The Streaming Future of Sport Untangled

The world of watching sport on a screen is changing daily.  Whether it’s the multiple Pay channels covering every game in the top leagues through to the advance of streaming direct to consumers, it is one of the most fascinating areas of how sport is changing and being changed.

Simon Kelehan is a former senior executive with both Virgin Media and eir Sport and now working as a consultant in this area under the banner of 3Vision Consulting.  He is also a member of Sport for Business and we asked him for his views on where we are now with sport and broadcast and where it was heading in the future.

SfB: The landscape of buying a subscription to Sky or Virgin or eir and getting a bundle of sports for one price is accepted as a winner in the Pay TV model but how big of an impact is the new wave of streaming having on sport?

SK: Almost every day there is another announcement about the launch or the plans for a new Direct-to-Consumer offering in sport.

Inspired by the success of Netflix, wity 140 million subscribers worldwide and rising, the world of D2C is seen as the future of entertainment.

Back in the day the only way to access great content was on TV channels which came packaged in bundles sold by TV service providers like Sky, Virgin Media and eir.

Now viewers have shifted towards streaming content on their devices and enjoying not being tied into long term contracts.  

Flexibility is the new normal – NOW TV from Sky offers weekend passes for Sky Sports,  Turner Sports in the USA allows micro-pay options in-game to watch live NBA games quarter by quarter.

There is a rush of newcomers to the D2C party.  Amazon is spending €5 billion on TV content.  November will see the launch of Disney Plus (think Walt Disney movies, Marvel, Star Wars and Pixar all in one place for $7 per month). March saw the glitzy Apple TV Plus announcement with A-Listers Steven Spielberg and Oprah Winfrey.  And watch this space for new D2C services from Time Warner, NBCU, BBC & ITV and any media corporate with an eye on their share price.

That’s easier to grasp in sport where watching a movie or a box set is easy to do at a time to suit you but is sport not different in happing the importance of a live and shared event?

D2C streaming has been slower to gain traction in sport but is gaining momentum.

F1 TV was launched in 2018 in multiple territories. UEFA recently unveiled its new streaming service. 

Amazon has licensed ATP tennis rights and in December will be streaming 20 UK Premier league games in the UK including the Merseyside derby.  

Facebook has dabbled with sports rights such as Major League Baseball in North America and La Liga in India.  In an interesting move Discovery has launched Discovery Golf, based on a €2 billion rights deal out to 2030 with the PGA.           

DAZN is a newly rebranded player that aspires to be the Netflix of sports . Backed by billionaire Len Blavatnik, DAZN offers a low-priced sports app in 9 countries with ambitious growth plans.

Does the rush to D2C models really make commercial sense for live sports? 

The Netflix numbers are extraordinary with annual revenues of $16 billion, and a company valuation over $150 billion.

What’s not to love? Well, a small matter of persistent cash loss of $2-3 billion per year is something.

Netflix is banking on subscriber growth in developing markets and future price increases to wash its face, as seen by its latest price increase announced recently.  So even the Netflix story sheds some doubt on the profit potential for D2C.  

Other dimensions of the Netflix story should give D2C cheerleaders pause for thought. The key to Netflix success is global scale, accumulating subscriber numbers across 190 countries. Netflix’s sweet spot is scripted TV Drama, a genre that travels across multiple territories. Sportis in many ways more local than global, outside the biggest of events.  

The top TV sports differ in each territory. Mainstream US Sports are niche sports outside North America, the UK Premier League is a niche sport in the US.  And in each territory a sporting Netflix would to have spend big on rights to compete with entrenched local distributors that have built a business around access to marquee sports rights.  

So it’s unlikely that FAANG (Facebook, Amazon, Apple, Netflix and Google) will join the headlong rush into D2C sports streaming.

Why are leagues considering and acting upon the model then?

Sports leagues considering a D2C model are attracted by the promise of subscription revenues and the possibilities of a deeper relationship directly with fans. 

In particular, more niche sports will be tempted by the ability to reach a global base of hardcore fans at relatively low cost.

Mainstream sports will need consider multiple factors before taking the leap into D2C streaming.  

Any new service starts with zero subscribers. It takes time, investment and a completely different skill-set to build a D2C service and recruit paying subscribers.  And it’s even harder to retain consumers in a world of one-click cancellations.

Single-sport services face the risk of switch-off in the off-season.  And sports relying on OTT distribution will struggle to recruit the next generation of fans, missing out on of the crossover effect in from being part of the bundle.

Top tier sports leagues will have to compare potential D2C subscription revenues over time with the predictable fixed rights fees on offer today from existing distribution channels.  

Existing channels will  pay considerable sums to protect the quadplay business (Basic TV, Phone, Broadband and Mobile) they have built around the totem pole of exclusive live sports. 

And if Pay TV companies won’t splash the cash, then traditional free to air broadcasters can make the business case to stump up for live sports rights to reach an audience and support their advertising business models.

They also hold a greater appeal to sponsors given their reach.

Is piracy and revenue leakage a major concern?

If a sports league takes the plunge into being a completely D2C proposition, then the issue of piracy becomes solely its problem.  

Rightsholders may pay lip service to the impact of piracy, but in the traditional model once rights fees were paid the downside risk has been essentially assumed by the distribution channel.  

Going straight to consumers means the sports league carry the piracy risk.

So, how will it pan out?

Sports leagues will continue to experiment with D2C, benefiting from the user insights and viewing data mined from direct to consumer apps as they seek to recruit new fans into the future.

OTT also opens up access to emerging markets overseas.  At a minimum D2C gives the mainstream sports leagues a backstop when negotiating TV rights renewal deals with the traditional distribution channels.  

Non-mainstream sports that currently struggle to get airtime on traditional broadcasters will increasingly go OTT to reach their fan base and extend reach internationally.

In short there will be a lot more experimentation in D2C sports. But there’s little evidence to suggest that standalone, single-sport D2C offerings will be replace the traditional channels for mainstream tv sports any time soon.



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