The sheer size of the revenues rights holders generate from pay TV is one factor slowing down the online migration of sports content. Rights holders are wary of moving from a model of licensing rights to third-party operators, which would risk ending what has been a golden era for them. For all its faults, the bundling method of selling channels to consumers is still one that enjoys widespread consumer acceptance.
In many parts of the world, but especially North America and Western Europe, pay TV growth is leveling off and operators are competing for market share more than building new customer bases. In the latest Premier League rights auction, two packages went unsold in the initial round and incumbents Sky and BT both reduced their payments over three years. Beginning in 2019, both companies will begin wholesaling one another’s sports channels. In Spain, Telefonica was able to trumpet a 5 percent decline in its payments for La Liga as it regained control of 90 percent of the live rights from the 2019 to 2020 season.
While escalating pay TV rights have priced free TV out of the market for many major events, sports remain an important part of the free-to-air schedule. In the US, most NFL, NBA or MLB games are broadcast by the team’s local TV station, despite the near-total penetration of pay TV. Rights holders of the Olympics, World Cup and Euro finals (the IOC, FIFA and UEFA) have managed to secure significant increases in their revenue from rights, despite mostly selling to free TV.
Like pay TV operators, broadcasters have also been active in offering events online, as well as on linear TV. The BBC reported a record total of 66.8 million online match requests throughout the 2018 World Cup finals, including 3.8 million live requests for the quarter final match between England and Sweden. The match also aired live on BBC1, capturing 89 percent of the TV audience at peak.
Specialist cable networks like ESPN and Discovery’s Eurosport are those most exposed to a perfect storm of cord-cutting and rising rights costs. ESPN’s customer base has fallen, from 99 million at the end of September 2013, to 88 million at the same point in 2017. The move online has been slow; 10 years separate the launch of Eurosport Player and ESPN+. For cable channels, the revenue benefits of a direct-to-consumer move have to be weighed against the potential effect on their traditional businesses, which will continue to comprise the overwhelming majority of revenue for the next five years.
ESPN’s online offer, revised in the first half of 2018, combines three key elements: “TV Everywhere” access to its core linear channels; ESPN+, a new direct-to-consumer online channel offering documentaries and second-tier rights to popular sports; and a platform allowing users to subscribe to some leagues’ online offers, if they also subscribe to ESPN+, for example MLB.tv and an announced offer from UFC.
Traditional linear players are facing a growing challenge from online video services. Amazon has been ramping up its sports content, striking a total of eight deals since its 2016 acquisition of NFL Thursday night games in the 2017 to 2018 season. Most of this content has been focused around adding value to the Amazon Prime subscription in the core e-commerce markets of the US and UK. YouTube TV, the Google-owned company’s “virtual pay TV” offer, has launched in the US, corresponding with a renewed interest in acquiring sports rights.
Social media – especially Facebook and Twitter – have quickly become an integral part of sports. The lead-up to events, the events themselves and post mortems are all part of the conversation around sports, with rights holders, teams, players, event organizers, sports federations and fans joining in. According to Nielsen, while the 2018 Super Bowl final had a TV audience of 103 million it also generated 170 million social media interactions, of which 122.1 million were on Facebook, on the day. In a natural progression, social media companies are now acquiring live rights to sporting events.
Facebook has live streams of Wednesday afternoon and Friday night Major League Baseball (MLB) baseball games, MLS and Liga MX football and more niche events like the World Surf League on its Watch service. The social media network is preparing the way for a further push into sports by acquiring rights to the English Premier League rights in Southeast Asia and La Liga in the Indian subcontinent.
Pure online subscription services specializing in sports are, however, very rare. DAZN, owned by the UK’s Perform Group, is one of the few online-only players to have launched into the sports space. Other services have a foot in both the linear and online worlds: Eleven Sport, owned by Aser Media, operates 15 linear channels in Europe, Asia and the US, but is online-only in Italy. Services like fuboTV and Sling TV in the US distribute online versions of channels also available via conventional means, while operators like MTG and Sky now offer the option to subscribe to their sports channels online outside a traditional pay TV contract.
IHS Markit estimates that DAZN, the only pure-play online player, had just over 300,000 subscribers at the end of 2017, which will rise to 900,000 by 2022. This forecast is only for the five countries it was available by mid-2018 (DAZN has since launched in Italy.)
However, the main opportunity for specialist online players is to identify sports that have difficulty in finding space – or at least a prominent position – on linear TV channels. Even specialist pay TV channels expect to aggregate audiences above a certain size. The internet is a natural home for less mainstream sports, many of which have been quick to exploit the opportunity of streaming. With its potentially global reach, the internet offers the possibility of aggregating highly engaged and underserved groups of fans in multiple territories.