Mastering the Digital Divide

SportBusiness International looks into the business models of digital sports networks, set up by rights-holders in association with established digital media operators to supplement traditional TV programming.

What are the benefits for rights-holders taking such a step, and what does it tell us about the ever-changing media landscape?

Ever since the internet became the go-to place to make major announcements to the widest audience possible, there has been a concerted effort from sports rights-holders to take greater control and ownership of their media output outside of TV and radio.

The proliferation of ‘digital sports networks’, featuring original and tailored digital offerings and operated to varying degrees by rights-holders in partnership with established digital media companies, are simply the latest step in reaching out to an audience with an ever-increasing appetite for content.

In January this year, two rights-holders made the headlines in this space. Firstly, golf’s PGA Tour teamed up with media company Bedrocket to launch Skratch TV, a golf-specific network featuring daily original video content – often showcasing golfers’ lifestyles away from the course – and highlights from Tour events (see Case Study One). Meanwhile KICKTV, set up in 2012 by Major League Soccer (MLS) to “broaden its voice” outside its official media platforms, was sold to London-based Copa 90 (see Case Study Two).

The emergence of YouTube a decade ago – as well as other video-sharing websites such as Dailymotion and Vimeo – has provided an ideal vehicle for sports associations and federations of any size to launch such digital sports networks.

However, for golf’s European Tour, the opportunity to develop its own channel arose when it established links with Microsoft following the software giant’s work around the 2012 London Olympic Games.

A free-to-access digital sports network providing on-demand coverage, as well as archived content, European Tour TV launched with the support of Microsoft’s Windows Azure Media Services two years ago. It is also used to stream live coverage of events in territories where it doesn’t have broadcast agreements in place, which currently numbers around 60 worldwide.

“Starting a live-scoring service years ago revolutionised our approach because until then golf fans never knew what was happening in real-time outside the TV window,” Mark Lichtenhein, the European Tour’s head of TV, digital media and technology, told SportBusiness International.

“We have fantastic broadcast partners around the world, but golf is just a part of what they do. When we launched European Tour TV, it was to provide complementary programming to the broadcast coverage.

“For broadcasters, from the Wednesday after a tournament has taken place, the focus switches to the next event, and we used to get lots of requests for highlights of tournaments that people had missed.

“European Tour TV now shows all events on a week’s delay plus 500 hours of the best moments of the European Tour. It is perfect for die-hard golf fans who love consuming the sport, but it also ensures that nobody on the planet is disenfranchised from watching golf.”

According to Lichtenhein, the primary motivation for launching European Tour TV was not to seek an easily identifiable bottom-line ROI: “We have a model whereby we cover our costs. Microsoft provided value-in-kind support with the set-up, and our operating costs are covered by sponsorship deals.

“The aim is really to connect with the fanbase and increase the overall value of the European Tour. If you take a step back, all sports – certainly pre-internet – were primarily B2B operations. We dealt with sponsors and broadcasters and they dealt with the end consumer. However, the world has changed, and sponsorship has changed too.

“Traditionally sponsors were about branding and visibility only, but now they expect the property to give them detailed information about the demographic of the fans and enable direct communications with that demographic.

“From a rights-holder’s point-of-view it is imperative now to know as much as possible about the end consumer. The media is increasingly fragmented, and it’s not just about a TV diet anymore.”

With football dominating that market, smaller sports are being forced to take matters into their own hands

Supplementary Media
With global appeal and a relatively affluent fanbase, golf is in an enviable position to supplement worldwide broadcast coverage with a digital sports network that will simply stoke viewers’ appetites.

For other sports properties, however, though engaging with fans remains the primary motivation for launching a network, the reasoning can be different.

For squash, a sport that struggles to secure mainstream exposure in an intensely competitive broadcast market, a digital sports network has ensured that fans can get to see action on the court, regardless of whether there is TV coverage in their country.

The Professional Squash Association (PSA)’s SquashTV platform, which provides coverage of more than 300 contests per year, relaunched in January. Through its new Ooyala player system, SquashTV will add Women’s World Tour coverage later this year after the men’s and women’s tours merged.

“The current sports TV market is dominated by top-flight football and the recent bidding wars for properties such as the UEFA Champions League exemplify that,” PSA chief executive Alex Gough told SportBusiness International.

“With football and the other major sports dominating that market, smaller sports such as squash or field hockey are being forced to take matters into their own hands.”

For the PSA, SquashTV is about taking control of the organisation’s media output and ensuring quality of coverage.

“By creating our own channel and developing an infrastructure that allows top-class squash to be broadcast, we can take 100-per-cent control of the sport’s televisual rights,” adds Gough. “Therefore we have the ability to negotiate contracts with broadcasters directly to help us ensure that the sport gets the greatest amount of coverage possible, while also maximising revenues.

“Alongside increasing the sport’s global broadcast portfolio, having our own channel allows us to bring squash to thousands of fans who otherwise would not be able to watch the players competing at the elite level.”

Though the business model digital sports networks differ vastly across sports properties (see Case Studies), some, including the PSA, will own the network outright, but use contractors to supply staff and equipment to deliver the production. SquashTV’s broadcast partners, for example, are real-time graphics provider MOOV and production company Timeline TV.

Newborn Business
Euroleague Basketball was a relatively early adopter of the digital sports network strategy, having launched its first streaming portal back in 2007. Euroleague TV now provides live and on-demand coverage of every game from the European club tournament in territories where there is no TV exposure.

“The digital business is only a newborn, but it is growing tremendously fast,” Euroleague Basketball’s director of brand and communication, Alex Ferrer Kristjansson, told SportBusiness International.

“Back in 2007, this platform was only a new way to engage with the fans and provide them with a service that would encourage greater loyalty; it had limited quality, but today that has changed dramatically.

“It is not only an engagement tool, but also a powerful marketing tool and it has started to pay off. We expect it to be a consistent revenue-generator in the coming years.”

Euroleague TV operates through a partnership between Euroleague Basketball, FIBA (the International Basketball Federation) Europe and digital sports specialists Perform.

“Perform manages the platform, customer relationships and all other operative issues, while Euroleague Basketball and FIBA Europe allocates the games so that both parties can join forces to create an attractive product for fans – the LiveBasketball Global Pass,” says Ferrer.

The pass is available across Europe from £8.99 (€12.40/$13.10) per month or £76.99 per year for British viewers, and gives fans access to coverage of the Euroleague, all major FIBA national team events plus a number of domestic tournaments.

As part of Euroleague Basketball’s expanding digital operations, video content is also distributed through ‘official premium media partners’ such as l’Equipe in France and La Gazzetta dello Sport in Italy.

However, as Ferrer explains, the property retains control of the output quality: “Every piece of content is produced in-house. We centralised all our audiovisual production in Barcelona a couple of years ago. There are many advantages of this approach, but the main ones are flexibility, speed, and editorial and brand control.”

You need a solid platform as people are not going to put up with lengthy buffering

Cost-Effective Option
European Tour TV’s content is also produced in-house, by the organisation’s European Tour Productions division, which the tour runs in partnership with the IMG agency.

“For smaller sports properties, linking up with YouTube can be a cost-effective option, but there is the downside that YouTube, rather than you, will know about your viewers,” says Lichtenhein. “For us, the focus is very much on long-form programming; 30 minutes-plus of high-definition coverage. The bite-sized stuff sits separately from that and can be integrated into the main website and social media channels.

“You need a solid, good quality platform, as people are not going to put up with lengthy buffering. We are lucky to have that Microsoft backbone. There’s a lot more consumption happening on mobile, so the second version of European Tour TV has been designed to work well across those devices as well as desktop platforms.

“One unintended consequence of launching European Tour TV is that we have been able to agree deals with some broadcasters in territories where we didn’t have deals in place, as they have seen how the service has been received.”

Meanwhile, SquashTV’s focus is “solely on live squash,” according to Gough.

“Our feed is delivered to broadcast partners and we have the same content going to our online channel,” he says.

“The difference is that our broadcast partners only take content from the semi-finals and finals of World Series events, whereas SquashTV has every match from every round plus action from smaller events as well.

“We have plans in place to develop our player features and magazine-style content exclusively for our online subscribers.

“We hope to continue to grow the platform, both in terms of the level of events and matches we cover, but also growing our broadcaster portfolio and ensuring semi-final and final action can be seen in as many countries around the world as possible.”

Selecting what should be shown on a digital sports network is a key consideration, with properties generally trying to strike the right balance between providing engaging content while not cannibalising rights-holding broadcasters’ coverage.

“Though the digital business is growing steadily, TV is still the main revenue-driver for sports rights-holders, and therefore they are always protected,” says the Euroleague’s Ferrer.

“Our streaming service is never competing with traditional TV channels since it presents a totally different offer to a totally different target market. We are mainly targeting those fans who want to watch more than what is available on TV in their country and those who live abroad and want to follow their team live.

“You simply need to understand what your fans need and what can you offer them through these new opportunities that do not clash with your other existing partners.”

Uphill Struggle
Geo-blocking content from certain territories is essential for properties that are keen to maintain a healthy relationship with their broadcast partners.

In late March, however, the European Commission announced plans to scrap geo-blocking in a move that could have significant repercussions for the sports media-rights industry. The decision was reached in principle by the European Union executive, though European Commission vice-president Andrus Ansip admitted that implementing such a measure would be “an uphill struggle” due to industry pressure.

For Lichtenhein, who is also chairman of the Sports Rights Owners Coalition, the announcement from Brussels was not unexpected. However, he says it has worrying implications for the growth of tailored digital content on innovative digital sports networks.

“This is an issue that is pretty fundamental to all sport, and we are engaged with the European Commission to explain the pitfalls of this idea,” he adds.

“I think their motivation is that there shouldn’t be geographical boundaries in the digital market. However, sport is very specific, from a cultural perspective, and there are sensitive markets.

“We are very concerned about any attempt to introduce something that would fundamentally alter the business model we have. Every country and audience gets the diet of sports they want, and there is not a one-size-fits-all solution.

“We have written a position paper explaining why we think that it would be damaging for the consumer – basically because they would have less choice than what they have currently.

“It’s about the broadcasters as well as the sports, and their businesses are going to be affected. In the digital age, sport really needs more protection rather than ideas that would undermine broadcast partners.”

With or without interference from Brussels, digital sports networks appear set to grow exponentially as viewers’ media consumption habits continue to evolve.

“Digital audiences are surpassing TV audiences in some countries already, and many studies show that second screens are now part of our lives,” adds Ferrer.

“The millennials were born into a digital world, and soon they will become consumers of these digital products.”

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