October 15, 2017

This article was first published in World Sports Advocate on 15 September 2017.

The English Premier League is celebrating its 25^th season this year.  BSkyB’s coverage of that first 1992/93 season and the investment in the competition since then has not only transformed the way the UK consumes live sport but also contributed to the development of the most lucrative football league in the world.  After a contract race reportedly conducted in a very different way to the structured, open and transparent tendering process which is now rigidly adhered to, BSkyB beat ITV to those rights with a bid of £304m over 5 years^[1] and anchor Richard Keys exclaimed its opening programme: “Weekends will never be the same again…  It’s a whole new ball game for all of us.”

Twenty-five years on, competition for the acquisition of audio-visual sports media rights has never been as fierce, with traditional linear broadcasting now being complemented with and, arguably, threatened by the plethora of digital products which are available to the sports fan.  This article will examine why Amazon’s deal with the ATP is a landmark deal for the UK sports market, compare viewing models and operators in other territories and speculate how “digital” platforms will continue to impact on the licensing of sports media rights as fans increasingly look to online platforms to consume sports content.  It is important to note that this analysis does not even attempt to analyse the broader impact of technology and new engagement experiences outside of the audio-visual environment.  That is for another day.

Background

Average viewing figures for Sky UK’s live sports channels reportedly fell 14% to a seven-year low over the course of the 2016/17 Premier League season.  This was against the background of paying £4.2bn for the 2016/17-2018/19 seasons.  As reported in our April 2017 World Sports Advocate article on internet piracy, this trend is not confined to the UK with NFL viewership in the US being down 9% in the regular season and 6% during the play-offs.  There are, as ever, a number of mitigating factors and academic explanations offered for this but it seems to be universally accepted that one of the causes is the shift in viewing habits with an increasing number of ways to consume content.

Against this background, it was announced on 1 August (exactly 4 years to the day since BT Sport was launched) that Amazon had beaten Sky to the exclusive media rights to the ATP World Tour from 2019.  The agreement covers the ATP World Tour Masters 1000 and Masters 500 events, including tournaments in Monte Carlo, Madrid, Paris, Miami, Indian Wells, Shanghai and the end of year finals in London, and it is understood that Amazon has paid around £10m per year (supposed an increase from the £8m per year currently paid by Sky).  It is not so much the amount paid by Amazon (sources have reported that Sky had refused to match the fees from the current deal) but the fact that this is the first major live sports media rights deal which Amazon has completed outside of the United States.

There has been speculation about Amazon’s move into live sports for a number of years and the ATP deal signals that the already competitive UK market for premium sports media rights (following the entry of BT) could be about to welcome another new significant player with established digital platforms going head-to-head with broadcasters (who both also happen to be deep-pocketed ISPs).

Live sport

This is Amazon’s second major sports media rights deal in the last few months following its global arrangement with the NFL in April to stream 10 Thursday Night Football games.  This deal (for essentially non-exclusive rights) was for a reported US$50m (five times the price paid by Twitter for the same rights in the previous season).  Amazon also recently obtained the rights to stream audio commentaries from Bundesliga matches via Alexa through its Amazon Music service.  This acquisition activity coupled with its Echo feature and the launch of channel services on Amazon Prime Video in May 2017, which, amongst other things, allows viewers to subscribe to the Eurosport Player for £6.99 a month[2], demonstrates Amazon’s intention to dominate the living-room; the ever changing TV landscape; and the rise of internet delivered over-the-top (OTT) services.

In its report for Ofcom on linear and non-linear viewing habits and attitudes published in May 2016, Kantar Media found that the majority of participants favoured linear viewing of “event TV” content “to avoid spoilers and be part of the conversation” and recognised, in particular, a strong preference from “linear viewing of live sports events”.

A lot has been written about how live sport will be the next genre to follow the Netflix model of flexible consumption but these services have been around for a number of years already.  Coliseum Sports Media beat Sky Television in New Zealand to the live Premier League rights in 2013 and, following launch, prompted almost immediate interest from ISP, Spark, and is now operating under a joint venture as Lightbox Sport.  More recently, DAZN, the OTT service launched by Perform Group^[3] in 2016 in Germany, Austria, Switzerland, Japan and now, in 2017, Canada has had notable exclusive rights wins over incumbent broadcaster operators (including Premier League in Germany and the J-League in Japan).  These services offer monthly subscription options at a single price point.

Interestingly, whilst Sky’s TV audience in the UK declined, it saw a 31% increase in sports viewing through Sky Go, its bonus internet simulcast service, and has also made its sports channels available through its Now TV service for a day rate of £6.99.  Its response to the changing TV landscape has been to announce preparation for its full television service to be made available over the internet as opposed to delivery via satellite and to revamp its sports channel line-up, replacing Sky Sports 1-5 with sport specific channels – led by football, golf and cricket – and offering subscribers the ability to subscribe to just a single channel for £18 per month as opposed to the full suite for £27.50.  All of this could be argued as a response to the “cord-cutting” threat of OTT operators.

Outside of mainstream sports events, there have undoubtedly been many more live digital deals announced in the last 12 months – the Champions League final via BT Sport on YouTube, MLS and MLB with Facebook, Sky Sports News “Deadline Day” with Twitter and the AFL Grand Final on Snapchat to name a few.  Further, Goal.com live streamed the St Pauli vs Stoke City pre-season friendly and Copa90 has tentatively announced the forthcoming launch of Copa90 LIVE to leverage its 80 million monthly views it currently achieves just five years since launching as a football channel on YouTube.

It’s not only the OTT giants, traditional pay television platforms, social media operators and digital publishers who are seeking to exploit the opportunity offered by high speed internet and a loyal fan base.  The English Football League this year launched its own streaming service called iFollow for overseas fans who can watch all of their team’s live league matches this season for £110.  This follows the model adopted by tier 1 US sports rights owners such as the NFL, NBA, MLB and UFC offering their various Game Pass, Season Pass and Fight Pass-branded products to enthusiasts based outside of the US.  In addition, Formula 1 (now under the ownership of Liberty Media) has been the latest mass market sports product to indicate that it may follow suit with a direct-to-consumer (D2C) product.  As with OTT distribution, whilst many people would see this as an innovative step in engaging with a global fan base, the Professional Squash Association launched SquashTV in 2009 before app delivery had even been conceived allowing their small but dedicated fan base to watch international tournaments from around the world online for a fixed annual subscription.

Engaging short-form content and reach

Fan engagement has been a key theme for rights holders in the last 12 months.  Sports federations and competition organisers will seek to preserve the revenues from lucrative exclusive media rights deals while obtaining the maximum reach and exposure for their sport.  This has been achieved through carving out specific clips packages from tender processes for digital publishers and executing engaging digital marketing strategies with strong brands and popular platforms.

Whether it is in-game clips or other short-form shoulder content, many sports fans these days do not want to watch the full 80 or 90 minutes or a full day’s play and would prefer a 90 second round-up or to follow the action from their desk or mobile phone with highlights.  Making these clips available without a pay-wall significantly improves reach and enables branded-content tie-ups which generate additional sponsorship revenue and exposure.  The revenues from any advertiser or sponsorship funded content will likely pale into insignificance compared to the licence fees generated from primary media rights deals but this exposure is an important component of any audio-visual strategy to broaden reach and awareness and engage with the highly sought after millennial audience.

After a couple of cycles of doing similar deals with Sky, the ECB changed its packaging structure this year to increase exposure of its new 20:20 competition by offering a free-to-air only package.  More clips are now also available via the BBC Sport website.  Cricket is a sport that lends itself well to in-match clips of a wicket or a boundary and bite-sized summaries of a session’s or day’s play and BBC Sport has successfully used highlights from South Africa’s and the West Indies’ tours of England as well as this year’s ICC Champions Trophy to bring the synonymous Test Match Special (TMS) brand into the digital era.

To take another example from the UK market, England Rugby has a very compelling digital strategy without necessarily using match clips.  Its Facebook page and match-day content does not cut across the exclusivity granted to broadcasters but it does engender a significant following through its O2-branded Inside Line features, exclusive coverage from the training ground and generation of immediate post-match reaction often shot on and next to the pitch on a mobile phone.  This content is appealing to the millennial audience who are the most active on social media and are keen to follow engaging short-form content which is current and refreshed regularly.

England Rugby also uses Facebook Live as an outlet for live match broadcasts when it has failed to secure a good enough deal with a broadcaster for its live rights.  In its latest move, Facebook has now launched its Watch tab outside of the US, a new platform that will allow users to easily access a variety of shows, including live sports coverage, across a range of devices.  Partners are offered the opportunity to produce original video content exclusively for Facebook in return for 55% of revenue generated from advertising inserted into the content.  This not only opens up opportunities for live coverage but also tailored, scheduled shorter-form programmes to appeal to Facebook’s broad audience – a further indication that we are not too far away from Facebook launching its own personalised television channel.

Conclusions and Comment

So what does this all mean for upcoming tenders and the structuring of media rights agreements?  Amazon’s entry into the UK marketplace is likely to increase competition and we wait eagerly to see whether they, Google or Facebook will bid for the Premier League crown jewels in the next domestic tender likely to be kick-off before the end of the year – indeed, speculation is rife following the Premier League’s recent public statements about its very positive attitude to “digital”.  Further, given the nature of OTT distribution and the continued discussions in Brussels around the Digital Single Market, is this an opportunity for the Premier League to sell pan-European rights?

Rights holders are also likely to use carve-outs and holdbacks/windows in a much more sophisticated way in their next round of media rights negotiations – the ability to launch their own D2C live streaming services, freely license clips packages to online platforms, complete global digital deals for a portion of live matches and holdback virtual or augmented reality opportunities are likely to become commonplace.

Initially within the confines of its commitments to the European Commission, the Premier League has been able to create packages and window content very effectively since 2006, optimising the return of revenues and generating a broad global exposure for the league.  By and large, this has been through traditional (live, delayed and highlights programming) media rights deals with linear broadcasters in addition to a limited clips package for internet/mobile distribution.  Content consumption has changed beyond all recognition since 2006 (never mind 1992) and a rights holder’s distribution (and digital) strategy will depend upon the sport and the market in which it is operating.  In the same way that the deal in 1992 was a new ball game for BSkyB and the F.A. Premier League (as they were both then known), the World Surf League’s deal with Facebook in March this year may yet prove to be a game-changer for both: a rights holder who has to date achieved limited coverage due to events being frequently postponed at short notice; and a digital platform with the audience and scale to compete with traditional operators for the distribution of live sports coverage.

[1] After being informed that ITV had offered £262m it is claimed that Alan Sugar, the chairman of Amstrad (who made BSkyB’s dishes at the time) and chairman of Tottenham Hotspur was heard on the phone to BSkyB exclaiming “blow them out of the water” (a claim which has since been denied). In the end BSkyB reported paid around just £190m, after certain foreign sales targets were not met.

[2] Even more recently, on 17 August, Amazon has completed a deal with Discovery for the Eurosport Player in Germany and Austria.

[3] In 2009 Perform Group was also responsible for the streaming and distribution of the England national team’s first internet-only PPV competitive match when England played Ukraine in a World Cup qualifier.