The Emergence of a New Sports Media Ecosystem
Sports rights owners seem to be carving up the sports media rule book and executing their rights against a new set of mechanics and metrics. This transformation has confirmed the view that Deltatre holds, that we are going to see the growth of the trend for a much more complex and varied media distribution approach from rights owners moving forward. Andy Wasef, EVP of Business strategy at Deltatre, explores the topic in more detail to uncover the possible future for sports media distribution and consumption.
We at Deltatre see the creation and management of a sophisticated media ecosystem that focuses on serving audience microsegments with a media diet that suits their tastes and preferences (between groups and even at different life stages, times of the year etc for individuals within those groups). This makes complete sense of course, but as an industry, we often forget to start strategy planning and execution with fans’ and viewers’ needs in mind. As with any organisation competing for people’s leisure time and disposable income, we’re in competition with a seemingly ever-expanding number of outlets, and starting with a deep and rounded view of your audiences and the cultural trends and tastes impacting all of them (not just the ‘younger generation’ and not just social media) helps provide the direction required for an effective strategy.
This brings up two key discussion points which I will focus on to consider what the future of media sports rights holds as part of this expanding digital ecosystem:
1. Does full exclusivity in media rights make sense for either the rights owner or the rightsholder?
It’s very well documented that the sports media business has undergone significant changes over the past 15 years or so, in line with the seismic media fragmentation created by the internet’s explosion. But the approach to media rights sales and acquisition hasn’t changed in proportion with it. Of course, we’ve seen the carving up of rights and distribution of highlight clips etc to varying degrees from different rights owners in different markets (with the NFL, WWE and NBA at the forefront of this approach.
But generally speaking, broadcasters still rule the roost when it comes to live sports and the prevailing thinking still seems very much to be that paying ever-increasing sums for full exclusivity of rights (especially for tier 1 and 2 rights) is preferable because it helps protect existing audiences, business models and revenue streams (or at least it helps stem the bleeding).
I’ve been reading and thinking a lot on this subject over the past year and the question is whether in 2018 and beyond this still makes sense for either party in the transaction? For rights buyers, the hypothesis is that by being the only (or main) show in town, fans/audiences will inevitably come to them (“Buy it and they will come.”). But what we’re seeing is that despite increasing rights fees, traditional TV audiences continue to slowly erode and digital consumption doesn’t fill the gap (both in terms of consumption or revenue). In laymen’s terms, when presented with a ‘take it or leave it’ choice, many audiences are choosing to leave it. The impact of this is especially acute when there’s a paywall of some kind in place and many fans simply chose to do without (either because they’re more casual fans, have lower disposable incomes or simply have other preferences of how to spend their money).
At some point, you would expect that the economics of ever-increasing rights fees (that sometimes act as a ‘loss leader’ for other parts of the buyers’ business) won’t stack up anymore and the question is whether paying a lower amount for less exclusivity makes more strategic and financial sense now and in the future. Once you make peace with fact that audiences’ tastes and preferences have fundamentally changed and that the same ARPU as before is no longer achievable – because the way some fans consume (‘follow’) their sports isn’t monetizable in the same way and to the same level – then you can begin to plan for a more sustainable buying approach where you co-exist in peaceful harmony with many other rightsholders of the same sport but of different shapes and sizes (am I being too naive here??!).
At the same time, many rights owners (sellers) continue to see the benefits – both financial and in terms of time, effort and energy on their part – in selling exclusively to one or two parties and allowing them to handle the difficult work of growing and monetising those audiences.
Again this is logical and no one can blame a rights owner (whether huge ones like the Premier League or those on the more niche end of the spectrum) from taking this view. Rights owners are experts at running and governing their sports, leagues, events and/or teams (and the huge complexity that goes into doing all that). They’ve not traditionally been in the business of sophisticated marketing or running a media organisation which is hard enough for those whose sole raison d’etre is media.
But when selling rights, most organisations have to balance the long-term health of their property (in terms of both fanship/viewership as well as participation) with shorter-term financial needs. And in doing so at a time of vastly shifting cultural trends, I’d question whether all of those considerations are satisfied by selling everything to 1 or 2 parties whose business models and interests might not match.
Tracey Keenan from WWE UK recently highlighting their continuing expansion of a complex media ecosystem where D2C, broadcast (paid and FTA), social, and PPV all co-exist in different forms in different markets.
We believe this ‘Horses for Courses’ approach will need to become the norm and that we’ll eventually see a shift away from exclusivity and different players in the ecosystem serving different audience needs in different ways and with different business models.
2. A different kind of commercial relationship between rights-owners and commercial partners.
Mai Fyfield, Chief Strategy Officer for Sky, commented in a recent panel discussion that historically their relationships with rights owners have been very transactional (i.e. bid for rights, win or lose, then execute with limited interaction with the seller). Her view was that that needed, and had begun, to change with the types of assets the seller provides and the way they jointly execute them being broader and more about partnerships (e.g. rights owners providing more complimentary content created centrally and as part of the deals).
This was echoed by John Gleasure of Dazn who described joint viewing events they’ve been putting on with the J-League in Japan, and Andreas Heyden from DFL Digital Sports who shared how the Bundesliga has continued to grow as one of the most exciting and watched leagues in Football while at the same time expanding both their own brand-building efforts as well as the types of content and partnerships they’ve created with different rightsholders (and sponsors) around the world.
You can see similar hallmarks in what the NFL (with NFL Films), the PGA Tour (with PGA Tour Productions) and the NBA have been doing for a few years. The same can be said of the IOC with the launch of the Olympic Channel and Olympic Channel Services, which aims to increase engagement with the Olympic Movement between the Games and provides a media platform/ecosystem and a range of content-related services for their commercial partners.
We believe this is a critical shift in how rights owners and holders will engage moving forward. In sponsorship, the need to demonstrate and deliver the same level of engagement, effectiveness and measurability as the other media options a marketer has at their disposal has begun to lead properties to increase the services, content, data and audience insights they provide to sponsors. The same will surely be true of what they provide those buying their rights, where the aforementioned shifts in audience behaviours and economics of traditional media are leading to significant pressure on margins and resources.
This will be especially so in smaller markets (either generally or for the rights owner in question) and I think we’ll be seeing more of this expansion in assets and services provided by rights owners to buyers (quite possibly also in partnership with the ‘lead’ rightsholder in their home market).
What these twin topics lead to of course is a broadening of the experiences related to anyone sports property, a more complex latticework ecosystem of media and content, a more varied set of revenue streams and business models, an evolved relationship between buyers and sellers, and a need for new resources and skills all around.
While this is undoubtedly more complicated and quite often more work, it’s the way we will stay aligned with the evolving tastes and preferences of the people we’re all serving, fans and viewers.
This article was written by Andy Wasef, EVP of Business strategy at Deltatre originally published here.
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