Sports media rights in 2018 – consumption trends and the growing influence of OTT digital playersAndrew Ryan
This article provides a high-level review of commercial and legal developments in the world of sports media rights. It focuses on the following key areas:
The Premier League rights sale – failure or success?
The growing influence of “over-the-top” (OTT) digital players
Developing the consumer experience
Mobile content presentation
Consumption trends – insights from the McKinsey report
The Premier League rights sale – failure or success?
“The bubble has burst!”. It was the almost inevitable headline1 when results of the Premier League’s latest domestic broadcast rights tender were released in mid-February 2018. Those trying to suggest that this was a major catastrophe for the Premier League and for the wider sports rights market in general, gleefully pointed to the topline results from the tender process. The total financial commitments between Sky and BT were approximately £500m less than the record £5.13 billion in fees which the same pair of broadcasters bid for the previous cycle (running from 2016 to 20192). Sky didn’t hesitate to trumpet its new fiscal responsibility, publicly pronouncing that it was now paying 16 per cent less per game with packages that will allow it to distribute 128 matches per season – this represented an aggregate reduction of close to £600 million despite having two more contests per year at its disposal3.
However, a deeper look at the situation suggests that in fact, the outcome of the tender was still an outstanding success for the Premier League. First and foremost, there are few sports properties across the globe that could command such an amount of money from a single territory - £4.464 billion across three years is still a phenomenal amount of money.
Second, and probably most importantly, to the extent there has been a decrease in aggregate fees from the previous cycle, there are several factors that have influenced this. It must be remembered that the previous cycle featured a 70% term-on-term increase, driven by the entrance into the market of a substantial economic beast in the form of BT who was looking to secure a critical mass of games for its new sports television service. Thus, the bids for the new cycle likely represented somewhat of a “marketplace correction”.
While competition still existed this time around, it was somewhat less intense. BT publicly stated that the Premier League rights were not essential for the BT Sport business model to work4 and the tender process came at a time in which BT’s share price hit a five-year low5. Possibly even more critically, back in December 2017, Sky and BT reached agreement on a carriage arrangement which had been years in the making6. By agreeing to terms which would enable each service to carry channels from the other, it meant that customers could access all Premier League matches from the one provider and thus not likely end up having to choose between one or the other. Thus, some of the competitive tension from the previous cycle had diminished.
The growing influence of OTT digital players
The Premier League tender process came at a time in which some of the big “digital” players were probably not quite ready to make a play for such an expensive set of rights, at least not the highest value packages anyway. This was despite a substantial amount of attention being given to interest from both Amazon and Facebook in the lead up to bids being due7. While the potential threat of one of these cashed up global entities entering the fray probably did go some of the way to helping maintain the value of the rights, they will likely be far more influential in three years’ time when the next cycle of rights is up for grabs.
Nonetheless, there is still the potential for them to play a part this time around given that two unsold packages remain available featuring twenty matches each (being two full rounds of matches each on a single day8). With the need to facilitate delivery of so many matches simultaneously, it is almost inevitable that these packages will end up with a digital-focused distributor. However, just because those organisations have the capacity to deliver content in that manner, does not mean that the packages represent a particularly attractive proposition, as reflected by the fact that bids for these packages did not meet the reserve price during the original tender process9.
Given the limitations of the packages, who buys them and what they do with the rights though is likely to be merely interesting, rather than particularly illuminating regarding future intentions or highly instructive as to consumer preferences and appetite for OTT-delivered content experiences. In this regard, it is not dissimilar to the National Football League (NFL) Thursday Night Football digital rights which have been held by Twitter and then Amazon respectively over the last two seasons.
Those rights have remained non-exclusive10, with linear broadcasts still available on NBC and CBS (who alternate games and were still entitled to make available an online stream of the games) and via mobile for Verizon subscribers. Thus, only so much can be read into the levels of viewership.
There are a few takeaways worth noting though.
Most obviously, Amazon made available not only the original television broadcast feed from the US, but also Spanish and Portuguese language options. They also offered a “British” commentary option, featuring commentators more renowned for their work with the round ball11. While this seemed to be more an amusement rather than providing a hugely useful alternative to the traditional commentary approach, the provision of different audio feeds is just one major advantage of OTT delivery as opposed to terrestrial or satellite (where additional “channels” would be necessary for such a service). This capacity is particularly advantageous in countries with a large diversity of languages12 or else, for sports trying to develop in a new market. It is not hard to foresee NFL coverage in future having an audio feed geared towards fans still learning the game. It is interesting to note that the NBA have taken a step forward in delivering a customized experience through an innovative relationship with Twitch (a platform more noted for streaming e-sports). Live broadcasts of the G-League (the NBA’s “development” league) are not only being made available on the platform, but there will be capacity for individual personalities on the site to provide their own “commentary” for games13 which are co-streamed on the commentator’s own Twitch “channel”.
Second, given Amazon’s primary existence is still as an online retailer, they were able to offer some interesting propositions to advertisers. For example, reports suggested that as part of packages for their NFL games, advertising partners could be provided with custom research detailing how viewers reacted to certain ads and whether such advertising activity led to a transaction on the Amazon site.14
Finally, the complexity and breadth of the Amazon business means it is more akin to the “triple play” (phone, broadband and television) businesses that have frequently dominated the rights acquisition market, than most of its digital competitors. Some commentators noted that with an US$99 annual fee, Amazon would only need to add 500,000 new customers to recoup the rights fee it paid for its NFL rights15. This is before considering the revenue possibilities of exploiting sports rights by delivering highly targeted (and valuable) advertising via dynamic ad insertion or the flow on effects of increased retail transactional activity (whether linked to the league, the sport, individual advertisers or otherwise). It all adds up to Amazon likely being a key player in the premium sports rights market in years to come.
This is not to say that Facebook has been quiet on sports rights front. It launched a bid for Indian Premier League cricket rights in mid-2017, with its USD610 million proposal a significant statement of intent16. Meanwhile, its re-jigged arrangements with the World Surf League, announced in January 2018, signaled a desire to have more sports content featured exclusively on the platform rather than as a supplementary media proposition17.
Two recent developments however have been of particular note. First was the recruitment of Discovery Eurosport’s Peter Hutton to take up a key role in Facebook’s live sports push18. Bringing in one of the industry’s most respected dealmakers not only brings a wealth of experience and knowledge into their sports team, but also an individual that will instill premium rightsholders with an added sense of confidence that their valuable rights will be well managed.
The second is the more recent news that the Facebook platform will feature 25 live Major League Baseball games which are reported as being “exclusive” (at least in the US, where even users subscribing to MLB:TV will not have separate access19). It is a miniscule number in the overall scheme of an entire baseball season, but the fact that in the US the games won’t be available elsewhere is a significant step for a premium rightsholder in that market.
Developing the consumer experience
Other than the variety of audio feeds and some integrated statistics presentations though, we are still yet to see any of the social platforms (or any other digital provider for that matter) deliver a consumption experience that is drastically different from watching a traditional live sports broadcast. We have, however, seen some tentative steps to innovate in the on-screen presentation of content across the last twelve months.
During the early weeks of the 2017/18 season, issues created by fog meant that NFL broadcaster NBC was unable to display footage from the primary camera angle on the side of the field during a game. As a result, it was forced to rely on the “SkyCam” which sits behind the line of scrimmage – a view that was more akin to the Madden football video game than traditional television coverage20. Given some positive feedback, NBC subsequently experimented with using that view as the primary position for a further game in November of this season21. It did show up some limitations in the approach (in particular for long passes downfield – often the most spectacular plays of the game) but on the other hand, it provided what was at times an optimal perspective for running plays.
Regardless of the success of this specific initiative, it is a positive development to see production teams taking a step back and re-imagining how vision should be presented on screen, particularly as technological developments mean that we are less and less bound by the limitations of where weighty, immobile camera equipment can be placed. It is almost inevitable that as drone technology develops in terms of on-board camera quality and battery capacity, there will be certain sports whose presentation perspectives will look very different than they do today. For others, production costs will be cut – the need to install at great expense tracking cameras on rails to follow the 100m sprint or a moguls skier may disappear where a drone camera can do the same job for a fraction of the price.
Mobile content presentation
There is still, however, somewhat of a lag in the development and production of content which is optimized for viewing on a mobile device. It is one of the strange quirks of the sports media world that a significant amount of resource and attention is devoted to virtual and augmented reality opportunities, but very little to optimization of mobile content presentation. No doubt VR and AR technologies are likely at some point to completely revolutionise how we consume live sport, and even now they are already making an impact. Until then though, around 5 billion people across the planet are expected to possess a smartphone by 201922 and many have a desire to watch sports content on that device. However, the presentation of live and highlights content in a mobile-friendly manner is, aside from the NBA who have innovated in this area for several years, relatively limited. This feels like a missed opportunity and one that is worthy of more urgent attention.
For instance, I really do find it surprising that sports like cricket and baseball, which are not played in a “side to side” fashion like football, basketball, etc, have not experimented with presenting games (or at least highlights packages which can be enhanced through post-production) in vertical view, as opposed to the traditional horizontal format. This would have the dual advantage of catering to the preferred way of holding a mobile device and also present a picture far more capable of focusing on the key area of play (e.g. the pitch in cricket). For most sports, even making available a mobile-optimised feed with less graphics creating screen clutter and thus, maximizing the space for vision of the actual play during action sequences, would be an excellent start. Ironically though, cricket’s oldest and slowest format - test matches - have turned into far more watchable affairs on mobile of late thanks to the introduction of day/night tests. The fluorescent pink ball used in those matches is infinitely easier to pick up on a small screen than the traditional red ball (or even the white ball used in limited overs games)!
One interesting aspect of the coverage of the Olympic Winter Games PyeongChang 2018 just passed though was US broadcaster NBC making available live snippets of coverage on Snapchat23, within the Snapchat Discover section of the app. This was notable for a few reasons over and above NBC making live coverage available via a social media platform. First, the live video feature has only been made available to Snapchat’s publishing partners as part of the launch phase. One would expect it to be rolled out to the wider user base in future and it is perhaps an indication that Snapchat sees “live” content as an important part of its strategy moving forward. Second and more relevant for this discussion, Snapchat took the live horizontal broadcast feed from NBC and turned it into a vertical video for presentation within the app, negating the need to film and deliver a separate vertical oriented feed. Perhaps this new technology, combined with YouTube updating its app in late 2017 to play vertical videos in full screen24 (rather than within a horizontal box), may mean that 2018 becomes the year when vertical video goes mainstream.
Consumption trends – the McKinsey report
Notwithstanding some of slow adoption of mobile focused approaches though, thanks to an extremely insightful bit of research from McKinsey which was published during the year, some of the prevailing myths – particularly around the consumption of sport by young persons – were either dispelled or at least moved from a position of relatively superficial analysis25. Entitled “We are wrong about millennial sports fans”, some of the key takeaways from the report were:
the drop in ratings for certain premium sports properties was not primarily due to a loss of reach among “millennials” and “Generation X” fans, it was that they were tuning in for less sessions and for shorter viewing periods. Essentially, given the vast array of alternative entertainment options (both sport and non-sport), people were watching less games and for a shorter span – they were no longer willing to engage with irrelevant matches or uneven contests;
segmenting fans by age/generation is less instructive than looking at their life situation (e.g. millennials living at a family home vs on their own and those with children vs without children);
contrary to popular belief, millennials and Generation X fans watch a similar number of live sports contests per week and an almost identical quantity of highlights and other non-live sports video. Where they do differ is that millennials are far more likely to use streaming technology to watch this content and to follow sports via social media platforms; and
rather than the availability of highlights content being an effective replacement for watching “live” broadcasts, those who watch a significant amount of such content are actually three times as likely to subscribe to a sports OTT service than individuals who do not. Furthermore, fans following players and teams via social media platforms are twice as likely to subscribe to such a service as people who do not.
Given one of the key themes from the introductory notes last year was that we still have a relatively simplified understanding of content consumption and that it was likely that a lot of our assumptions about what content was attractive to people in specific situations were flawed, having an analysis which considered some of these points in a sophisticated way was a positive step forward.
Regardless of the value of the McKinsey report though, particularly for those of you who work within a sports property, if there was one article from the last year which I would urge you to read, it is Eugene Wei’s “Beware the lessons of growing up Galapagos”.26 While not focused primarily on sports media rights, it is a brilliant discussion of sports properties as cultural products and quasi-religions that have developed as such in an “age of entertainment scarcity” and asks some pertinent questions as to how such properties can maintain relevance in the modern world. An original and thought provoking read.
The views expressed in this section are the author’s own.
This is an extract from the Media Rights chapter of the LawInSport and BASL Sports Law Yearbook 2017/18. To obtain a full copy of the Yearbook, which contains 10 chapters and over 50 articles like this from the industry’s leading sports lawyers, please visit our website: https://sportslawyearbook.uk/
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- Tags: Broadcasting | Cricket | English Football League (EFL) | Football | Media Rights | National Basketball League (NBL) | National Football League (NFL) | OTT | The FA | UEFA Champions League | UEFA England & Wales Cricket Board (ECB) | United Kingdom (UK) | United States of America (USA)
- Key contemporary trends in the UK sports media rights market (2017/18) - A view from industry
- Decoding the Indian Premier League Media Rights Sale – Part 1
- Key updates on copyright protection and enforcement for sports media rightsholders
- Launching new sports competitions: key considerations for licensed and unlicensed events
About the Author
Andrew Ryan is Head of Media Legal and Business Affairs with the International Olympic Committee's Television and Marketing Services entity. He advises on all commercial media aspects of the IOC’s operations, with a primary focus on both rightsholder broadcast partner relationships and the Olympic Channel which was launched at the conclusion of the Rio 2016 Olympics. Prior to joining the IOC, Andrew spent four years with Perform Group where he was Head of Legal (Commercial). Perform Group is a global leader in the commercialisation of multimedia sports content across internet-enabled digital platforms. During 2016, he was heavily involved in the development and launch of Perform’s OTT service “DAZN” and negotiated the ground-breaking 17 year strategic media partnership with FIBA which involved the creation of FIBA Media.