For all that it has grown in recent decades, and for all the space it occupies in the affections and imaginations of so many millions of people all over the world, sport is always beholden to industries bigger than itself. Of no business is this truer than broadcasting. Billions in rights income has not only bankrolled professional sport but, in many cases, ensured the future of organisations at the grassroots.
The result is that sport has changed in television’s image – moving timeslots, changing formats, and in some cases adopting rules or modes of officiating that are inspired by televisual aids. The relationship is symbiotic: the leading sports properties are becoming more reliable drivers of interest and revenues for broadcast platforms than almost anything else.
Episodic television has long since passed the point where its primary value is on its first airing. Most broadcasters in major markets now have comprehensive on-demand services, giving viewers access to newer programming for limited windows and to libraries of older series.
The viewing habits of younger generations suggest that the traditional television model will only become less consequential. According to a report released by the research agency Childwise in January 2016, less than a quarter of British children watch television as it is broadcast. Subscription on-demand viewing service Netflix is watched by that group more than any conventional TV channel. 38 per cent watch most of their television programmes on demand and for 15 to 16-year-olds – notably less likely to watch with their parents – less than a quarter watch programmes as scheduled.
In the US, ratings and data giant Nielsen – which bought into the sports industry through its takeover of Repucom earlier this year – has been producing its Total Audience Report on a quarterly basis since 2011. Released in September, the latest edition found that traditional TV viewing among the slightly older 18 to 24-year-old demographic had dropped by 38 per cent in that five-year period. Among those aged 25 to 34 the drop is less pronounced at 25.6 per cent, but these are the last generations to have grown used to watching television in the era before on-demand became mainstream.
If the changes in the entertainment industry have shown anything, it’s that none of the old certainties are that certain any more.
At this stage, television looks to sport as a vessel of many of its former practices. Live sport, in particular, creates an appointment to view. This is obviously true of headline events like the Super Bowl or major soccer finals, but it is also a factor lower down the scale. As Television, the Royal Television Society’s members’ magazine, noted in September, UKTV’s deal to show former WBA world heavyweight champion David Haye’s comeback fights on its Dave channel delivered ratings of up to four times those of its regular entertainment output. The boxer’s first bout drew over three million British viewers in May; a second brought in a peak of 2.5 million.
Outside of sport, the alchemy of what makes a must-see, appointment to view event is harder to distil. Despite its availability live across multiple digital streaming outlets – and all manner of sliced and diced, shareable video forms within hours of the event – 83 million Americans watched the opening presidential debate between Hillary Clinton and Donald Trump on television on 27th September: fewer than the giddy forecasts of over 100 million, but more than had ever watched a debate before. Yet the sole vice presidential debate between Tim Kaine and Mike Pence attracted 37 million viewers: 14 million fewer than had watched Joe Biden and Paul Ryan in 2012.
Broadcasters are still making long-term bets on sport, and few are bigger or longer-term than that taken by US network NBC on the Olympic Games. Back in May 2014, it signed a US$7.65 billion deal with the International Olympic Committee (IOC) to continue showing every Games until 2032. It is by far the most significant financial arrangement the IOC has in place.
Yet the organisation has made its own move towards a more digitally minded future. On 21st August, to coincide with the closing ceremony of the Rio 2016 Games, came the launch of an over-the-top (OTT) digital service called the Olympic Channel. Much discussed since its confirmation in December 2014 as part of IOC president Thomas Bach’s Agenda 2020 reforms, the channel’s output includes documentaries, coverage from past Games and other content contributed by member federations.
Timo Lumme, the managing director of IOC television and marketing services, says the body is “at the beginning of a journey with the Olympic Channel”.
“It is perhaps one of the most important outcomes of the Olympic Agenda 2020 process and has set out a clear objective and plan for the Olympic movement to engage with younger generations,” he says. “We believe it will be a major shift in how we attract and communicate with young people, offering new generations of Olympic fans the chance to discover, engage and share in the power of sport and the excitement of the Olympic Games all year round on platforms and in a voice that is relevant to them.
“We have so far reached partnerships with two worldwide TOP partners, Bridgestone and Toyota, who are supporting the Olympic Channel as founding partners. We are in ongoing discussions with other partners regarding the founding partner opportunity up to 2020, and post 2020 we plan to integrate the Olympic Channel platform into the overall TOP Partner package. We believe this will offer significant incremental value for the IOC and for the partners.”
For the IOC, the Olympic Channel has been conceived as a means of retaining contact with audiences – younger ones, especially – between Games. The channel’s strapline is: ‘Where the Games never end.’ Other OTT projects are afoot that have a more straightforwardly commercial bent, and they are inspired by what has been happening elsewhere in broadcasting.
Netflix got its real start when it moved into the direct mail DVD rental business in 1998, a service born of the convenience of home delivery but catalysed by the fact that the new discs were easier to put in the post than bulky video cassettes. It followed that up with a streaming service in 2007, just before its mainstream rivals were prepared to do so.
Between them, online streaming and DVDs led to the rise in ‘binge-viewing’, whereby viewers consume series in lengthy bursts or in their entirety, rather than week to week. The result is that where Netflix and its ilk initially rose to prominence as the slayers of the home video rental industry – seeing off physical rental outlets like Blockbuster Video – they are now profoundly changing the business of television.
Netflix, and rival services like Amazon Video, are now working to reinforce those trends through their own programming efforts. Initially, these services competed on which films and TV series they could pick up from other companies’ archives. Now, they are producing their own in increasing numbers: according to The Hollywood Reporter, by the end of this year Netflix will have increased its original output by 3,050 per cent since 2012.
Netflix’s budget for acquisitions and for original programming and films is set to rise from its current level of US$6 billion. It has committed aggressively to creating ambitious shows that traditional networks might like, but would rarely risk – the likes of anthropomorphic Hollywood satire and tragi-sitcom Bojack Horseman or the thoughtful Aziz Ansari-led, Peabody Award-winning comedy Master of None. It retains those programmes exclusively and signs creatives up to more favourable, certain terms than they would get elsewhere. More pertinently, it also releases entire seasons at once so that they can be watched at the viewer’s leisure – or in one sitting – from launch.
New subscribers for Netflix slowed to 1.7 million in the second quarter of 2016 but it still boasts 83 million worldwide and 46 million in the US. Irrespective of the fate of the company itself, however, the OTT model it has embraced and pioneered has already changed the industry. According to estimates released by research firm SNL Kagan in August, Q2 of 2016 also saw 800,000 Americans indulge in ‘cord-cutting’ – or cancelling their pay-TV subscriptions.
“It is a bit of an acceleration and the biggest quarterly loss that we’ve seen,” said SNL Kagan analyst Ian Olgeirson, speaking to the Los Angeles Times. “We are seeing a gradual increase in the decline rate.”
Premium sports channels have hitherto used cable and satellite platforms in most markets as their point of contact with the consumer, and been used by those platforms as an incentive to stay on long-term deals – even as the entertainment offerings that are included become less attractive relative to what is available elsewhere. If the rise of cord-cutting continues alongside the further normalisation of OTT subscription services, it is only logical that sport would look to adapt.
In August The Walt Disney Company confirmed its US$1 billion deal for a 33 per cent stake in BAMTech, the technology company and live streaming specialist spun off from Major League Baseball Advanced Media (MLBAM). That enterprise began at the turn of the century as a means of developing online tools for the 30 Major League Baseball (MLB) teams, creating websites and other assets. It developed into something much larger, not only offering a broader range of services to those teams but also moving into digital rights arbitrage and white-label video streaming for the likes of World Wrestling Entertainment.
In August 2015, as if to underline the extent to which it had grown beyond its initial baseball remit, MLBAM signed a six-year, US$600 million deal with the National Hockey League (NHL). BAMTech, whose devolution followed that agreement, is among those companies best placed to lead sport into an OTT era – it has developed ahead of the curve, and out of the limelight.
“We made our mistakes – we still make them, but we made a lot more in ‘01 and ‘02 – when no one was really paying attention,” said MLBAM president and chief executive Bob Bowman, speaking to SportsPro last year. We bet big on broadband. Broadband was not widely distributed but we sort of built our site, which at the time was just a website, based on broadband: lots of video. Then we made another big bet on mobile in ’05, before iPhone, before the App Store, before any of that started, and that combination of mobile with video turned out to be great.
“We started streaming live games before anybody did that and now that leads us to where we are today, where live games and live content and so-called ‘over-the-top’ is what everybody’s talking about. But you combine video with mobile with broadband capability, along with a game that’s played every day, and where fans are as passionate about baseball as they are about European football, it’s a pretty good combination.”
Disney, which owns ESPN, has a four-year option on a further 33 per cent stake in BAMTech and is planning to work with the company to create a new online streaming service. That service would not initially feature any current ESPN content. Notably, however, Disney is also beginning to make ESPN available outside of cable packages in the US, on more internet-based platforms like Sling TV. ESPN subscriber numbers declined to 92 million at the end of the 2015 financial year, down from 99 million two years earlier, and that figure has still been dropping through 2016.
“Our investment in BAMTech gives us the technology infrastructure we need to quickly scale and monetise our streaming capabilities at ESPN and across our company,” Disney chairman and chief executive Bob Iger said on confirmation of the deal.
“We look forward to working closely with BAMTech as we explore new ways to deliver the unmatched content of The Walt Disney Company across a variety of platforms.”
Disney is only the latest entrant in the race to become the ‘Netflix of sports’. Owned by digital sports and media specialist Perform Group, DAZN launched in Germany, Austria and Switzerland in August with the rights in those markets to live soccer from the top divisions in England, Spain, France and Italy as well as highlights of Germany’s Bundesliga and 2. Bundesliga, while it also offers coverage of the National Basketball Association (NBA), National Football League (NFL), and a range of other sports. It is in Japan, however, where Perform has made its biggest play so far with the new service, snapping up the rights to the J.League from 2017 to 2026 in a ¥210 billion (US$2 billion) deal.
Discovery-backed Eurosport has also positioned itself as a company that can fulfil the role of a premium OTT sports channel. It has targeted growth of its Eurosport Player service to at least one million international users, and Discovery Communications chief executive David Zaslav told the Goldman Sachs Communicopia conference in September that the product was central to the company’s future.
“We own it all and when we go to the player and charge US$8 per subscriber we’re in a whole different game,” he said. “For us, Eurosport direct-to-consumer fills the full circle of where the world is going.”
The Sportsman Media Holding is a German-based trader in media rights and has run its own OTT video service, Laola1.tv, for several years. Earlier this year, the group was acquired by sports data services company Sportradar, which is best known for its betting monitoring integrity products but is seeking to expand its offering in other areas.
“What we were lacking was the expertise or knowledge about the whole data world,” says Stefan Debus, the head of business development at The Sportsman. “My understanding is that within Sportradar there was some knowledge built up with regards to media rights or streaming, but it was not really prominent in the old Sportradar structure – that was a focus on data topics and data products.
“Now, putting both pieces together, I think we have a very strong market proposition.”
The Sportsman has developed expertise in one area where the over-the-top delivery of live sport has been a going concern for some time. In 2005, in collaboration with what is now Bwin and “together with our technical colleagues, experts in the streaming field”, it created the concept “of putting live streams beside the technical product” on gambling websites.
“Since we were a traditional media rights agency, we knew that it was important to safeguard the TV rights and to find the way of how to create a new rights settlement – the betting rights, as we called it – and to have both working in parallel,” Debus explains. “So what we developed was a solution where you have some sort of limitations with regard to size, with regards to technical quality and bandwidth restrictions, and also with a registration process for betting users that actually want to access this. So by doing that we were able to carve out those rights and were able to still distribute media rights traditionally.
“This is still valid today and the product for the betting industry is totally different to what it is for TV because the people that are accessing the streams on the betting side are not really interested in watching a 90-minute football match, for example, in a small format and reduced quality. It’s more to enhance the betting product to drive people to the site and keep them there. And also to attract interest to other sports, because obviously we have a focus on football – we have premium football rights like the Bundesliga and the Spanish Copa del Rey – and now together with Sportradar a big proposition with the ITF [International Tennis Federation], and with Tennis Australia for the Australian Open.
“We’re trying to build up a streaming proposition which is available 24 hours a day, 365 days a year, so that there’s always something going on with regards to moving images. Obviously, the betting offering for the various customers is much broader, so we try to have a full programme over the week to send people to the web pages and to keep them there.”
Operating an OTT offering brings myriad complications and Debus explains that the technology behind the system is key to its viability, “because we are currently, in a joint portfolio, handling 30,000 live matches a year, and with quite a significant number of customers and quite a complex package structure which we sell, sometimes territory by territory or in territorial packages”.
“You need to have a very strong engine,” he adds. “You need to have a very reliable stream so that the right picture is linked to the right bet and delivered in the best possible quality to the customer or the betting partner.”
In the specialist, sealed-off betting rights marketplace, Debus notes that “so far there has never been a rights product that has been sold individually by an original rights owner”.
“For example, the Bundesliga has so far not sold the rights directly to the customer because even though the Bundesliga is quite a strong proposition, it is not strong enough to convince the betting operator to have a new technical set-up,” he explains. “So what the betting operator is looking for is a big proposition, a very broad portfolio with different sports so that he can have the full programme on his webpage.”
Whether a major rights holder would be moved to open a mass market OTT route to the consumer is another question. The scale of the technical and marketing operation would suggest otherwise, and it may be that any OTT sports offerings for now remain part of a traditional multi-sports channel model.
“I don’t think it will totally replace the TV product as it stands today,” says Debus of OTT sport. “I cannot really give an outlook of how the situation will be in three, five or ten years from now. I think it is also a question of how different people, the different generations, will consume their media. I think TV will obviously remain an important product but OTT will grow and it will be interesting to see how both will go along together, or whether they will be in competition with each other.”
He adds: “I think we will see quite some time where both will still be there in parallel, and probably OTT will take away some of the business from the TV product, but I don’t think it will be a complete switch – not within the next three to five years.
“Which doesn’t mean that there aren’t certain markets where OTT will soon become more important or more prominent than the TV offering.”
However the market develops, sport is now emerging as a significant factor in how the leaders in the digital broadcast landscape will differentiate themselves. The current NFL season is the first to have games streamed live on Twitter. In April, the social network signed a ten-game deal for the rights to Thursday night games from the ongoing season alongside linear free-to-air TV coverage. The size of the agreement – reportedly worth US$10 million – suggests that the social network is very much dipping a toe in the water, rather than taking the plunge, though a subsequent partnership with MLBAM for access to one out-of-market game a week in MLB and the NHL hints at an unfolding strategy.
For rights holders, deals like those available from Twitter are a means of growing exposure in the short term. In the long term, however, it is already apparent that digital platforms are positioning themselves for more formal and fee-based partnerships with sporting leagues and organisations – a process already underway in China, where the likes of Sina Sports and Le Sports are building content arrangements that go beyond marketing and promotion.
One of the companies seen off by Twitter in the race for those NFL rights was Amazon, which is said by Bloomberg to be marshalling resources for the creation of a new sports outlet alongside or as part of its Amazon Video service. In March, it hired former CBS and Sports Illustrated executive James DeLorenzo as its head of sports; to his team was added former YouTube executive Charlie Neiman, while a principal content acquisition manager for sports was sought a few months ago. For Amazon, with its massive and diverse set of operations, there are a very wide range of possibilities in sport but the possibility of concerted investment in rights fees is perhaps the most significant.
It may be some time before sport – and major live sport in particular – becomes decoupled from the traditional TV model, and just as long before rights monies become more significant from digital media than they are from traditional broadcasters. But the market is in flux. The challenge for those in sport is to be ready to connect.