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How digital technology is driving new media rights models in sport
The growth of digital technology is steadily shifting the focus of sports broadcasting away from the traditional linear TV broadcasters towards new players in the market.
Live streaming, ‘over-the-top’ delivery (OTT), mobile applications and on-demand services mean that sports fans no longer have to go to a sporting event or watch linear TV broadcasts to satisfy their passion for their favourite sport or team. These new technologies – together with the prevalence of smartphones, social media and improved internet connectivity – have resulted in a myriad of options becoming available to fans in terms of how they consume sports content.
Given the huge subscriber bases and financial muscle of social media giants such as Twitter, Facebook and Snapchat, their recent pushes into the sports broadcasting market have generated much interest in the sports and media communities. Last year, we published a blog article commenting on Twitter having signed deals with each of the “big four” US sports leagues and live streaming its first sports broadcast. Facebook has also been busy building up its sports offering and has acquired live streaming rights in respect of Major League Baseball, the Mexican Liga MX and Major League Soccer. Its recent (but unsuccessful) bid to acquire the rights to stream coverage of IPL cricket in India for a reported $600 million suggest that Facebook will soon be an active player in bidding for even bigger sports rights packages, such as those relating to Premier League football.
However, most recently it has been Amazon that has been attracting significant attention, having acquired the rights (previously held by Twitter) to stream NFL Thursday Night Football games and, more recently, having successfully bid for the UK rights to the ATP Tour. According to its CFO Brian Olsavsky, Amazon will increase its investment in video in 2018 as its video business continues to drive conversion of free Amazon Prime trials, higher membership renewal rates for existing subscribers and higher overall engagement.
So what effect is this new digital landscape having on the relatively small group of traditional TV broadcasters who previously dominated the market? TV ratings have dropped in recent years for a number of major sports leagues and events in both North America and Europe. Although Sky and BT collectively paid £5.14bn for the last round of live rights for the Premier League, figures from the Broadcasters Audience Research Board show drops in average viewing figures of 14% and 2% respectively. Although these figures may, to an extent, be accounted for by certain ‘exceptional’ factors, such as Leicester City’s unexpected triumph during the previous season and the absence of certain clubs with large fan bases such as Newcastle United and Aston Villa, they reflect the wider trend of younger sports fans preferring to watch highlights and clips via social media channels rather than viewing a full game on TV.
Similarly, across the pond, NFL ratings have fallen significantly across all pay TV providers over the past few seasons. However, traditional broadcasters are reacting to these changing viewing habits by adding to their own digital programming. According to Sky, viewing across its own streaming services – Now TV and Sky Go (which are available to non-Sky customers) – increased by 31% in the last year, and that in itself is a reason for the decline in its TV audiences. BT Sport has also pointed out that may of its customers are now consuming its content through digital platforms such as the BT Sport app and YouTube. (In 2017, for the first time, BT Sport streamed the Champions League final live on the BT Sports App and YouTube.)
Although the steady decline in TV audience viewing figures may depress future rights values, streaming platforms present smaller sports with new distribution opportunities. For the first time last year, the British Olympic Association showed live sports coverage on the Team GB digital channels when England played Slovenia in a women’s table tennis match. Formula 1 (which currently has a highlights deal with Snapchat) has announced a plan to launch its own OTT platform in the future and the International Tennis Federation has partnered with Sportradar to provide a live streaming platform for the Davis Cup and Fed Cup.
However, a potential knock-on effect of these previously unavailable opportunities is that sports broadcasters may choose to focus a greater proportion of their investment on securing the rights to show premium sports content which has the power to drive new subscriptions and subscription renewals (e.g. Premier League football) rather than bidding for rights to show the lower priority sports events which could, in turn, serve to increase the financial gap between the major sports and the lesser known ones.
What is not in doubt is that the new technologies and market entrants mentioned above are revolutionising what was, until recently, a stable and well established commercial model for sports broadcasting. As sports rights holders evaluate their media rights strategies in light of this rapidly evolving landscape, they would be well advised to examine their existing and future agreements to ensure that they retain the flexibility they need to take advantage of the new opportunities that are emerging.
Disclaimer: This article is produced for and on behalf of White & Black Limited, which is a limited liability company registered in England and Wales with registered number 06436665. It is authorised and regulated by the Solicitors Regulation Authority. The contents of this article should be viewed as opinion and general guidance, and should not be treated as legal advice.