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Is it Inevitable that the TV Industry Will Lose Major Sports Rights to the Digital Giants?

VideoAdNews, December 12, 2017

By Vincent Flood

Speculation about the US digital giants moving into sports streaming has been commonplace for years now and in recent years we’ve started to see them dipping their toes in the water. Twitter won digital broadcast rights for Thursday Night NFL last season, which were then won by Amazon this season. Amazon also outbid Sky last summer for UK broadcast rights for the ATP World Tour, whilst Facebook streamed a number of MLB and MLS games this year.

However, these moves have been piecemeal and it remains to be seen whether the companies sometimes referred to as GAFA or GAFAN when you’re including Netflix (Google, Apple, Facebook, Amazon, Netflix) will play a supplementary role to the TV establishment or if they’ll be willing to compete for the exclusive rights to major deals like the Premier League, the Olympics, and the NBA in the short to medium term.

Analysts have marked out 2021 as a potentially pivotal year, with sports rights up for renewal including NFL Monday Night Football and MLB in the US and The Champions League and Bundesliga in Europe. There’s also a big opportunity coming up in 2018 as the Premier League’s rights are up for grabs, and if Amazon or Facebook were to snatch a sizeable package away from Sky and BT it would be a cause for serious concern amongst the TV establishment. The question remains though, will the likes of Facebook, Amazon and Apple be able to outbid the legacy broadcasters, and would they be able to monetise the content as effectively if they did?

Cash Imbalance

It’s quite clear that when it comes to financial resources, it’s no competition. As GroupM’s recent ‘The State of Video’ report put it, “Apple has enough cash to buy the NFL, NBA, MLB and NHL rights, and all the teams too.” Amazon has a market cap of $576.96bn compared to Sky’s $21.4bn, so there’s no doubt that these companies could blow the likes of Sky out the water if they wanted to.

So it’s not a question though of whether they could win, but rather we have to ask whether it would be desirable for them to win in practice. WPP’s CEO Martin Sorrell told the Leaders in Sports conference earlier this year that while he expects the likes of Amazon to compete for rights, he also predicts BT and Sky to retain the Premier League rights, as they’re so crucial to their business plans in terms of promoting their wider TV and broadband products.

“It works well for broadcasters at the moment, having a subscription fee and an ad funded model beside it which you use to push your full portfolio of products,” Phil Stephan, director of global consulting at sports marketing agency Two Circles, told VAN. For example, when BT launched its sports channel, analysts noted that the loss-making venture was an effort to win broadband subscribers back from Sky.

Over on the tech side, major sports rights would be a risky investment for the likes of Google, Apple and Facebook who have relatively immature OTT platforms and app offerings. The exception could be Amazon, as the retail behemoth could use sports content as a beachhead for ecommerce sales, or to attract new customers to its Amazon Prime deliver and content service.

Long-term Monetisation

In the long-term, any rights holder will have to look at ways to keep audiences engaged with sports. Interestingly, GroupM’s report found that viewership for live sports is dropping for younger audiences, and suggested that the formats may have to be revamped in order to boost interest and engagement amongst younger demographics.

“We believe that formats will evolve to become more personalised, and experiences will evolve to become more personalised across all the different platforms” said Richard Hampson, SVP of market insights & analytics ESP Properties, a commercial and creative adviser for sports and entertainment rights holders.

Digital platforms are undoubtedly best placed to deliver on personalisation, particularly when it comes to things like the new forms of live stats that are enabled by emerging technologies, real-time highlights and more interactive content. As GroupM pointed out in their report, mobile and smaller screen environments are also best for delivering those types of services and when it comes to engaging younger audiences.

More obscure sports might also find digital platforms to be best for building a following, since they’re not bundled in a package with more costly mainstream sports and so can reach more people. Larger sports though have already built strong followings on broadcast which they will be reluctant to risk jeopardising. Stephan explained that these rights holders will have a social strategy and will want to reach new audiences over social platforms, but will do so “in an agile way that enables them to protect their existing revenue lines”.

The Legacy Advantage

Before the digital disruptors start to think about long term monetisation, they will have to overcome some much more immediate challenges. Cash alone doesn’t guarantee success and new entrants will find themselves competing with players that have decades of experience in sports broadcasting.

The NFL has been receptive to new bidders for their rights (i.e. the Thursday Night Football package currently held by Amazon), but the NFL’s vice president of digital media business development Vishal Shah feels they don’t offer the same production quality as the TV broadcasters. “Live sports production is something that is still relatively new to them and hopefully something that they’re building a skill set around,” he said this year’s NeuLion Sports Media & Technology Conference. Amazon currently relies on CBS and NBC for production of the NFL games it streams.

There are also issues with live streaming which need to be ironed out. A recent report from Phenix and YouGov found that 72 percent of sports live stream viewers expect latency issues during live streams, which are particularly problematic for live sports where they can cause viewers to miss key moments of a game. As a result, 63 percent of sports fans are reluctant to subscribe or resubscribe to sports live-streaming platforms in 2018.

The current setup for sports rights deals also favours TV broadcasters, and the sales process will have to adapt to new entrants. “From the TV side, broadcasters have an established commercial model which is delivering a brand safe environment and mass reach across engaged fans, which is incredibly attractive to advertisers, and the current way that rights have been sold and packaged up supports that business model,” said Hampson.

All to play for?

There are those who are bullish about the tech giants’ willingness to place big bets on sports rights in the short-term. Juniper Research last week predicted that Facebook and Amazon will bid for, and win, major sports packages next year. However, all of the analysts that VAN spoke to agreed that it is difficult to say anything concrete about who will win future sports packages.

What we’re most likely to see is the tech companies honing their ability to produce sports content, so in the meantime rights holders may follow the NFL’s model of giving non-exclusive or additional content to digital players. This way the rights owners can earn incremental revenue and add further value to existing TV broadcast deals without cannibalising their value.

Looking further ahead, as Hampson pointed out, technology will continue to evolve and drive innovation in this space. Virtual reality, augmented reality, or some other as-yet unimagined tech could change the way we watch sports, and hand the advantage to whichever platforms adapt to it most quickly.

“The digital channels present new opportunities as well as a bit of risk, and the rights holders who are best placed to succeed are the ones who recognise both the opportunities and the risk and are able to navigate that by a real understanding of where can they can add value beyond just rights fees,” said Stephan.

For those competing for rights, demonstrating their long term value to rights holders, rather than just offering huge rights fees, may be key for winning the battle for the future of sports entertainment.

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