A current view of the sports media rights market from Head of Legal, Sport at BT
Published 16 May 2017 By: Alex Slade
This is an extract from the Sport & Media Rights chapter of the LawInSport & BASL Sports Law Yearbook 2016/17. To access or order a full copy of the Yearbook, please see here.
Note: The views expressed in this piece are the author’s own.
2016/17 has been a busy year. The general theme was digital – whether it was social media exploitation, M&A prospects for digital companies, piracy, “cord-cutting” or access to content. The explosion of eSports and the arrival of drone racing has also added new excitement and opportunities into the rights market and the year has seen these being pushed to the forefront of broadcasters’ minds.
Whilst these developments have caused a few challenges for traditional broadcasters, they were not a surprise. We have all been moving towards a more digital-heavy offering and the way in which these new opportunities are exploited is where the focus has been, and is likely to be for some time to come.
This article explores some of the most interesting commercial developments for sports broadcasters in 2016/17, including:
- Social media and digital exploration – looking at the moves by established social media players such as Twitter and Facebook into mainstream sports broadcasting;
- Mergers and acquisitions – looking at the key activity in the space, most notably surrounding Formula 1 and UFC;
- Changing consumption models - looking at how broadcasters are responding to piracy concerns and the recent shift in consumer viewing demands;
- eSports and drone racing – looking at how the latest sports trends are being approached by broadcasters;
- Free to air – a brief update on the sector’s performance; and
- Looking forward – what is to come in the remainder of 2017.
Social media & digital exploitation
The value of social media is clear to see. It provides a two-way conversation with fans and allows them to become part of the story by enabling direct engagement with an event. Until 2016 there was little significant live sports content on social media and the platform was seen as a clips and highlights outlet, rather than the focus of any long form exploitation. Clips and highlights sit perfectly in the social media environment of quick chat and ever-moving discussions, but rights holders have been reluctant to allow live games to be provided on a these platforms. However, this is changing.
Yahoo! was first out of the blocks in 2015 with the first global live stream of a regular season NFL game, watched by over 15 million people. Twitter then entered the fray in 2016 by acquiring digital rights to NFL’s Thursday night football on a free, live streamed basis. How long it will be before other internet giants such as Amazon, Google and Facebook start acquiring rights remains to be seen but, given the success of the few examples so far, it can’t be long in coming.
In the UK, BT Sport streamed both the UEFA Champions League and UEFA Europa League finals live on YouTube for free, as well as through their web and App presence. Nearly 3 million people watched via these various outlets. On demand clips and highlights were viewed on Facebook, Twitter and YouTube by another 3 million people.
La Liga became the first European football league to globally broadcast a match on Facebook Live when it agreed terms with Grabyo, Facebook’s official live streaming partner, to show the Spanish Women’s first division fixture between Atletico Madrid and Athletic. The importance of social media in day-to-day interactions is summed up by Gareth Capon, Chief Executive of Grabyo:
“The global shift towards fans consuming content on their mobile devices is driven by social platforms with video driving greatest engagement for fans around the world. Consumers have smartphones within arms’ reach 24 hours a day, no other platform offers this opportunity for reach and viewing across all demographic groups".
It seems a long time ago, but Facebook Live only launched in late 2015 making live broadcasting available to all, and making the move from simply hosting user-generated content to becoming a media owner in its own right.
With Facebook’s claims, that the average duration of video viewing on its platform is three times longer and elicits over ten times more comment when the content is live, it is hard to envisage that 2017 will not see a huge expansion in the availability of live sports content through social media. The difficulty for broadcasters will be deciding what content to put onto social media – it seems unlikely that it will be used purely as another outlet for showing the same content that is available on their linear TV offerings. The opportunity for content that might not work so well or might not have an obvious place on linear TV is wide open.
Does this mean that social media is the future of sport viewing and that traditional broadcasters are doomed? The end of traditional broadcasting has been predicted with the emergence of every new technology, not just social media, and the resilience of "traditional" means of consumption shows that huge value is set by the big screen experience. Subtle, but impressive, technology developments (SD to HD to 4K, fully immersive sound, better screen resolution, bigger and better TVs) mean that we are not likely to see the appeal of sport on the big screen dying out any time soon. The challenge is to ensure that broadcasters remain at the forefront of developments and can exploit their content in the richest environment for the viewers. New and old are not mutually exclusive – there is a place for both, and the question should be how traditional broadcasters can tap into this social media potential to enhance what they currently provide.
Disney acquired a one-third stake in MLB Advanced Media, the video-streaming division of North America’s Major League Baseball. The deal values MLBAM, which is jointly owned by the league’s 30 franchises, at about $3.5bn. Disney has an option to acquire a further one-third stake over the next four years. This shows the value that broadcasters and rights holders place on digital outlets and further acquisitions and partnerships are likely to be an increasingly common occurrence. Perform Media also launched DAZN, a multi-sport OTT (over-the-top) service available in Germany, Austria, Switzerland and also Japan.
How long will it be before we see a social media or OTT only service bidding for or acquiring significant rights such as the Olympics or a World Cup? It may not be in 2017 but it is surely nearing.
Mergers & acquisitions
2016 saw some significant takeovers in the sports world that could have a substantial impact on the exploitation of the certain rights.
The proposed takeover of Formula 1 by Liberty Media passed its first hurdle when the Competitions and Mergers Authority announced in December that it had investigated and cleared the anticipated acquisition. This opens the door to Liberty Media to increase its 18.7 per cent stake in Formula 1 to outright ownership in 2017. The fact that, as Bernie Ecclestone has said, “There’s no marketing, no research, no data, no digital platforms” in Formula 1 means that there is a huge opportunity for Liberty Media to drag this high profile sport into the digital age and really push the exploitation possibilities. No plans have been released to explain how this will manifest itself but any way to bring the fans closer to the action through better accessibility and new technology (such as virtual reality), can only bring increased interest in the sport and revenue to the business.
Records were set when WME/IMG completed its takeover of UFC for or reported $4 billion – believed to be the biggest single financial transaction in the history of sport. This not only proves that Mixed Martial Arts (MMA) has truly hit the mainstream but also vindicates the efforts of American sports promotion company, Zuffa, and UFC to carefully nurture this often-maligned sport from the fringes of the acceptable to the firmly established (New York State only lifted its 20-year ban on MMA in May to enable UFC 205 to be contested at Madison Square Gardens). UFC already has a very strong digital presence so it remains to be seen what further developments will be made under the new ownership but this injection of power and money is bound to create change. Change is already afoot as the signs are that WME/IMG will be decreasing the number of pay-per-view events in order to secure a higher guaranteed income.
The $14.8 billion deal by 21st Century Fox for control of European pay-TV provider Sky is in the early stages and may yet be subject to further scrutiny from both Ofcom and the European Commission to address media plurality concerns. Fox has said that the deal
"creates a global leader in content creation and distribution, enhances our sports and entertainment scale, and gives us unique and leading direct-to-consumer capabilities and technologies."
There is great potential for Sky to increase its reach through Europe with this deal and it will be interesting to see how this affects its rights bidding strategy across all content, not least of which is sport.
Changing consumption models
As more and more people go online to watch their sports a number of challenges have emerged. Among them are an increase in piracy as well as a drop in viewing of traditional TV. The viewing figures in 2016 across Sky, BT Sport and Eurosport channels saw a combined drop of 9% compared to 2010. The increasing ease with which one can find and stream unauthorised live sporting content is a worrying development for broadcasters and rights holders alike. Whilst the industry has not struck upon a straight forward, dynamic way of tackling piracy there have been some notable successes in 2016.
A key recent success in the UK involved the sale of illegal IPTV boxes, which came pre-loaded with apps enabling the illegal streaming of sporting events without the need for subscription to more traditional satellite or cable services. In December 2016, the first legal case involving a supplier of illegal IPTV boxes enabling viewers to watch unauthorised content led to a man being sentenced to four years’ imprisonment for conspiracy to defraud. The Premier League had brought the prosecution against two men, after the pair were discovered to be selling devices to pubs and individuals which facilitated mass piracy, including the broadcasting of Premier League football on unauthorised foreign channels. One of the pair was sentenced to four years in prison and the second received a two-year suspended prison sentence.
In September, FACT (Federation Against Copyright Theft) successfully brought a prosecution on behalf of Sky Sports against a pub in Leeds that was illegally showing Sky Sports on the premises. The hotel supervisor was found guilty of two offences of dishonest reception of a television transmission (a Sky televised football match) and was fined over £10,000. The act is in breach of Section 297 (1) of the Copyright Design and Patents Act 1988.
In the Fanatix case (see Chapter 3.5), the High Court held that the use of an App offering the ability to upload and view clips featuring highlights of cricket matches infringed copyright in the TV broadcast and films contained within that broadcast. The finding that even very short highlight clips (in this case only 8 seconds long) can constitute a substantial part of the broadcast will provide comfort that a broadcaster’s significant investment can be protected.
These cases may represent a drop in the ocean of piracy and illegal access but the sanctions handed down hopefully provide a welcome deterrent.
Viewing figures and shifting habits
It’s not just piracy that comes from the increase in digital viewing. Many broadcasters are experiencing an increasingly significant drop in viewing on their TV services as people find more agile ways of watching their favourite sports. In the USA, ESPN (owned by Disney) experienced a drop in subscribers of 1.5 million between February and May 2016 alone. This is likely to have been a significant factor in Disney’s decision to invest in the MLBAM streaming service, mentioned above. It’s not just the USA that is suffering as Sky Sports in the UK saw a 19% drop in their English Premier League viewing in October 2016 as compared to the October 2015.
Despite these worrying statistics the question must be asked whether this is genuine cord cutting, with viewers giving up their traditional TV viewing habits, or whether this is simply the same viewers and subscribers turning to other outlets offered by the same providers and altering their viewing patterns. This reinforces the need for traditional broadcasters to look for more diverse opportunities to meet these needs. What new technology can be tapped into to ensure that the subscriber base remains?
Second-screening, the concept of engaging with sports content using two devices at the same time, is fast becoming the norm and engagement has risen from 61% to 76% in the past 5 years. This might involve anything from watching video replays of incidents, checking live scores from other games, downloading stats and data analytics, or engaging with the broadcaster’s network on social media platforms. For the near future at least, the "first screen" remains the TV set, but it may be that the shift continues to the extent that the mobile or tablet usurps the place of the first screen.
Personalisation is a key concept in this shift as new and innovative technology pushes the demand for new ways of consuming sports content. Virtual reality (“VR”) and further development of augmented reality will provide ever richer experiences for fans - better and more exciting ways of being part of the action and becoming even further immersed in the event. In the UK, BT Sport trialled a VR broadcast during an English Premier League match between Arsenal and Chelsea in September. In the author’s view, it is only a matter of time before VR headsets are taken up en masse and content becomes widely available.
Overall, the consumer is getting a better experience and more importantly is demanding a better experience. Sky has said that it will broadcast the entire 2017 Formula 1 season in ultra-high-definition following a successful test during the Singapore grand prix in September. Varied means of consumption, on the go access, multi-device access at all times is simply seen as a right by viewers. Broadcasters and providers of other content services need to factor this customer expectation into their rights acquisition strategies, and rights holders need to factor this in when valuing the rights and in splitting rights into standalone packages.
eSports and Drone Racing
The increase in popularity and awareness of eSports, and the emergence of drone racing, took off in 2016. These are both sports that are now being taken seriously by the broadcasters. eSports is fast becoming one of the most talked-about industries for investors. Pro gaming will be a $465 million industry by 2017 and commentators suggest could be worth between $1 billion and up to $2 billion by 2019.
The challenge is how to translate this success and potential onto the big screen when eGaming viewership is so significantly online. This is something that is being tracked carefully. There is a marked difference in attitude between eGaming versions of traditional sports such as football, that seem to have a more natural fit with established TV services, and the more “true” eGaming events such as League of Legends and Counter Strike. It is the latter category that have not translated well so far onto TV. The mistakes made by traditional broadcasters have centred on them trying to make eGaming events fit the linear TV world rather than looking at how to extract the best bits of eGaming to create a format that will work on linear TV whilst not tinkering with the underlying format.
The evidence that drone racing is knocking on the door of the mainstream lies in the facts that both Sky and ESPN invested heavily in this nascent sport in 2016. Sky invested around £1 million in the Drone Racing League, which was only set up in 2015. In April, ESPN and the Drone Sports Association in the USA signed a multi-year deal to bring the new sport of drone racing to the sports network. 2017 is likely to see this sport having a significantly bigger presence on screen than it has previously enjoyed.
Free to air offerings
Despite diminishing budgets, free to air sports broadcasting is still alive and well in the UK. A number of deals were concluded this year that underline the fact that access to a large audience is still viewed as importantly as the license fee itself.
ITV has acquired rights to the 2019 and 2023 Rugby World Cups in deal understood to represent an uplift of about 25 per cent on the value of ITV’s deal for the 2011 and 2015 World Cups. BDO Darts remains on FTA but switches from the BBC to Channel 4, but with the BBC acquiring a two-year deal with Matchroom to cover the new Champions League of Darts event in 2016 and 2017. And The FA Cup remains on the BBC, albeit shared with pay provider BT Sport.
A number of exciting sets of rights are likely to come to market in the UK in 2017. Not least among these are the UEFA Champions League and Europa League, in which UEFA is targeting a significant increase in its per-season rights fee of 28% (from €2.5 billion in 2015-’18 to €3.2 billion in 2018-21); and the England & Wales Cricket Board rights for all formats of cricket (including the as-yet unclear plans for the 20:20 format). There are also tenders expected from European football rights holders (La Liga and Serie A) and also European rugby (European Champions Cup).
Following the High Court of India’s intervention in the Indian Premier League auction in December, the bidding process was suspended. This was supposed to be the biggest deal in cricket broadcast history, with experts estimating the amount to be anywhere between $2.5 -3.5 billion. of the BCCI appointed administration committee will review the administrative reforms recommended by the Justice RM Lodha Committee and also the tender documents themselves to see if any revisions are required. The removal of the BCCI’s President and Secretary in January 2017 delayed resurrecting the IPL tender for some time, but in February in was announced that the BCCI had reopened the process, seemingly on a more informal basis, with bids being accepted until October 2017.
Finally, the huge unknown of Brexit and the impact it may have in the UK and beyond, remains to be seen but will start developing once the British Government invoke Article 50, planned for March 2017, and trigger the count-down to exit. The fallout or even potential benefits to broadcasting are as yet unknown.
Note: The views expressed in this piece are the author’s own.
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Alex Slade is VP Legal, EMEA at Aser Media, the owner of the Eleven Sports Network. Alex covers all areas of the business but his primary focus is the Eleven Sports channels and offerings in EMEA and the US. That work encompasses rights acquisition, licensing, distribution and carriage of sports rights for the Eleven Sports Network.
In addition, he is also an Independent Non-Executive Director of the British Judo Association.
Prior to Eleven Sports he worked for BT Sport as Head of Legal, Sport having joined just before the launch of the channels and before that for he worked in kids TV at Nickelodeon. Outside interests include cycling and sailing - Alex spent a year out competing in the Clipper Round the World Yacht Race in 2005-06. Alex lives with his wife and three daughters in Suffolk.