As the saying goes: COVID19 has been an accelerator for a lot existing trends—which were already in work but now came a lot faster to realization. Not to take to too much of history lesson, but looking back: sports, in particular, has always been at the forefront of technological and media disruption: Replacing radio as the dominating mass medium was driven by sports, the rise of pay-TV was driven by the drawing power of top-tier live sports programming, and many OTT-streamers, who lack both the positive (think: brand awareness, cashflows, production expertise) and negative (think: overhead, legacy-sized infrastructure, need to protect existing revenue streams) aspects of traditional media, have been forcing the consumer’s transition from traditional to digital distribution and adaption of new technologies by means of exclusive live sports content as differentiator. Even before COVID19, I had expected as much disruption and technological innovation over the next five years as ever before over a same period of time—some of it we have now experienced within merely three months. Acceleration of anything does not always have to be in your favor though: As an example, what also has accelerated has been the number of concessions made by the Premier League to its domestic broadcasters in order to minimize lost revenues in the short-term—many of them the league had probably earmarked to use as bargaining chips down the road once it would have gone back to the market to secure their next (domestic) media rights deal: from 2022/23 through (likely) 2024/25.
The "Sports x Media Industrial Complex" has been a mutually beneficial relationship for decades and although there is a dependence on each other and both parties have greatly suffered with sports on pause, the majority of rights-holding broadcasters, thanks to their diversified businesses, did not run the risk of running out of money anytime soon. Take the EPL's domestic rights holders as an example: Those telecommunication (see: Sky UK + BT) and e-commerce (see: Amazon) companies unquestionably even benefitted from the forced shut-down in terms of their core businesses. Their broadcasting divisions certainly will take a hit, at least on the revenue side, but the cost side was able to adjust well—another major difference to sports teams—and as long as we are not talking about pure-sports streamers still in their start-up phase (see: DAZN), sports simply faced a bigger existential threat than media.
To this end, I'm mostly referring to top-tier professional sports. The challenges for smaller, less popular sports and amateur sports, in particular, are much greater and more substantial for the foreseeable future—also due to the way of how different sports and different levels of professionalism generate their revenues, which is a good segue to the specific case of the English Premier League.
Short-termism -- EPL Setting (Dangerous) Precedents
The English Premier League, the 800-pound gorilla of the world's most global sports, is back on the field after a more than three-months long hiatus—and has made a lot of concessions to its broadcasting partners while doing so. But why did football leagues return in the first place—putting public and private health and safety at risk?
RETURN OR NOT: DIFFERENT INCENTIVES AND NO TRUE BLUEPRINT FOR DECISION-MAKING
Any top-flight European football league that is currently in the process of finishing its campaign has two primary incentives to do so: legal and financial ones.
LEGAL: Any unexpected and sudden cancellation of football leagues across Europe required some formula to decide the competition, but even approaches such as points-per-game which at least account for number of games played are inherently not fair (think: strength of schedule) and have resulted in the to-be-expected legal challenges by disadvantaged teams across multiple leagues (e.g. SPFL, Ligue 1) when it comes to promotion, relegation, or qualification for European club competitions next year.
FINANCIAL: Looking at the revenue mix of teams in the Big-5 European football leagues, staging the remaining games in any form or fashion and, thus, delivering on the commitments to their broadcasting and commercial partners will unlock two out of three most important revenue streams to a large extent. On the other hand, matchday revenues would have be gone in any scenario for the foreseeable future, most likely including most of the 2020/21 season.
There has not been a true blueprint how to make the decision about returning or not, and has sometimes even been dictated by outside forces (think: France's sporting ban until September, effectively cancelling the Ligue 1 in April 2020). Legal challenges regarding relegation or qualification for European competitions, and negotiations between the leagues and their broadcasters to settle the lost programming are often still ongoing. However, fact is at least the German Bundesliga (May 16), Spanish La Liga (June 11), English Premier League (June 19), and Italian Serie A (June 22) have returned last week.
EPL: ONE-BILLION-POUND HIT DUE TO COVID19 (AS THE BEST CASE)
Nonetheless, according to the Deloitte Sports Business Group, the EPL must expect total lost revenues EPL of £1.0BN due to COVID, with lost revenues of £500M each for the 2019/20 and 2020/21 season—assuming "Project Restart" goes according to plan. The revenue hit for the 2019/20 season is driven by rebates on already received media rights fees from both domestic and international rights holders and, to a lesser extent, not fully delivering on some commercial commitments as well as staging the remaining nine games behind closed doors. Next season's under-delivery compared to expected revenues will then primarily driven by loosing out on any matchday revenue by playing behind closed doors.
The disclosure of Manchester United as a publicly-listed company and its responsibility towards shareholders provided an additional glance into the business of EPL clubs and has been consistent with the aforementioned estimates: The Red Devils budget for £20M in rebates to broadcasters for the current season, resulting in approximately £340M across all EPL clubs for all domestic as well as international broadcasters (think: Manchester United demanding higher share of total domestic broadcasting monies than the average club).
When it comes to the EPL, there will be rebates for the domestic rights holders since the league already received all rights fees payable for the current season by March 2020. For the Bundesliga, for example, it has been discounts that were needed to unlock an advanced payment from its domestic broadcasters to ease the liquidity challenges of cash-strapped teams since one more matchday was required to be played to trigger the final installment of the rights fees under normal circumstances.
MAKING BROADCASTERS HAPPY AS HIGHEST PRIORITY
To summarize, delivering the games to the broadcasters has been the priority for the top-tier European football leagues. However, the EPL, in particular, has put a lot of (additional) concessions on the table for the rest of the 2019/20 season to accommodate its broadcasters as well as possible—in need of countering arguments by Sky UK and BT Sport during settlement talks for the aforementioned rebates, including:
⚽ Supply of Games increased to all 92x remaining games available (i.e. 45x additional games)
📺 Free-to-Air Coverage for broader access while facing inherent trade-off between monetizability and access
📆 Staggering of Games to maximize live programming minutes and catering to overseas broadcasters as well
🕒Temporary Lift of Blackout Window on Saturdays @ 3pm as in-stadium attendance isn't part of the equation
🤳🏻 Other concessions like increased player access or behind-the-scenes footage
Many of these accommodations are interconnected and cannot be assessed as a stand-alone decision (think: no full staggering of games without lift of blackout-window), but the big question will be whether the league can put the genie back in the bottle once we have returned to some kind normalcy down the road? The fact is that the EPL put a lot of potential bargaining chips for future media rights auction on the table rights right now to minimize lost revenues and, thus, avoid business disruption and retain as much financial integrity as possible in the short-term. (see: Twitterpost ⤵️)
⚽ Supply of Games: Allocating 45x Additional Games to the League's Rights Holders for Wall-to-Wall Live Coverage
While stadiums not operating at full capacity must be the base assumption for the upcoming 2020/21 season and allows for some innovation down the road, making the entire inventory of games available to its rights holders for full-game live broadcasts for the rest of the current 2019/20 season allowed the league to start to "make good" for the postponed games towards its broadcasters. Sky Sports and BT Sport, in particular, have been in dire need for any live sports programming to have a justified claim start charging monthly subscription fees from their customers again. As a result, the league allotted 45x additional games to their domestic rights holders, roughly based on their initial rights fee commitments. Most interestingly, highlights rights holders BBC also received consideration and was allotted four games—for good reason: The value proposition of its flagship-program "Match of the Day" on Saturdays is highly diluted with all games being broadcasted live (and stretched across exclusive broadcasting windows across the entire weekend). At the same time, the public broadcaster needs to generate a return on paying £200M per season.
Having artificially restricted the number of games made available during domestic rights tenders has been an exception among the Big-5 football leagues and was considered a valuable asset going forward: (Over-)compensating for a potential stagnation or even correction of the sports rights market with increased inventory, either by creating completely new competitions (e.g. UEFA Conference League) or making more games available (e.g. NBA, EPL), seemed to have become the go-to strategy for many rights owners over last few months amidst a difficult market environment (think: sustaining current level of media rights fees at lower per-game prices for broadcasters).
While Sky UK and BT Sport have reportedly already communicated their desire for more than their original 128x and 52x games, respectively, next season as part of the EPL "making good," the league moving back to the original level of game inventory for the current rights cycle (200 out of 380 matches) seems just as likely (see below: Outlook for 2020/21 Season).
📺 Increased FTA Coverage: Pay-TV as Winner, Impact on Free-TV Ecosystem, and Future Expectation Setting
Providing improved access to the league's product, specifically through increased free-to-air coverage, has been part of the conversation between the governments, leagues and their broadcasters in Germany, Italy, and the UK. In Germany, Sky DE simulcasted its live whip-around show ("Konferenz") on its FTA channel Sky Sport News HD for two matchdays, Italian politicians have been demanding something similar as well. EPL's pay-TV broadcasters, however, have been in a comparably comfortable situation to strike that balance of monetizability of and access to some of their live games while planning "Project Restart": Due to having restricted supply in the first place, any of the 45x additionally awarded games comes as a "free throw-in" and is most likely a lower-tier matchups. In contrast, Sky's subsidiaries in Germany and Italy have been asked to put premium live programming in front of the paywall for which the broadcasters have paid hard cash and accounted for to drive revenues in order to recoup their respective upfront investment in form of annually paid rights fees to the leagues.
Thus, it has been a relatively easy decision for Sky Sports (via Pick Channel) and Amazon (via Prime Video and Twitch) to put the additional game inventory in front of the paywall—even from a commercial point of view: Both the upside of adding these 12x rather low-profile games to the Sky Sports package (= incremental customer acquisition) and downside of not adding some value beyond the original value proposition (= customer churn) should have been non-significant. On the other hand, windowing and exposing the EPL to the biggest audiences possible has several benefits including some goodwill from the league and politicians.
Further, thanks to the comparatively high willingness to pay for exclusive media content by British consumers and the EPL's undisputed mainstream popularity and drawing power, the league has traditionally been able to overcome the usual trade-off between restricting access via monetization on paid platforms and staying top-of-mind of the mainstream population by providing free access. In other words, the impact on subscription business of Sky Sports or BT Sport would have been minimal in the short-term in either case. Other UK sports properties like the domestic Rugby Football League have not the drawing power to overcome very limited visibility on free-to-air channels. (see: Twitterpost ⤵️)
Nonetheless, additional exposure for the league (and live coverage of the rights holders) certainly does not hurt for future customer acquisition and driver greater commercial value around the individual teams. Additionally, Sky's advertisers, in particular, will enjoy the rare opportunity to combine premium live sports programming with mass-reach distribution—and the Sky Sports and BBC will probably demand a large chunk of the budgets in an already tight TV advertising market in wake of COVID19—inevitably resulting in a hit on advertising revenue of other free-to-air broadcasters: Several industries that have traditionally been among the biggest spenders on TV advertising during live sports programming have been hit the hardest by the impact of the coronavirus, including the traveling, auto, and insurance industry. (see: Twitterpost ⤵️)
When it comes to Amazon, there are several reasons for putting their additional 4x live games, which have been "free throw-ins" in the first place, in front of the paywall of Amazon Prime (£7.99 per month or £79 per year), Prime Video (which can be purchased as a stand-alone for £5.99 a month, no annual subscription option available), or Twitch:
Besides avoiding any public backlash for putting "free throw-ins," given the EPL already delivered on all of its commitments for the 2019/20 season by the time the world of sports was put on pause, behind a pay-wall, the still-required app download is the first step of the conversion funnel for the bottom-line subscription--and getting on the home screen of any user's smartphone, tablet, smart TV, or any other streaming device is already quite fierce, before any competition for the consumer's disposable income and some share of their wallet kicks in. Additionally, the stand-alone pay-value of the lower-tier games (think: Amazon's first FTA game is Crystal Palace vs. FC Burnley on June 30, 2020) is minimal, which might do the trick for the app download, but not for signing up for a free-trial (including providing personal and credit card information) or even the monthly/annual subscription. To this end, once any given consumer downloaded the app, Amazon's algorithm will get to work to push him or her further down funnel. In other words, there is nothing such as "freebies" even though it might look like this.
But is there any downside to the increased FTA coverage, at least from the league's and its right holders' point of view? In the very short-term, the only downside that comes to mind is a PR problem for BT Sport if the pay-TV broadcaster does not follow suit since there certainly is some peer-pressure after Sky UK's and Amazon's move. (see: Twitterpost ⤵️)
In the long-run, the role of FTA could be redefined, even for the EPL that seemed to be accepted as a pure pay-TV product by even casual sports fans without any negative impact on its popularity: Consumer expectations could be reset as they already face subscription fatigue combined with wallet share tensions given the plethora of digital subscription products and could demand at least some FTA coverage of live EPL games going forward—which would represent less potential for monetization for rights holders and, thus, broadcasting revenues for the leagues. In this regard, most of the new freely-available games being of limited appeal to the mainstream or casual sports fan should play into the hands of the league though. The limited drawing power of lower-tier match-ups has been evidenced by the somewhat disappointing average viewership (= average minute audience) of +/- 3.6M for BBC's first EPL game ever and its first live broadcast from the English top-flight competition since 1988: Bournemouth vs. Crystal Palace on June 20, 2020. Sky Sports has been bringing in +/- 1.6 average viewers per game during the 2019/20 season pre-COVID and behind its pay-wall. Thus, the involved teams (and kick-times) still matter, but the occasional top-tier match-up such as last Sunday night's "Merseyside Derby" will be appointment-TV for the casual sports fan: The game's record audience of 5.5M viewers in the UK set the record for the most-watched game in EPL history and pulverized the previous record of 4.3M viewers set by a "Manchester Derby" in the 2011-12 season—which took place behind the paywall of Sky Sports though. Although more free-to-air games across BBC, Prime Video/Twitch, as well as Sky's Pick Channel are upcoming, a combination of exhausting the pent-up demand, low-profile matchups, and a decided title race probably means we already reached the "post-pandemic peak" when it comes to the English Premier League.
Heading into next season, turning back the clock after setting the repeated precedence of providing free access to the highest-profile games in a tight championship race would certainly have been more difficult. Looking ahead, I can imagine some dedicated carve-outs for free-to-air games for the league's next rights cycle as advertisers from some deep-pocketed consumer industries will still be looking for pure eyeballs and awareness-generating reach at scale amidst the secular decline of linear TV—making programming that can deliver such mass-reach significantly more valuable. Additionally, removing the paywall multiplies the monetization potential through any future add-on integrations: betting, e-commerce, or other forms of engagement that can at least partially offset the lack of subscription revenues. Finally, even the market-leading EPL should benefit from the occasional free-to-air windowing (think: acquiring the incremental pay-TV subscribers, goodwill). Balancing such carve-outs with any potential cannibalization of the subscription-based businesses of pay-TV rights holders is the challenge of packaging the rights for league executives in advance of the next rights tender—and given the uncompetitiveness of free-TV's level of monetization with the dual revenue stream of pay-TV means that rights owners would have to make the proactive decision to create such dedicated rights packages if broader exposure is part of their set of objectives. (see: Twitterpost ⤵️)
📆 Staggering of Games: Maximizing live programming minutes and catering to overseas broadcasters
In addition to opening up more game inventory to would-be rights buyers, which has been a specific case to the EPL, rights owners, in general, tried to gain leverage during recent rights negotiations by staggering the individual games of any given matchday over an increasing number of time slots.
With effectively every mainstream sports property on pause, broadcasters have shown a dire need for any live sports programming over the last couple of months to reduce customer churn and, ideally, being able to reasonably demand the payment of subscription fees. With European football leagues being among the first competitions back, rights owners are certainly catering to the broadcasters' needs when looking at the leagues' game schedules for the rest of season: The extreme staggering of games to maximise exclusive broadcasting windows has become a go-to move for many sports leagues to gain goodwill and minimize rebates—accelerating a trend which leagues probably would have preferred to have played more strategically and gradually over the next few years instead.
Even for sports-needing broadcasters, stand-alone programming windows have a diminishing marginal benefit (think: lower-tier games in exclusive windows), but kicking-off games very early (think: Asian broadcasters) and late (think: American broadcasters) also accommodates international rights holders, from which outstanding rights payments must be collected as well and are probably an even more difficult challenge than their domestic counterparts when it comes to not only collecting "some cents on the dollar."
Until the coronavirus put the world (of sports) upside down, EPL and, in particular, the Bundesliga have been rather conservative in this regard. While the Bundesliga has continued to stick to its usual kick-off times, a decision that has been both applauded (think: sticking to values/traditions) and critiqued (think: missing a great opportunity for (international) exposure) in Germany, the EPL has followed the approach of the Serie A and La Liga which already were aggressively playing this playbook before the recent sports hiatus.
🕒 (Temporary) Lift of Blackout Window: A Long-lasting Headache for Foreign Leagues and their UK Broadcasters
An inherent precondition for stretching games across Saturdays (or Sundays) while being able to provide full live broadcasting access to those games behind closed doors has been the temporary lift of the so-called "blackout window." It prevented any live sports broadcasting in the UK between 2:45 and 5:15pm on Saturdays—based on rights used by the FA and granted by UEFA to its member associations. Aimed at protecting participation in grass-roots football and gate receipts for lower league clubs (which would directly compete with the TV product of top-tier domestic and non-domestic football competitions), the EPL's schedule and, by implication, broadcasters' programming schedule have been swiftly built around that limitation. Although there has been general opposition against the "blackout window" recently (think: piracy, limited impact on original objective), the most vocal advocates for lifting the ban have been international leagues and their local broadcasting partners trying to raise their visibility, profile, and ultimately value: For example, La Liga, together with rights-holding broadcaster Eleven Sports, challenged the rule back during the 2018/19 season. (see: Twitterpost ⤵️)
While the Spanish league's attempt failed last season, the combination of recent developments including the staggering of games, games being played behind closed doors, increased piracy in the digital age, or the increased importance of overseas broadcasting monies and the lucrative UK pay-TV market being a high-potential market for foreign leagues, make it seem very difficult to turn back the clock once the world of sports returns to normalcy.
REVENUE COLLECTION: DOMESTIC BROADCASTERS NOT DONE, OVERSEAS MARKETS TO GO
At least the above-mentioned concessions, mostly catered to the league's domestic broadcasters, have enabled the EPL to settle with Sky Sports on a still sizeable £170M rebate—representing more than 14% of total rights fees due for the 2019/20 season. Although similar deals with BT Sport and BBC are still pending and similar negotiations in Italy (where Sky IT demands a 14-18% discount) or Spain (where league president Tebas put any discussions about rebates with rights-holding Telefònica/MediaPro on-hold until after the season) are still to be solved, the even bigger challenge will probably be the collection of revenues from international broadcasters.
Signs of ongoing face-offs in overseas markets between top-tier rights owners or intermediating agencies, who did a complete buy-out of overseas rights (e.g. MediaPro for La Liga, IMG for Serie A), with international broadcasters over potential discounts or rebates are reasons for further concern: For example, the Serie A going dark on DAZN in Brazil has come as a surprise. The pure-sports streamer's launch in Brazil in the summer of 2019 gave IMG finally an out from the emergency solution of distributing and monetizing the rights to the Italian top-flight competition via their owned and operated OTT service ("Serie A Pass") during the 2018/19 season—while not receiving adequate bids from local broadcasters (e.g. Globo incl. SporTV, Disney via ESPN/Fox, Turner via Esporte Interativo) for a long time and despite the arrival of Cristiano Ronaldo: Such self-exploitation of rights (think: no initial customer base, no B2C brand awareness, lack of marketing/sales expertise), though, had no chance to come anywhere close to the level of revenues budgeted in a core market like Brazil to successfully refinance the €371M per season investment in guaranteed rights fees to Serie A—which has forced the agency to drive a tough bargain with interested broadcasters in the first place. Do we see a comeback of the "Serie A Pass" for the rest of the season with DAZN and IMG seemingly in a commercial gridlock in the wake of the COVID-induced hiatus? As a side note: DAZN has deliberately signed short-term contracts in Brazil upon entering Latin America's biggest broadcasting market which might gave them a quick out and facilitated their "trial and error" - approach when it comes to its portfolio composition.
Although I am of the opinion that international broadcasting monies will make the difference among the European Big-5 football leagues going forward, the most value is still captured domestically (at least for now). Nonetheless, overseas revenues for the global brand of the EPL and, to a slightly lesser degree, the La Liga come close to the domestic broadcasting revenue generation:
Speaking of the German Bundesliga, whose recently completed domestic media rights tender, kicking in with the 2021/22 season, deserves a separate discussion at some point and not just an off-the-top-of-my-head thread on Twitter (👉🏻 Quick Reaction to Bundesliga Domestic Media Rights Tender), the German top-flight competition has probably been the league returning without the least precedence-setting changes and potential unintended consequences: For better or worse, the German league has remained conservative in terms of scheduling, limited free-to-air exposure to simulcasting the league's live whip-around broadcast ("Konferenz" from Sky Sport) to two occasions on the pay-TV operator's free-to-channel Sky Sport News HD, and any other potential new revenue streams (e.g. unbranded tarps in the stands, if at all). Probably the only aggressive move by the Bundesliga has been the actual return date: Despite coming back (May 16, 2020) almost four weeks before the next-earliest Big-5 league (La Liga on June 11, 2020), the German league has been at least as long in training before returning to the pitch (6x weeks) as any other of the big leagues. To this end, the complete support from and full alignment with the government helped tremendously and has been another big difference to some of the other leagues. Unbelievably, the Bundesliga will have finished its season this Saturday, June 27, 2020—without major hiccups and more than a month before the European club competitions are scheduled to resume playing in August.
🤳🏻 Other (Potential) Concessions: Commercial Partner in Focus
Not being able to put the genie back into the bottle poses the risk that any concession that was made now in favor of short-term revenues retention will be considered as a given in future rights negotiations—instead of added value. With negotiations with broadcasters hopefully out of the way soon, leagues will shift their attention to restoring sponsorship and advertising dollars lost to the global pandemic, likely forced to make good on previous commitments way into next season (just like with their broadcasting partners): Potential concessions could include increased player access for media and/or sponsors, making new physical or virtual advertising space (e.g. NFL team‘s local sponsors with camera-visible signage of local sponsors on tarps in lower-tier stands on national TV) and/or categories (e.g. MLS sponsors on shorts or left sleeves) available. Unfortunately, such incremental moves were earmarked to sustain future revenue growth and to be incremental in nature. Now, they will be needed to serve as compensation for existing instead of new commercial partners and make good for already budgeted, booked, or even reinvested revenues. I also do not believe in the idea of "temporary assets" given all the implications outlined above—most of them will stick around long after having hopefully overcome the current pandemic and, in the best case, the increased commercialisation of any given sports and some of previously unbranded assets can be turned into incremental instead of compensating revenues further down the road.
QUICK HITS: Fake Crowd Noise, Tarps/CGI Fans in Stadium Stands, Innovation in Linear TV vs. OTT, 2020/21 Outlook
🎥 Game Production: The Bundesliga coming out of the gates with a super-conservative approach (think: no fake crowd noise, blank empty stands, limited innovation in game production) quickly led to my expectation that other leagues will use the Bundesliga as a blue-print, especially from a health and safety point of view, and demand all the attention and eyeballs from international audiences, in particular, upon their own return—after the German league had the global football's attention exclusively for about four weeks. Looking at the parties behind the game productions, the Bundesliga is the only league which produces the games in-house (as part of their strategy to control more of the broadcasting value chain) and delivers the match signal to its domestic and international broadcasters. In the case of the other European Big-5 leagues, the rights holders, either through in-house capabilities or third-party service providers, are responsible for game production. (see: Twitterpost ⤵️)
🔊 Fake Crowd Noise: In general, I personally prefer some crowd noise being pumped into the broadcasting signal. While the Bundesliga has not offered any solution for fake crowd noise, rights-holding Sky DE decided to do so: An extremely detailed (think: repurposing real-world recordings of previous matches between the two teams involved in every given match-up) and manual (think: real-time insertion of sound signals based on game action) has resulted in the highest quality among the leagues, even taking the few hiccups (e.g. during VR - review) into account—manual processes are simply susceptible to errors. The other big European leagues relied on a much less sophisticated process (think: recycling crowd noise from EA's FIFA 2020 video game) and the differences in quality to the Bundesliga have been significant. Good for Sky DE, the pan-European pay-TV operator seems to have been able to generate some B2B revenues as other international broadcasters of the Bundesliga added crowd noise over the first couple of weeks—while being left hanging dry by the league itself which stayed true to its claim "Football As It's Meant to Be." On the other hand, the Bundesliga has trialed (think: vertical live broadcasts tailored for mobile consumption) and already rolled-out (think: AWS-supported real-time match analysis including “Average Positions” and “Expected Goals”) some interesting projects related to game production pre-COVID—which suggest that the league simply played it safe as there have been both proponents and opponents in Germany of coming back as early as they did (while other sports did not at the time). (see: Twitterpost ⤵️)
The only downside for Sky DE: During the first weeks, in particular, the visual disconnect between highly-produced (and realistic) crowd noise and mostly uncovered empty stands felt weird—which is a nice segue to what other leagues have done in the stands instead: tarps and CGI fans.
🏟️ Tarps/CGI Fans in Stadium Stands: Looking at their respective revenue mix, unsurprisingly most top-tier sports have already evolved into a "made-for-TV" product—with varying degrees of continuing to cater to traditional values and/or fans in attendance. With games behind played behind closed doors, the broadcast (or personalized narrowcast, more on product differentiation in a second) is where the audience is going to be exclusively. The watch experience arguably has already been superior to the in-stadium experience. Unfortunately, the in-stadium attendance has also been an essential part of the "made-for-TV" product, as evidenced by the urgency with which fake crowd noise and even CGI fan visuals were added—it is not true the other way around though. With no need for any consideration for the most traditional revenue stream (i.e. gate receipts and other income sources related to the in-stadium experience such as food & beverages, parking, or hospitality) for the foreseeable future, any sports should fully embrace the playing field as a stage for the cameras and make it as visually appealing as possible. I personally like the slick and clean cover-ups in the lower bowls of the stadiums in the EPL. The additional advertising space is an obvious opportunity, although the English league limited any sponsor-branded portion to 25% of the total surface area for now. Other leagues like the MLB, already working with Nielsen on a proprietary solution for valuing that exposure for sponsors called "Nielsen Whitespace Valuation," will unquestionably exploit such newly-found inventory more aggressively to make good on sponsorship commitments—again driven by their slightly different composition of revenues and the MLB clubs' higher reliance on local sponsorships. An additional benefit: The argument of being a "temporary asset" is much easier to make for branded stadium wraps given that crowds will return at some point down the road. In a nutshell, sports should become a "purely-made-for-TV" product for the time being—which also implies the challenges that lower-tier leagues and less popular sports are facing post-COVID.
To summarize how the European football leagues have done in my opinion: Bundesliga too conservative (think: mostly uncovered stands, partially covered by tarps/and fan cut-outs), La Liga and Serie A went overboard (think: CPI fans), and the EPL (think: slick branding of stadium stands, live video walls) did the best.
💰 Accelerated Innovation in Watch XP (and Commercial Models?): Until the COVID-pandemic, OTT had not delivered at all on its promises when it comes to the watch experience beyond facilitating "TV Everywhere." More often than not, it has remained a pure simulcast of the linear broadcast—while facing much more challenging economics as a business model, lower broadcast reliability and quality, and an up-hill battle due to the digital divide when it comes to mainstream adoption.
As with many things, the sports hiatus both forced and bought time for rights-holders to accelerate the realization of some of the much-acclaimed potential of OTT: re-creating the common watch experience in a socially-distant manner (e.g. Eleven Sports as pioneer: "Watch Together", BT Sport: "Watch Together", Sky UK: "FanZone") and much more choice/personalization for video (e.g. live catch-up features) and audio feeds have been relatively quick wins. Further additions such as in-stream match predictions, game polls, or individualized fan noise should follow soon. More advanced features and their adoption (think: AR/VR) will probably depend on how long games without fans are the reality—otherwise they will remain "in their way," hopefully not until the next global pandemic.
Although there has been little innovation in the watch experience before the global pandemic, there has been even less progress when it comes to the commercial model of OTT sports live streaming beyond the standard monthly, flat-fee, all-you-can-eat subscription model ever: Blog #45 - Rethinking the Multi-Sports Subscription.
In order to create (think: increasing consumer's willingness to pay relative to own input costs) and capture (think: higher prices relative to own input costs) value to make being pure-sports streamer a viable business model, any market-defining innovation in the watch experience will need to come together with more price and product differentiation along the way as consumption preferences and habits have become more heterogeneous.
🕶️ Outlook for the 2020/21 Season: The most interesting time as it relates to all the things discussed above might still be ahead of us: What will be abandoned again, stick around, or will be added heading into the 2020/21 season—once leagues and rights holders have some time over the "summer break" to evaluate the implemented initiatives? As mentioned before, leagues sometimes will not be able to turn back the clock. On other occasions, the changed conditions resulted in value-adding innovation. One particular topic, which will have wide-ranging implications for the EPL is the topic of "supply of games." Regardless of whether more inventory will be made available for the next rights cycle starting with the 2022/23 season and whether it will still be able to positively impact bids, the bigger question is what happens for the rest of this cycle (2019/20 - 2021/22) as rights holders continue to only have a legitimate claim on 200 out of the 380 games per season while games will mostly remain to be played behind closed doors? Some food for thought: Not being forced to make good on any postponed games (although a diminished product due to lack of in-stadium attendance) and instead of allocating the other 180x non-broadcasted games across its domestic rights holders as it was done for the rest of 2019/20 season, does the league allow their teams to go direct-to-consumer domestically and sell their (home) games directly to their fans, or at least their season ticket holders to compensate for the lack of original matchday revenues—just like the second-tier EFL and SPFL will do next season? (see: Twitterpost ⤵️)
In such scenario, EPL teams certainly would need the time provided by the "summer break" to figure things out, including:
Revenue sharing among teams of those incrementally-generated direct-to-consumer revenues (although EPL teams get compensated for being on national TV and any opportunities for incremental team revenues from games not being broadcasted by Sky UK, BT Sport, or Amazon would actually result in a more even playing field).
💻100% have an owned and operated digital club channel
🗝️ 90% have a registration interface (i.e. fan data)
🤑 40% offer paid subscriptions to non-live video and/or live audio content
📺 10% (i.e. Manchester United & Liverpool FC) have linear distribution of such programming in the UK
Leagues, including the EPL which as the only European Big-5 football league has still held-back game inventory domestically, always talked about their ambitions of going direct-to-consumer, disintermediating third-party broadcasters *but never actually would do and are only hoping such threats artificially boost bids when wholesaling their broadcasting rights*. The EPL might have the opportunity to do just that while having their broadcasting monies already fully guaranteed. Whether their broadcasting partners would like such form of a partial substitute and further competition for the consumer's wallet is another question—and, as mentioned before, Sky Sports and BT Sport already registered their claim on more game inventory for the 2020/21 season.
One additional benefit: The current dilution of BBC's highlight programming, to which the increased FTA coverage contributed significantly as well, would have only been of temporary nature—for which the publicly-funded channel has already been compensated during the ongoing campaign—and could return to the pre-COVID set-up.
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