Industry Trend Analysis - Sports Next Battle Between Traditional And OTT Players - OCT 2017
BMI View: Should they choose to, OTT players could become major players in the sport s content market. As usage is geared towards streaming, they have the financial clout to outbid their rivals, which are rationalising their spending as price inflation hit s premium sport s content . Fragmentation and the live nature of the content will continue to be hindrances in the short-to-medium term however.
Disney, owner of ESPN, has increased its stake in streaming technology developer BAMTech to 75%, with plans to launch a direct streaming service in the US from early 2018 (see ' Hulu And ESPN Show Streaming Comes At A Price ' , August 12 2016). At the same time, Amazon has reportedly outbid Sky for the broadcast of Masters ATP tennis in the UK market (see ' Amazon, Spotify And The Drive To A Subscription Model ' , April 6 2017). These two events highlight the shift in the perceived value of sports content through the advent of streaming services and new usage patterns, and we expect the over-the-top (OTT) players will be a major threat to traditional broadcasters, because of their financial clout, making subscription rather than advertising the prevalent model.
|Source: Companies, Press Reports, BMI|
Sports content has always been a key differentiator for broadcasters, because of the audience it brings and the advertising rates that can be charged. This has become even more crucial with the evolution of on-demand and binge watching, through Netflix for instance, as sport has become the prime live event. At the same time, some telecoms operators, like BT or Altice, have become aggressive actors in acquiring those rights, seeing them as a key tenet of attracting and retaining customers on their traditional platforms (see ' Premium Content Costly, But Beneficial For Operators ' , January 14 2016). This means that a combination of advertising and subscriptions is required to recoup the money spent on broadcasting rights, which has kept on increasing. As an example, March 2017 saw BT spend GBP1.2bn (USD1.4bn) to renew the rights for the Champions League in the UK, having spent GBP897mn just three years previously; the 35% is indicative of many content auctions across Europe.
The combination of high prices and streaming has changed the structure of the sports content market. Players like ESPN, wary of cord-cutting and the loss of subscribers on traditional platforms, are looking to expand their offerings, through the availability of a streaming service. This will focus on secondary events at first as the prime events will remain broadcasted, because of their advertising potential, but it allows for a direct relationship between ESPN and its users, when it so far needs a third party to provide its services. On the other hand, OTT players have entered the arena. Some have partnered with current broadcasters, or bid for limited number of platforms (such as online), giving some financial relief to traditional players, by helping them monetise their content or making the rights cheaper. Others have bid for exclusive content, such as Amazon, taking advantage of traditional players focusing their efforts on particular sports and events because of the high prices, giving them the opportunity to enter a less competitive auction, or one where they can outbid traditional players not willing to overspend on what they consider secondary content.
As they have done in the telecoms sector, the OTT players provide a threat to traditional actors when it comes to the future of sports content and broadcasting. The move from an advertising to a subscription model strengthens their position, especially for a player like Amazon which can leverage its other services and does not need to be directly profitable with sport, as is the case with current players. This will not happen in the short-to-medium-term, as traditional broadcasters retain two advantages:
The fragmentation of the content market, where owners prefer to sell on a national rather than a global basis, because it allows them to sell at a higher price. This is even more the case with sports content than with TV or films, with the exception of some niche events;
The fact that sport is and will remain a live experience, and therefore has very different usage patterns than other content, which can be watched on-demand at any time.
The OTT players are cash-rich and have the reserves to outbid all their opponents, even in a market where price inflation has been right. Should prices continue to increase, fewer traditional players will be able to compete, and this could give the right impetus for content owners to sell their rights on a more regional and global basis, giving OTT players an even greater advantage.