Media Rights, Cricket, Multiple sports, Rugby, Oceania

The strategy behind Kayo Sports’ post-Covid resurgence

Kayo Sports’ subscriber numbers took a heavy hit in March and April following the coronavirus outbreak, before the return of Australian sport handed the streaming service a lifeline. CEO Julian Ogrin explains how the two-year-old operator managed to come back stronger.

by Steven Impey
The strategy behind Kayo Sports’ post-Covid resurgence

While two years in business may seem like nothing at all, in the life of a startup it is more than enough time for a new concept to either land on its feet or fall flat on its face.

In the two years since Foxtel quietly rolled out its Kayo Sports streaming service in November 2018, the Australian public has given its verdict. After weathering a tumultuous period during sport’s coronavirus-enforced closure, Kayo appears to be back on track.

There was no pomp, and certainly no circumstance, at Kayo’s inception.

In fact, news of the over-the-top (OTT) platform’s rollout was planted discreetly by the Foxtel network on a select few "tech and social forums”, explains Kayo’s chief executive Julian Ogrin, in order to see how consumers would react.

“When we launched the service, we really wanted to be the customer champion,” Ogrin goes on, speaking during last month’s SportsPro Asia virtual summit. “That was the most important foundation that we put in place…to see whether they’d make it the centrepiece for all of their sports considerations.”

Two years later, and Kayo’s Australian customer base has grown in excess of 644,000 subscribers paying up to AUS$25 per month. That’s a 77 per cent increase on the 364,000 paying customers it had on its books this time last year. By comparison, as of 30th September, the Foxtel Now streaming service has seen its subscriber base decline from 375,000 to 298,000 in the space of a year.

Meanwhile, household linear signups across News Corp, Foxtel's parent organisation, have also taken a significant hit over the past 12 months, with pay-TV subscriptions dropping by 209,000 to 1.85 million since September 2019, owing largely to the impact of the coronavirus pandemic.  

Kayo capitalised on Australian sport's resumption behind closed doors

Naturally, sport's hiatus in the wake of the Covid-19 outbreak had taken its toll on the Kayo business, too. By 2nd May, roughly six weeks after the start of Australian sport’s winter codes in mid-March, Kayo’s paid subscriptions had spiralled to just over 272,000.

The outbreak, Ogrin continues, fell within “about a four-week radius” of the platform’s busiest period. After what he describes as “a phenomenal start” and “an explosion of growth” in the first quarter of 2020, stoppages to many of its core sports programming felt “harrowing”. 

Notably, those impacted sports included the Australian Football League (AFL) and National Rugby League (NRL), which were put on hold shortly after the cancellation of Formula One’s season-opener in Melbourne and the National Basketball Association’s (NBA) suspension had sparked sport’s global shutdown.

“We saw a third of our [subscriber] base pause at that time, which was pretty scary, and we didn’t know when we were going to get sport back,” Ogrin continues. “Immediately, we had to pivot and what we did in that period of time was focus on things like classic games and esports.”

There were many broadcasters who took a similar tact. However, for a company that bills itself as the “Netflix of sport”, and one that boasts rights to more than 50 domestic and international competitions, there was only a limited timeframe that Kayo would be able to keep up appearances. 

When live action began to ramp up again in May, that all changed. Kayo was rebranded as “Kayo is your ticket”, Ogrin recalls, reflecting on the rollercoaster that has been the past six months. 

“We were like the only stadium in Australia where all these sports were open [to fans],” he elaborates. As a result, consumption of Kayo’s content has grown by 150 per cent this year, surpassing more than 160 million hours viewed since the OTT service’s launch in 2018.

Short-form video has also played an integral role in driving that engagement, with new initiatives like Kayo Minis – highlights packages of 15 minutes made available immediately after a fixture – proving particularly popular.

“In a large proportion of our customers, sometimes when you get through a on-peak period of a season, they pause – but then, a week or two weeks before the kick-off to a season, they all come back,” Ogrin continues.

“The way we’ve built our business, to continuously dial with our customers, shows that, while most of our customers are what we call ‘pay and stay’, we talk to the others differently and make sure that we have a one-to-one communication.

“As we look to move from fanatics to fans and really build that audience even further, the question is: how do we actually get to new decision-makers? A good example is that so many parents taking their kids to school and Saturday sports, they are not necessarily the fanatic, but their kids are.

“It’s all about our brand and our tone and extending that to the decision-makers for other people. In addition to that, it’s about the experience of being accessible. We are now exploring the option to come in front of the paywall.”

Some 70 per cent of Australian households are streamers. Kayo Sports has played a big role in that growth

Julian Ogrin, Kayo Sports' chief executive

Last month, Kayo announced that coverage for a selection of sports would be made free to access as a way to give customers who choose to pause their subscriptions during the Australian summer to stay engaged with the platform on a freemium basis.

Among the lower-tier disciplines that do not garner as many paying customers as cricket, rugby league and Aussie rules, Ogrin (right) cites motorsport as one of the platform’s fastest-growing sports, one which has the potential to capture a larger audience. As a result, Australia’s Supercars touring car championship is among those sports placed in front of the paywall. By building out a free offering, the hope will be to draw interest in Kayo’s paid programming.

That would likely include Kayo’s coverage from the popular Bathurst endurance racing series, which Ogrin says is clocking “longer engagement” times, with its six-hour event garnering 250,000 unique viewers and 550,000 total hours consumed.  

“When people come into an event on Kayo, they come in large,” Ogrin says. “What we want to do then is to make sure that the viewing experience is great. We’ve also built some success around the curation of content and particularly short-form [video].”

With a greater number of digital broadcasters, such as Amazon’s Twitch, now offering new ways for fans to share the viewing experience, Ogrin also cites interactive content as one of the innovations that Kayo is looking to integrate on the back of the coronavirus pandemic. 

“We have a product development roadmap that is far greater that we can physically do,” he explains. “So, you always have to prioritise and re-prioritise. 

“If you think about what we’ve learnt through social interaction, for example, the idea of being to get your mates on a video conference call to watch a game, those types of integrated experiences are the ones we see moving forward. 

“For us, it’s about bringing the customer closer to the game and being able to interact in different ways. That is something we see as being pretty exciting. We’re going through this whole conversation at the moment. We’ve got to do a lot of careful planning around it.”

Kayo made its Supercars motor racing coverage free to access in October

To be a success, Ogrin says that “protecting the rights” that it carries from threats such as piracy is imperative if social viewing is going to become a viable business option.

“We have an obligation to the partner to ensure that someone who has paid for [our content] is protecting those rights we’re selling,” he says. “How you incorporate that into a shared environment takes a lot of careful consideration and thinking.”

To do this, Ogrin says that Kayo now faces a decision as to whether the business looks to introduce its own flavour to the platform’s future viewing options, or to lean on the expertise of a third-party platform to take on the responsibility, which could well prove to be the safest route. 

By way of an example, several elite sports leagues have recently teamed up with the OTT solutions company LiveLike to deliver on their social-viewing needs. Since the resumption of sport earlier in the year, they have included the likes of the National Basketball Association (NBA), which incorporated virtual watch parties during the league’s 2020 postseason.

Above all else, Ogrin points to Kayo’s data arm as the most powerful tool in its armoury today. Given its success to date and the ability to serve a broad set of domestic and overseas rights holders, he says that Kayo has become the “ultimate convenience play”, built on the company’s understanding of the “unique Australian market” and its position as a leading content aggregator.

“We have such strong data now that we really do know the customer’s cohorts, their behaviours, what makes them tick,” Ogrin continues. “The more we can actually share that with our partners, that is our advantage at Kayo Sports: where we want to keep our customers happy.”

Channel Nine's new Stan Sport streaming platform will show Australian rugby union under a three-year broadcast deal

On the back of Kayo’s success, several of Australia’s sporting bodies have seen the value in partnering with other direct-to-consumer (DTC) platforms both domestically and overseas. 

While Cricket Australia remains at a loggerheads with its domestic TV rights partners on the back of disruption caused by the pandemic, the national governing body earlier this month tied up a 70-territory broadcast deal with Aser Venture’s recently launched LiveNow pay-per-view (PPV) streaming service in Europe and the Far East.

Meanwhile, commercial broadcaster Channel Nine has signed a landmark broadcast agreement with Rugby Australia worth AUS$100 million (US$72 million). The three-year deal will see exclusive international and domestic rugby union made available via the network’s free-to-air (FTA) linear channel, as well as its new Stan Sport streaming service, due to go live in 2021.

This should come as no surprise. According to Ogrin, Australia’s burgeoning streaming sector is a response to changing viewing habits and an increase in demand for digital media in the home. What’s more, he says the data shows there will be a sharp increase in DTC adoption within Australian homes over the next three years. 

“Kayo came about as an opportunity in the Australian market where we saw 55 per cent of Australian household penetration, at that point in time, were streamers and specifically in entertainment,” he says, highlighting why Foxtel decided to go OTT.

“By 2023, that forecast is expected to grow out to over 85 per cent of households. At two years old, some of the most recent research shows that some 70 per cent of Australian households are streamers, and Kayo Sports has played a big role in that growth.”