with
the NFL in 2014.
“Both Facebook and Twitter have a global user base that
would certainly appreciate the addition of live sports content, but for now,
both are looking to build out new formats for viewers around the major sports,”
says Gareth Capon, CEO, Grabyo which creates and publishes content for sports
clients on social media. Twitter partners with BT Sport each week to simulcast
its ‘live score’ show on Saturdays and is working with a number of US
rightsholders to bring live highlights, news and bespoke programming to the
platform, he notes.
In exclusive research, Ampere Analysis polled 28,000
internet users across 14 markets to evaluate their willingness to pay for
sports content. Of those that enjoy watching sport (42%), the vast majority
would be willing to pay regularly to watch at least one of their favourite
events. With interests ranging from soccer to the Olympics, tennis to motor
racing, basketball, athletics and cycling, are broadcasters and channels
missing out on opportunities to further monetise sport?
Sports are set to feature heavily on Facebook video hub
Watch. The network’s sports rights effort will be spearheaded by Peter Hutton,
the former Eurosport CEO who helped deliver the Olympics for the panEuropean
digital broadcaster. Internet tech companies not only bring cash, but also
expertise in using data and analytics to better engage and extract value from
fans via advertising. At the same time, sports fans now expect flexible options
for viewing; broadcasters, rights holders and brands need to create more
content and viewing options than ever before.
Consequently, while there is evidence that viewing of live
scheduled sports is in decline, OTT formats have become the new engine for
growth embraced by sports-centric aggregators like Eleven Sports and Perform’s
DAZN, on top of leagues or federations like MLB.TV, WWE Network, NFL GamePass,
NHL TV and The PGA Tour. F1, the world’s most popular motorsport now under the
management of Liberty Media, will be the next to live stream races although the
sport has existing pay-TV deals to untangle before it goes completely OTT.
“OTT services offer fans the flexibility to watch live away
from TV, whilst offering rightsholders the ability to own each fan’s personal,
shopping and behavioural data, using this to advertise and cross-sell with
regional, targeted messaging – a relationship which is missing from linear TV,”
suggests Capon.
Broadcasters are looking to give customers the same
flexibility in viewing while also keeping them within the live pay-TV product
by launching their own versions: Eurosport Player, Bein Sport Connect, Fox
Sports Go, Sky’s NOW TV. The daddy of the them all is Disney’s ESPN-branded
sports app. With technical backend under command of BAMTech, the technology
outfit it bought from the MLB for $2.5bn, and a new base for BAMTech Europe in
Amsterdam, Disney has a launching pad for the $5 per month service on this side
of the Atlantic. Disney boss Bob Iger calls this “a massive strategic shift in
the company’s content distribution strategy.” Sports federations employ a dual
strategy of D2C and broadcaster deals depending on market dynamics in each
region.
With the number of available channels multiplying over the
top come great opportunities for second-tier events, niche sports as well as
female and youth sports. OTT allows for a lower barrier to entry than
traditional methods and allows new specialist services to go direct to
consumer. While the addressable audience may be smaller, fans are passionate,
usually without other means of other access and can subsequently be charged a
premium. The BBC’s move to stream an extra 1,000 hours per year of mostly niche
sports like bowling is possible in part because some sports have cut a deal for
exposure via BBC online.
“Less prestigious leagues whose games aren’t fully broadcast
will make non-exclusive deals with a variety of streaming platforms to gain
visibility and increase fan engagement,” suggests Alon Werber, CEO of automated
sports production vendor Pixellot. “While the most expensive leagues will
continue selling their rights to broadcasters, we will see some shifts in tier
2 sports and second-level leagues,” he says.
“For these leagues, the advent of OTT, together with automated
production, is a game changer,” he says. Werber thinks women’s sports will
drive this revolution. “Today about 95% of sports programming is male. In many
cases, streaming services have the power to democratise sports broadcasting by
opening programming to more sports and levels of professionalism. Facebook, for
example, broadcast two qualifying matches of the women’s World Cup tournament
and drew a large audience. Youth sports are an important segment for OTT too,
targeting parents and school alumni.”
A new breed of ambitious digital publishers like Goal.com,
Dugout and Copa90, are attracting millions of younger users who appreciate the
opportunity to access an engaging mix of footage, social interaction with their
favourite players and teams, and fan generated content. These sites too are
picking up niche live rights. Dugout, for example, has begun showing Scottish
Football League action; Copa90, which generates 80m views a month, streams
friendly fixtures.
“Sports content often drives significant levels of online
conversation,” says Capon. “Social platforms are arguably the most direct,
scalable medium for clubs to interact with fans on a global basis.” The average
Winter Olympics fan spent nearly two and half hours on social media, according
to a GlobalWebIndex survey.
Capon thinks a growing focus on live streaming will force
clubs to change the way that they look and sell social sponsorship.
“Traditional sponsorship packages have been sold on reach and impressions. Yet
the trend in sponsorship is towards meaningful partnerships between brands and
rights holders where results are measured beyond awareness and reach metrics.
Fan engagement is a key part of this. Social networks give brands and rights
owners the potential to maintain an ongoing conversation with fans throughout
the week, rather than just during the match or game, and to build hype around
live events.”
With the shift to OTT comes a shift in editorial
presentation in which linear viewing is eschewed in favour of shorter highlights
sessions and engagement around the live event. “Data suggests that younger
audiences are not tuning into watch full-length matches, instead relying more
on short, catch up clips,” says Ferreira-Cole. “Digital content that is
shareable or even editable generates a high level of engagement, particularly
amongst younger age groups,” adds Werber. Sky Sports, for example, acquired the
rights to EPL clips offered by News UK, via The Sun app, to connect with these
audiences.
If traditional media has been slow to understand this
behaviour when trapped in large broadcast deals, it’s become imperative to
think in a shorter mindset, but combining new forms of popular short-form
content with broadcast-quality live event coverage. For this reason,
Ferreira-Cole thinks the tech giants are still not ready to become full-on
sports streamers.
“Sports broadcasting requires building a narrative and
storytelling around the ebb and flow of sporting events which means you need
continual engagement with fans, whether it’s through fantasy league updates,
social media, team updates or gossip,” he says. “This is something that the
streaming giants, who provide a much more PPV-based experience, cannot
currently provide.”
For example, putting an Anthony Joshua fight on Netflix as a
PPV won’t work in this context as it doesn’t allow the drama of the fight to be
built up, reckons Ferreira-Cole. One partnership he feels does demonstrate the
power of creating a buzz around a sporting event is Matchroom and Sky
(signatories of a 7-year deal to 2025 to show Matchroom events like boxing and
darts). “The collaboration has revived boxing, creating a fantastic
entertainment product,” he says. “Other new entrants in the market are also
seeing success including ITV Box Office World Boxing Super Series, which uses a
12 million addressable audience and a free-to-air platform to drive new ITV
audiences to a PPV experience.”
As the cost of rights increases, so too does the importance
of sports OTT services being able to monetise their content effectively. For
established broadcasters, this requires rethinking traditional business models
and offering customers a variety of ways to pay for the content they consume on
their services. For example, the NBA League Pass streaming service lets
subscribers select from a menu of à la carte content, including skinny bundles
and one-off events, PPV one team, day pass, SVoD, ad-funded and a variety of
other models.
But it will take more than fresh business models and opening
the wallet for rights for OTT to take-over mainstream sports coverage. OTT will
need to deliver on the high production values viewers have to expect from
broadcast. Technically, high-resolution and reliable low-latency feeds over IP
will be challenge. Buffering continues to dog sports streamers. DAZN suffered
these glitches when launching into Canada with exclusive NFL coverage at the
start of last season. Eurosport also had to apologise to subscribers and offer
refunds when Bundesliga live streams were similarly hit. An alleged failure to
make good on an HD service resulted in a class action brought against Showtime
for its online PPV of the Mayweather v McGregor fight in August. Live stream
piracy – which also afflicted the Showtime internet service – needs constant
attention by rights holders too.
As IHS notes in a recent report, ‘New Frontiers for
Distribution of Sports Content’, the
biggest challenge for operators is to develop a model that is economically
sustainable and sufficiently appealing to consumers to replace or at least
diminish pirated streams on websites and set-top boxes.
To survive cord cutting, traditional media has to offer
subscription options combining incumbent TV and OTT. Werber argues. “Sport fans
will pay more for the content they want but won’t buy a buffet of sports
channels. If you’re a hockey fan you will pay for a hockey channel and not a
premium channel that also broadcasts hockey. Similar to the NBA league pass,
NBCUniversal launched a $50 ‘Premier League Pass’ live streaming subscription
service to US customers. I predict more leagues will go in that way.”
The trends are strong enough for Werber to declare, “Sports
TV channels will cease to exist in the format we know them today.”
Ferreira-Cole also believes the writing is on the wall for broadcast
aggregators. “Would you argue that broadcasters govern reach when Netflix has
over 100m subscribers and audiences in over 130 countries?
This domination is exactly what many of the biggest sports
rights holders crave. Broadcasters may dominate their local markets and will
likely continue to do so for some time, but they just don’t have the financial
backing to compete in the long run on a global scale. Traditional players will
need to consolidate, combine forces or rethink their offerings in order to stay
relevant - but intrinsically and historically, broadcasters aren’t well
equipped, structured or even legally permitted to work together.”
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