Going All-In on Streaming is a Major Risk for Sports Leagues

18 August, 2021 

The sports rights market is in a strange space at the moment. We’ve seen prices start to deflate a little in some countries, as traditional broadcasters try to bring an end to spiralling price wars. But at the same time competition is heating up, in a sense, as new entrants like Amazon, DAZN, and fuboTV compete for major sports packages.

Amidst the chaos, sports leagues themselves are experimenting with broadcasting their own games, via direct-to-consumer streaming services.

Just last week, Reuters reported that Spain’s top football league La Liga is considering launching its own direct-to-consumer proposition. And we’ve seen similar rumours around UEFA’s Champions League.

What stands out about these rumours is that the leagues involved are apparently planning to offer live coverage in the markets where their rights are most valuable. So far, most sports leagues who have chosen to go direct-to-consumer have focused on international markets instead.

The NBA and NFL are two good examples. Both run successful streaming services, which include live coverage of games. But both limit coverage in their US home market, not showing any games which are available on broadcast TV.

Racing competition F1 went a step further in 2018 with F1 TV, a subscription service which offered live race coverage in some of its most popular markets. But even F1 seems to have pulled back a little. Now, in three of its five biggest markets (the UK, Italy, and Germany) F1 TV only offers archive and on-demand content, with live race coverage sold exclusively to broadcast partners.

Major sports associations’ streaming ambitions tend to have been played out abroad for good reason. In international markets, where rights deals are less lucrative, there’s much less risk associated with going D2C. But in domestic markets, an ill-judged attempt to go it alone could compromise rights deals worth billions, and alienate long-standing broadcast partners.

Could subscription fees “dwarf” rights revenues?

The exact risk to La Liga, or any other sports league going D2C in its home market, depends on the strategy it takes.

One possibility is to live stream sports via a D2C service, while still selling rights for the same games to broadcast partners in the same market. They might try to build some measure of exclusivity into these deals – for example by offering exclusive rights for linear TV to a third-party, while keeping exclusive digital streaming rights for themselves.

But this would have a major impact on rights auctions. “One of the big USPs for a company like Sky in the UK or Telefonica in Spain is the exclusive access they have to the majority share of valuable domestic sports rights,” said Alistair Taylor, senior consultant at The Sports Consultancy, a company which helps rights holders with monetisation and broadcasting.

Another option would be to carve out a small package of rights for the D2C platform, while leaving the majority of rights to traditional broadcasters. Bloomberg reported earlier this year that La Liga is carving out new packages for its upcoming rights auction, designed to entice new players to compete for packages. The league could reserve one of these packages for itself, if it wanted to dip its toes into streaming without fully committing.

These sorts of packages might be a hard sell for consumers. A small selection of games can be an interesting add-on for something like Amazon Prime, where they’re just one part of a much larger service. But they’re unlikely to tempt viewers to sign up to a whole new streaming service unless the price is very low.

The final option, and the biggest gamble, would be to go all in on streaming. If a league believed they could monetise their content better than their broadcast partners, they could make all games exclusive to their own streaming platform. They would lose out on income from rights deals, but could potentially make up for it through subscription and advertising revenues.

Chris Jordan, former chairman of Crystal Palace Football Club, believes clubs could make more from going completely D2C. “In my view, the Premier League has the opportunity to become a broadcaster in its own right, and dwarf the revenues it currently gets,” he told TalkSport.

Jordan argued that a global Premier League streaming service charging £8 per month, similar to a service like Netflix, could pick up as many as 100 million subscribers. If it did so, the league would bring in £10 billion each year, not £8.7 billion every three years as it currently does.

But The Sports Consultancy’s Alistair Taylor isn’t so sure that the maths adds up. “One hundred million is the highest possible number of subscribers that sort of service could ever hope to reach,” he said. “The largest pay TV service in the UK has got 10 million subscribers, and Netflix only has 9.8 million. So it would take a long time to get there, irrespective of churn.”

And the number of people willing to sign up to a standalone service for a major sports league might be smaller than would be expected.

“Sports ranks about fifth or sixth in terms of genre preference and propensity to pay for the general consumer. Scripted dramas, documentaries, and news all rank higher,” said Taylor. “So the risk for a league is that they reduce their total addressable audience.”

Sports leagues likely to test the waters

There are definitely benefits to a sports league from making some sort of move into streaming.

As the NFL and NBA have found, a D2C service can be an effective tool in smaller markets, where rights are less valuable. By directly reaching avid fans, rather than bundling with a wider product, sports leagues can charge high subscriptions fees.

And Alistair Taylor said that sports leagues are likely to continue testing the waters with streaming, as they look to build up their stores of first-party data relating to their audiences. The Sports Consultancy published a report on sports sponsorship which found that 15 percent of sponsors say rights holders give them sufficient data. So sports leagues could boost the value of their sponsorships if they were able to provide smarter data on their audiences.

But the fact remains that sports leagues will find it difficult to match their domestic rights revenues by going all-in on their own streaming service.

Broadcasting partners are often willing to pay above the odds for major sports rights because they play into a wider strategy. In the UK for example, BT and Sky use the Premier League to hook people into their TV, internet and mobile packages. Amazon meanwhile has used its limited experiment with Premier League rights to bring in more Prime subscribers.

And as long as partners remain willing to pay over the odds, it’s unlikely that the economics of going all-in on D2C will add up for major sports leagues.

2021-08-18T15:01:52+01:00

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