#37 English Premier League: Is there anything to gain for Scudamore's Successor as the League?
In a piece from last summer (Blog #23 – Konvergenz bei den nationalen TV-Erlösen im europäischen Fußball), I made the case that revenues from domestic media rights are going to converge among the Big-5 European football leagues: Whereas the all-dominating English Premier League experienced a significant market correction for its upcoming domestic rights cycle (2019 - 22) compared to its current deal (-9,6%), its peers were able to lock in moderate (Italian Serie A, +11.3% incl. variable compensation // Spanish LaLiga, +14.9% with live free-to-air packages still to be awarded) to impressive (French Ligue 1, +58.8%) increases. Another obvious difference in addition to the direction in which rights fees seem trending between the EPL and its competitors has been that the latter will mostly continue to rely on the established legacy and/or dedicated pure-sports rights holders for the foreseeable future when it comes to their most important source of revenues. The English Premier League, instead, seems to have desperately wanted to get into business with one of those “new players” from Big-Tech and was willing to take a deep discount to on-board Seattle-based Amazon into its set of rights holders for the next rights cycle: It reportedly paid anywhere between GBP 21-30m per season for its two-matchday schedule per season. However, I do expect that these numbers already include any costs for production, commentary, and other shoulder programming. Thus, it paid probably “almost nothing” in terms of actual rights fees. Since domestic markets have been moving towards saturation for most of the biggest sports media properties in all of sports, seemingly every league or sports organization has made internationalization a top priority going forward. However, first results from awarding live audiovisual rights for the three seasons from 2019/20 to 2021/22 in overseas market are mixed for the English Premier League as well: This leads to the question whether the tepid interest in becoming the league's next CEO is somehow connected to the fact that it will be an uphill-battle for any successor to come even close to Richard Scudamore's achievements during his stellar 20-year run at the top of the league?
In-between I took a look at the astonishingly effective defense vehicle that incumbent legacy media companies in the United States have implemented to deter new market entrants while the latter start to make inroads in Europe (e.g. DAZN, RMC Sports, Amazon). At the end, this time's version of my final hits tackle some interesting current storylines: US sports leagues looking at Europe for future growth, MLS' future media rights strategy, beIN SPORTS ongoing carriage dispute in the United States, and the English FA following EPL's lead when it comes to carving out rights packages dedicated to technology companies.
The reduction in the most recent UK media rights payment to the EPL for the upcoming rights period (2019 - 22) has probably contributed towards the difficulties the EPL has had in appointing a new chief executive. On the other hand, everybody is expecting international media rights income continue to grow. The Big-Six clubs are pushing to get a higher share of this source of revenue, which they were glad to forego in 1992 as a bargaining chip to gain support from smaller clubs to form today's EPL, and could become another headache for the new CEO. (see: Twitterpost ⬇️)
But how did we get here, are increasing overseas revenues really a foregone conclusion, and has the new CEO actually anything to gain?
Leagues Giving Deep Discounts to get into Business with Big-Tech
Obviously, the English Premier League, and many other leagues for this matter (see: LaLiga in India, NFL in the United States), have been willing to take deep discounts to get into business with new players in the sports broadcasting market - in hope for a big payday further down the road. These technology companies are simply not paying market rate at this moment in time though. For comparison, Sky UK (GBP 9.3m) and BT Sport (GBP 9.2m) are going to pay multiple times over on a per-match-basis for the rights packages A through F with 32 games each. Admittedly, the comparison has its flaws (e.g. numbers of games vs. number of broadcast windows), but a certain discount for Amazon in order to engage with the EPL is undeniable. Another thing to consider in this regard is that the EPL has traditionally limited the supply of live games that are broadcasted in its domestic market: The league has just increased the number of available live games from currently 168 to 200 games starting with the 2019/20 season. Therefore, Amazon, or any other new rights holder for that matter, is not replacing any existing broadcasting partners (i.e. Sky UK, BT Sport) but was just awarded additional game inventory. In fact, BT Sport also benefitted from the league’s decision and effectively carries more games for a lower overall price tag. (Again, more games does not necessarily mean more exclusive broadcast windows.) Against this background, it is much easier for the EPL to give such discount to build an initial relationship with these technology companies than for other Big-5 European football leagues who have traditionally made all of their games available on a live-basis in their respective domestic markets – where it is much more painful to take less money compared to overseas markets given that is where league have to create the vast majority of their revenues. Relying on their traditional rights holders, who are currently still the more profitable option for these leagues, has been a logical decision for Ligue 1, LaLiga & Co. By implication, these legacy players have mostly maintained a monopoly on first-tier broadcasting rights in Europe and across the globe. Another challenge that I repeatedly mentioned in the past is the decade-long head-start of legacy media companies when it comes to the production of live sports events. With the exception of the German Bundesliga (via its subsidiary Sportcast GmbH) most of the premier sports leagues (e.g. EPL, LaLiga, NFL, NBA) continue to outsource production responsibilities to the rights holders - just another entry barrier for non-endemic sports broadcasters. (see: Twitterpost ⬇️)
Amazon is going to outsource any production and shoulder programming to BT Sport and its long-time partner Sunset+Vine, a leading sports production and media company in the UK. Effectively, Amazon remains the distributing outlet, similar to what they have done in the NFL with Thursday Night Football – although on an exclusive basis this time around. BT Sport playing friendly with Amazon also shows that the incumbent players do not really seem to be worried by new players tipping their toes into the space of first-tier sports rights. Digital-only horizontal platforms such as Facebook, Twitter, YouTube, and Amazon have long been an outlet for lower-tier assets which are fine with being paid with reach/distribution plus some share of advertising revenue instead of guaranteed upfront rights fees. However, they are still in a period of experimentation, but it is much easier stay true to their culture of “move fast and break things” (i.e. test, learn, look at the data, move again) when you talk about low-risk and low-budget long-tail broadcasting rights instead of billion-dollar investments.
The LaLiga (Telefónica), Ligue 1 (MediaPro, BeIN Sports), and Serie A (Sky IT, DAZN) were not willing to forego any revenues today for increased hopes of an ultimate payday down the road – going with mostly established rights holders willing to pay market rate. The Bundesliga is the next league up and I think that there is a real possibility the German top-flight competition could be the first to get the best of both worlds: A technology company (read: Amazon) paying market rate for domestic broadcasting rights - more on that later.
In a nutshell, the leading football leagues in Europe which have continued to rely on established rights holders have locked in significant increases, which fortifies their grasp on the premier broadcasting rights in Europe through at least the 2020/21 season (Serie A). The EPL, the only league to incorporate a technology company suffered a significant setback and any investment from Amazon, Facebook & Co. in the sports broadcasting market remains minuscule in the grand scheme of things: Amazon, probably the most serious contender for making any noise for multiple reasons (e.g. dual revenue stream of subscriptions and advertising, high household penetration in markets such as Germany or UK) when it comes to premium sports media rights, has merely committed to approximately USD 100m in annual rights across all territories and assets including the NFL (USD 65m; global rights), ATP World Tour 1000/500 Events (USD 12,9m; UK), EPL (see above; UK), or US Open (USD 7.0m; UK). (see: Twitterpost ⬇️)
Considering that the sports broadcasting rights are a USD 50-billion-market globally, that is a lot of talk about a set of very insignificant players at this moment in time. Unsurprisingly, I would disagree with takes that Amazon, FB & Co. will be major competitors for upcoming sports broadcasting deal in the near term – except for the few instances here and there as part of their current period of experimentation.
US-Based Legacy Brands with effective Defense Strategy against New Market Entrants
Whether these technology companies will ultimately come to the conclusion that they want to go all-in with live sports – or want to have nothing to do at all with that – remains to be seen. However, US-based incumbents, in particular, have built a pretty effective defense strategy as far as I am concerned: First-tier rights remain essential for the ecosystem of linear free-to-air and pay television in order to drive subscriptions (i.e. retransmission/carriage fees from television platform operators) and advertising revenue. Their absolute unwillingness to concede these marquee rights to any new challengers has inevitably forced new market entrants, both financially powerful, global (e.g. Amazon, Facebook, Twitter) as well as pure-sports, local upstarts (e.g. FloSports/US, WatchStadium/US, FOOTTERS/Spain, Sporttotal.TV/Germany), to focus on lower-tier competitions and niche customer groups to build an awareness (and initial subscriber base) for their ambitions in streaming of live sports. Gaining any traction with non-marquee rights plus being digital-only represents an uphill-battle from the get-go. Additionally, established media companies such as ESPN, Turner Sports, CBS and NBC launching stand-alone digital distribution outlets (i.e. ESPN+, B/R Live, CBS Sports Network, NBC Sports Gold) creates an even bigger moat for these incumbents: Lower-tier rights – which these incumbents at least theoretically would have been willing to concede to new bidders given skyrocketed acquisition costs and / or limited space in the linear ecosystem to distribute and, therefore, monetize such content – have found a new home under the umbrella of legacy media companies while being kept away from the new competition. Opting for media rights deals with unestablished bidders (e.g. FloSports in the US) often reflects a trade-off between higher rights fees versus (I) limited visibility (e.g. low brand awareness / newness of rights holder), (II) distribution (e.g. small subscriber base of rights holder) and (III) accessibility (e.g. lackluster digital adoption across different demographics).
ESPN (e.g. for Pac-12 on ESPN+), Turner Sports (e.g. for UEFA Champions League on B/R Live), and NBC Sports (e.g. for English Premier League on NBC Sports Gold), instead, offer the best of all worlds for leagues/organizations: First, legacy media companies are willing to offer reasonable rights fees thanks to the incremental monetization of the content via new OTT services. Additionally, these second- and third-tier assets benefit from higher visibility among mainstream sports fans due to the pure association to and marketing power of legacy media companies, but also thanks to the opportunity of the occasional windowing across their fully-distributed, linear broadcast channels. Finally, having streaming platforms as their usual home allows for great flexibility via on-demand consumption.
In a nutshell, these complementary digital outlets such as ESPN+ and B/R Live are not a replacement for ESPN’s or Turner’s established brands. Rather, these are incremental platforms with exclusive content that take digital competitors off the table by allowing scaled distribution of second- and third-tier events while first-tier events continue to be aired on linear free- or pay-TV exclusively – in other words, consumers have to subscribe to the traditional pay-TV bundle. A general take is that the North American sports media market is always a few years ahead of its European counterpart. However, digital-only or -first bidders for sports broadcasting rights made much more inroads in the latter up to this point (e.g. DAZN in Germany & Italy; Eleven Sports and Amazon in the UK; RMC Sports in France). That prompts the question whether a similar strategy as currently observed by the legacy media brands in North America would have made historically dominating pay-TV operators such as Sky PLC (UK, Germany & Italy), Canal+ Group (France), or Telefónica (Spain) less susceptible to new market entrants. Currently the incumbents continue to use the digital ecosystem as a mere complementary distribution channel for its linearly broadcasted content but not as an incremental product. For example, ESPN+ and B/R Live pretty much suffocated any ambitions by aggressive upstarts such as DAZN. Other potential players such as Amazon, Facebook, or YouTube have unsurprisingly not even considered to enter the sports broadcasting arena in any serious manner in their domestic market up to this point. (see: Twitterpost ⬇️)
Amidst the current rumours of the NFL potentially slicing the current NFL Sunday Ticket hold by AT&T into a streaming-only and linear-only package after the upcoming 2019 season, Disney and Amazon reportedly are the current front-runners for the streaming option: Disney preventing Amazon from taking advantage of probably the best opportunity for any digital-only player to become a serious player in the world’s largest sports media market would be the most-clearing evidence of the great effectiveness of leveraging digital platforms as incremental products for defensive purposes by legacy media companies.
International Media Rights as True Differentiator Between Big-5 Football Leagues?
Coming back to the current situation around the EPL, another conclusion of the seeming convergence of domestic media rights revenues has been that international markets will inevitably become the true differentiator between the “haves and have nots” among the Big-5 European football leagues. Unsurprisingly, every one of them sees a lot of growth ahead outside of their respective own borders. Looking at recent developments for the EPL, though, there is the question whether the English top-flight competition has not only been already overpriced in its domestic market, but also in multiple overseas markets: Is there any risk of a similar market correction of its media rights valuations in overseas markets like the EPL has just suffered domestically and, by implication, the opportunity for the other Big-5 leagues to close the gap even more?
To that end, any candidate for CEO position of the EPL is probably asking him- or herself whether there is actually anything to gain given that Scudamore’s successor will inevitably be compared to 59-years-old’s stellar two-decade-long run at the top of the league: Amongst other things (e.g. introduction of tiered sponsorship model), growing annual media rights revenues from GBP 520m to GBP 2,748m since 2001 (+6.0% p.a. [domestic], +16,4% p.a. [international], +8.4% p.a. [overall], 4.3x since 2001) and, thereby, transforming the EPL into a commercial powerhouse will always be top of mind when talking about his legacy.
Based on every official and reported candidate for the league’s CEO position (e.g. BBC's Tim Davie, Discovery's Susanna Dinnage, ITV's Tom Betts) having a background in the media industry does not seem to be a “good-to-have” but a “required” prerequisite for any candidate. It not only shows that the league thinks the broadcasting side of things continues to be of paramount importance for the future of the EPL. It also tells any candidate that how the future CEO will cope with the current disruption in the broadcasting and streaming space (i.e. media rights revenue) will be the figure based on which his or her success or failure will be measured.
After the suffered setback in the domestic market for the upcoming rights cycle (2019 - 22), the initial results in some overseas market are not really promising neither: Significant corrections in some territories, that rank among the most significant contributors to EPL's overall revenues from international rights (e.g. Hong Kong, South-East Asia, Singapore), are reminiscent of the market correction in the UK after a fierce bidding war between Sky Sports UK an BT Sport just three years before. In fact, a less competitive landscape of potential bidders has clearly been the main factor for less profitable deals for the EPL across Asia in particular. Pay-TV markets in many regions seem to have moved towards a "winner-takes-all" scenario: Amidst skyrocketing rights acquisition costs, only a virtual monopoly on sports broadcasting rights seems to ensure a clear path to profitable operations. Increasingly fewer contenders are willing or able to sustain losses for a prolonged period of time to build up a meaningful subscriber base to evolve into a sustainable business: Examples like DAZN and Eleven Sports, who survive more than one rights cycle, remain the exception. Nonetheless, new upstarts continue to pop-up (e.g. Mola TV in Indonesia). The question will be whether these have the staying power to overcome the initial growing pains (e.g. lack of brand awareness, distribution, consumer trust) – most of their predecessors (e.g. LeSports) did not. Many industry experts still expect the great rights grab by "Big-Tech." However, even if Amazon, Facebook, YouTube & Co. end their current period of experimentation with the conclusion that at least a few of them want to become serious bidders in the sports broadcasting market, a new contender here and there will be needed to challenge the incumbents in the meantime and avoid a temporary downtick in market value of audiovisual rights. Another thing to consider and something that supports the idea of a value convergence of media rights across the European Big-Five is that the EPL has in many instances generated two- to three-times the amount in overseas market than its continental competitors. Since the latter, LaLiga and Ligue 1 in particular, have successfully moved closer to the English top-flight competition domestically, could there be a similar development abroad?
In the grand scheme of things, neither individual outcome is disastrous for the EPL and one or two major increases in the more significant football broadcasting markets (e.g. Sub-Sahara: +22.6% to $233m per season) can easily compensate for several minor setbacks. The league is about to complete the sale of its international rights for the upcoming rights cycle shortly, and as of late, most industry experts have continued to believe that the league is still on its way to a solid increase (approx. +25%), exceeding £4.0bn for the three-year period for the first time ever, and compensate for the drop in the value of the domestic rights. Total media rights income for the next cycle – domestic and international – will probably grow in the mid-to-high single digits (approx. 5-10%) compared to the current cycle.
With the increased reliance on media revenue, especially in the case of average to below-average EPL teams, to finance its day-to-day operations, the still-to-be-determined new CEO will primarily be tasked with handling the ongoing disruption of the sports broadcasting market. Even if the league will be able to squeeze out a small increase in total media revenues this time around (2019 - 22), the margin for failure (i.e. correction in individual overseas markets) certainly gets even smaller. It also remains to be seen how piracy will impact the value of sports broadcasting rights around the world: Saudi Arabian-based(-backed) beoutQ is the certainly most publicized example of illegally distributing valuable live sports content and had already real negative impact on the monetizability of premium sports rights (e.g. Formula 1 in MENA region). With a looming flattening out of rights fees and very few catalysts on the horizon, even smaller piracy operations in numerous territories could make the difference between an increase or correction of overall media revenues. Pirates of live sports continue to always seem one step ahead and the fact that the UK trade minister George Hollingbery recently admitted having never heard of beoutQ shows that the sports-media-complex will probably be on its own to fight the illegal distribution of its live content - it is simply not that big of a deal in the grand scheme of things, despite generating approximately GBP 4.8bn in revenues as a league during the 2017/18 season.
On the other hand, the rights cycle starting with the 2022/23 season should benefit from the fact that its broadcasting rights for the world's biggest sports broadcasting market (+/- $21.9bn or +/- 44.2% of global market volume) are back on the market: In 2015, NBCUniversal retained the English Premier League in the United States for a total of USD 1.0bn (+/- $167m per season) as part of a six-year deal (2016 - 22). The appetite for the English top-flight league has only grown since then, and is the only league (+/- 428,500 on average) that was able to rival the TV viewership of the uber-popular Mexican Liga MX (+/- 459,300 on average) during the 2018/19 season. The domestic MLS (+/- 290,300 on average) is a distant third while the LaLiga (beIN SPORTS), Ligue 1 (beIN SPORTS), Bundesliga (Fox Sports), and Serie A (ESPN) rarely crack the 100K - mark – if they make it into the limited space of linear television in the first place.
Other Big-5 with Promising Developments in Overseas Markets
As far as the EPL is concerned, tt remains to be seen whether exceptional growth in relative terms in some less-relevant markets such as Germany or Indonesia will overcompensate for any declines elsewhere. An overall slowdown in growth in both the domestic as well as international markets for the English Premier League is undeniable though. The league’s competitors, for their part, have made serious progress outside of their own borders and seem to deliver on the assumption that a stronger focus on internationalization offers tremendous upside compared to the increasingly saturated domestic markets:
The Italian Serie A locked in a significant increase in guaranteed rights fees for its current rights cycle (2018-21) from sports agency IMG (€371m per season) compared to its previous agreement with now-dissolved MP&Silva (€190m per season) – with Cristiano Ronaldo unexpectedly joining Juventus FC shortly thereafter, the Endeavor-owned sports agency might have been lucky that it only had to double the previous financial guarantees to acquire global rights to the Italian top-flight competition. Whether it has been a bargain for the global sports agency is an entirely different question and IMG’s struggles to profitably monetize the Serie A in some key markets (e.g. Scandinavia, Latin America) reflects the industry-wide margin pressure on the business model of intermediaries (i.e. rights trading) – despite the unexpected boost by Cristiano Ronaldo. (see: Twitterpost ⬇️)
Furthermore, the Spanish La Liga continues to benefit from the global appeal of FC Barcelona and Real Madrid and just locked in an impressive increase (+38%) for its international broadcasting rights from sports production and agency company MediaPro (€897m per season; 2019 - 24) compared to their previous three-year agreement (2016 - 19). Given the increasing pressure on intermediaries to make rights trading a profitable business and a potentially looming market correction in the next few years, it remains to be seen how the Barcelona-based agency will feel about the deal going forward. (see: Twitterpost ⬇️)
The French Ligue 1, on the other hand, is so bullish on its future prospects, that it already demands renegotiations for its admittedly grossly undervalued international broadcasting rights with exclusive rights holder beIN SPORTS midway through the decade-long deal (2014 - 24). The currently guaranteed rights fees (€80m per season) plus revenue sharing of any revenue beyond those guarantees – whose upside for the league is probably greatly limited due to the fact that beIN SPORTS self-exploits a large portion of the rights across most of the biggest sports media markets with MENA, South-East Asia, North America as well as France and Spain – certainly does not reflect the league’s intrinsic value in wake of the arrival of Neymar Jr. and rise of Kylian Mbappé. However, renegotiating broadcasting deals at the halfway point just because the rights buyer pocketed a bargain for once would undermine the entire integrity of media rights deal and shift any financial risk to media companies / agencies – and could certainly have unintended consequences. (see: Twitterpost ⬇️)
Finally, the German Bundesliga has certainly not fully realized its revenue potential in foreign markets for a long time. However, the recent pivot from outsourcing most of its off-the-field activities (e.g. production of broadcast feed, selling media rights, digital activations) to building-up in-house capabilities in these areas looks at least forward-thinking. With regard to international audiovisual rights, offloading these assets to multinationally-operating broadcasters such as FOX Sports and beIN SPORTS has been the standard practice for a long time. To the league's credit, it went away from intermediaries who simply bought and resold its international rights (here: Infront Sports & Media for EUR 15.0m in 2003/04 season) and resulted in even less control over its product shortly after starting to monetize international rights in the 2003/04 season. Taking on much more ownership of these processes under the umbrella of its subsidiary DFL International GmbH should ensure more direct relationships with international rights holders and more influence on the presentation and activation in all-important overseas markets going forward. However, there always continues to be the trade-off between risks and costs of directly marketing broadcasting rights and the financial upside. Therefore, the Bundesliga will – like the English Premier League – also rely on sports agencies in smaller markets. For example, the EPL, which makes sure to maintain direct relations with rights holders in the most important markets, offloaded their international rights across Central and Eastern Europe as well as Central Asia for the 2019 - 22 cycle to IMG: The sports agency pays the league approximately USD 40m per season for rights across 26 countries. The agency’s deal with the league during the 2016 - 19 cycle – covering 27 countries in the same region – is worth about $45m per season, providing further evidence that the EPL might have already hit its peak in many overseas markets for the foreseeable future as well. (see: Twitterpost ⬇️)
For each of these four leagues, it is not about catching the EPL anytime soon – which should remain a pipe-dream for the foreseeable future – but slowly but surely closing the gap to the former all-dominating industry leader when it comes to the financials. (For example, English clubs won the UEFA Champions League only once over the last decade.) Just pushing each other for the second place in the shadow of the EPL should provide enough incentive to continue to push the envelope. (see: Twitterpost ⬇️)
Lack of Catalysts to Grow Domestic Media Revenue for EPL
Finally, it is difficult to identify any obvious catalysts for the EPL going forward. From getting "Big-Tech" even more interested, exploit all 380 matches, or go direct-to-consumer with an own OTT streaming service, all of the most-mentioned opportunities have clear downsides: First, nobody knows what Amazon, Facebook & Co. will do beyond their current period of experimentation – as outlined above. Second, the EPL is the only major European football league that is not exploiting all of its matches in its domestic market. However, it is not like the EPL is withholding the most-marquee match-ups from its broadcasting partners. Showing the remaining EPL matches live in the UK should only represent a very limited increase in consumer value and, therefore, what rights holders would be willing to pay for the additional inventory – as we have just observed for the upcoming rights period. Third, one of the reasons why rights holders such as Sky UK and BT Sport are able to pay astronomic fees is that they can monetize their customers on multiples ways (e.g. vertically-integrated telecommunication companies) or such premium live sports content provides a strategic value by leveraging its long-tail content (e.g. live sports holding together ballooned, overpriced programming bundles). The EPL, or any sports leagues for this matter, would have fewer levers to pull when charging consumers directly. Additionally, production and marketing costs and the financial risks have to be considered. One potential catalyst in this regard that I have mentioned repeatedly would be a premium add-on streaming service by leagues. That could establish a direct link to fans but without any negative or very limited impact on the value of the existing rights packages held by the league's broadcasting partners. (see: Twitterpost ⬇️)
Actually launching a self-owned and -operating streaming service would at least make its threats to cut out the middlemen somehow more credible and could serve its intended purpose of driving up prices for third-party rights holders. Although none of their live matches should be expected to be shown on LaLigaSportTV anytime soon, the Spanish top-flight league has recently been the first European football league to launch their own OTT service. With 180 EPL games still not to be shown by Sky Sports, BT Sport, or Amazon during the upcoming rights cycle, such a streaming service as a premium add-on service would have more potential compared to its European peers that have already awarded all of their matches to their respective broadcasting partners for exploitation. There should be a market given that rabid fanbases of lower-tier clubs whose matches make it rarely onto Sky Sports' or BT Sport's linear television channels have certainly an interest in watching their team. At the same time, limiting the access to all live games from the beginning by simply not making them available certainly does not help to overcome any piracy issues domestically.
Let's finish with some FINAL HITS: My quick take on a few ongoing sports business and media storylines:
Final Hit 1️⃣: Small pay-TV makes Germany unattractive for US major leagues.
As much as European football leagues have keyed on the biggest sports broadcasting market globally, US majors leagues have also looked beyond their own borders in pursuit of further growth and in light of an increasingly saturated domestic market for their own product. Since these leagues are much less restricted in terms of actually staging regular-season games abroad, there are obvious clues in which (European) overseas markets the NFL (regular season games in the UK), NBA (UK & France), and NHL (mostly Scandinavia) see the most potential – and potential in this regard means subsequent monetization through more valuable broadcasting rights deals. Although it seems odd at first glance that no major US sports league has made Germany a priority although the NFL and NBA, in particular, have built up tremendous momentum among German mainstream sports fans, there is a reason for their preference for other European countries: The less-competitive pay-TV landscape in Germany offers limited monetizability compared to the UK or France. The total value of sports media rights in Germany (USD 2.171bn in 2019) amounts to approximately only the half of the UK market – with very little growth expected in the foreseeable future. With market-leader Sky Sport DE seemingly pursuing a premium strategy when it comes to sports broadcasting rights and willing to concede any assets that are not able to drive subscriptions in a significant way, DAZN has pretty much become the default option for most US sports. Given the lack of alternatives, the rights fees paid to the NFL, NBA & Co. are comparatively lackluster. Whether the NBA (USD 3.0m per season), for example, is a profitable investment for the digital-only streaming service though, is another question since the German consumer has traditionally been reluctant to pay for any media content since they have been benefitted from a very strong free-TV landscape (which does not seem to be a alternative for US sports). But there is no question that the lack of competition in the pay-TV landscape – to which the consumer habits certainly contribute – suppresses the value of rights properties beyond the domestic top-flight football competition (i.e.) Bundesliga. (see: Twitterpost ⬇️)
Final Hit 2️⃣: MLS to become first premium(-ish) asset with global broadcasting rights?
A few weeks ago, I wondered why IMG, who holds global broadcasting rights to the MLS outside of the US, went year-to-year in pretty much every overseas market. Admittedly, the US-based football league is not the hottest property out there. It seemed weird nonetheless. We might have an answer though since the league also seems to have instructed their franchises to take the same approach when it comes to their local broadcasting rights. In other words, the MLS might become the first first-tier-(ish) competition to bundle local, national, and global rights once its national television deal with ESPN, FOX, Univision (USD 90m per season) is up after the 2022 season. That approach would naturally limit the field of potential bidders to digital, globally-operating players such as Amazon, Facebook & Co. and would go against the aggressive slicing and dicing observed in other major sports properties that try to carve out additional rights packages to accommodate new market entrants. On the other hand, the traditional fragmentation based on national, or even local, media markets has stripped technology companies from one of their biggest competitive advantages: global scale. Up to this point, only lower-tier sports properties were willing to grant global media rights including their domestic markets on an exclusive basis (e.g. AVP Beach Volleyball on Amazon). As far as I know, the MLS would the most valuable property to take this approach. My prediction though: they will not. (see: Twitterpost ⬇️)
Final Hit 3️⃣: BeIN SPORTS' struggles in the US finally reflect in distribution numbers.
The decreasing distribution of beIN SPORT across US television due to being dropped by major distribution platforms such as Direct TV and Comcast has been a major issue for the Spanish LaLiga and French Ligue 1. Already among the least-distributed sports channels in the US, official numbers had not reflect the effective reach of beIN SPORT for a long time but I expected that it should have approximately been cut in a half ever since the disputes started late last year. Now, we have got an update and the number indeed has come way down (although not as much as I thought): From August 2018 to April 2019 the Qatar-based sports channel lost approximately 6.5m subscribers (-28.5%), making the declines by other sports-dedicated pay-TV channels look almost negligible.
I do not see beIN SPORTS leaving the US markets anytime soon but given a very lackluster OTT service called "beIN SPORTS Connect," that is only available for traditional pay-TV subscribers anyways, and the diminished visibility for any sports property that is exclusively carried on beIN SPORT (e.g. LaLiga, Ligue 1, WTA Tour), I could see the LaLiga, for example, take less money to switch its US broadcasting partner once their current deal expires after the upcoming 2019/20 season. In hindsight, the Italian Serie A and the English Football League have been pretty lucky moving on from beIN SPORTS to ESPN+ – including the occasional windowing on ESPN2 – before this season or two seasons ago, respectively. (see: Twitterpost ⬇️)
Final Hit 4️⃣: English FA carves-out non-linear rights packages, just like the EPL.
Finally, the English FA seems to follow the same blueprint as the EPL in order to get technology companies interested in their broadcasting rights: using some of the unused match inventory that is currently not broadcasted on television to carve-out an additional rights packages specifically dedicated to non-linear distribution. Similar to the EPL, having traditionally limited the supply puts The FA in an inherent advantage compared to other European football associations such as the German DFB or French FFF which have made all matches of domestic cups available to its broadcasting partners for a long time. However, I do think that there is some risk for the FA: Up to this point, there has always been some backlash when live sports content with real mainstream appeal has gone the digital-only route (e.g. MLB on Facebook in the United States, NFL on DAZN in Canada). The English football fans will not remember that these games were not available for live consumption at all before, but will focus on the fact that there is not only one more rights holder (i.e. more fragmentation) but that said broadcaster is even digital-only and cannot be found on their traditional set of linear television channels. (see: Twitterpost ⬇️)
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