As the world's leading sports media executives were saying a fond farewell to Sportel Monaco last month, Ted Sarandos (pictured), chief content officer of Netflix was in New York talking to shareholders and the media about profits, plans and potential.
He confirmed Netflix was slowly easing into fresh territory with the production of weekly talk shows, and the chance that a deeper move into that territory would see it competing directly with Vice in the next two years. He also appeared anxious to dampen any suggestions that sport was also on his agenda…without ruling it out altogether.
“There are a lot or irrational bidders for sport. We’re not anxious to become another one,” he said at the time. Irrational is not a word likely to be used to describe Perform, the sports media company which announced the launch of an OTT live streaming service that has been dubbed ‘the Netflix of sports’.
Given that Netflix remains essentially a video on demand service and that Perform will be offering live sports as well as studio programmes, it is probably not the most accurate tag. However, the fact is both are straight-to-consumer offers which reflect the way that the media market is changing as customers – particularly in the United States – continue to kick against the hegemony of pay-television operators and increasingly refuse to fork out for bundles of channels, many of which are seldom if ever watched.
Perform’s concept is to sweat their assets to realise revenue from rights considered to be undervalued in individual markets. For now, at least, that suggests secondary rights which are unlikely to trouble the established pay-television operator in each market.
There are various models of successful sports media businesses and you don’t have to be BT Sport and embark on a high-cost, high-risk rights acquisition spree to meet expectations and objectives.
Will the day come when a Netflix equivalent becomes the global partner of the Premier league, NFL or Formula One?
The interesting question is how the new Perform initiative and the possible arrival in the sports space of Netflix and other major OTT brands – perhaps including a new Apple service – will impact on the sector, not next month or next year but several years down the line.
Industry analysts say that the relatively low barriers to entry will mean that the Perform move is closely watched and, assuming it is successful, will generate competition in the most lucrative markets. That, in turn, may fuel rights inflation, producing something of a bonanza for secondary rights owners.
At the same time, the fact that Netflix and others are taking big chunks out of the movie and television business from major pay-operators in the US and elsewhere suggests that the power of the juggernauts is being slowly eroded. That erosion may well lead to a reconsideration of sport’s role in the media business.
Is sport’s time as a marketing battering ram for the sale of subscriptions to pay-television bundles finally coming to an end? The well-established OTT operations set up by operators including Sky in the UK to offer choice and counter the any negative impact suggests it is an option they need to have covered.
Given the way that revenues will be shared under the Perform OTT model, there is a clear partnership between the operator and the rights owner which might also develop further under some circumstances. Is it fanciful to imagine a scenario in which a massive, well-funded OTT operators with global coverage began to bid for and win the rights for tier one properties on the basis of a fee plus attractive revenue split?
Will the day come when a Netflix equivalent becomes the global partner of the Premier league, NFL or Formula One, dispensing with the need to sell rights by territory and ensuring that all the action and support programming is available live or on demand for a fee which truly reflects the value of the property?
Clichés tend to become clichés because they contain a fundamental truth and the sports media mantra ‘Content is King’ underscores the point.
No matter how technology and changes in consumer behaviour impact on the ways that sports content reaches its audience, the difference in value will always be premium rights. For those who own those rights there are now new opportunities for monetising them and the notion of selling though an exclusive partner on the basis of a performance based revenue share or simply setting up shop and going direct to market may prove attractive in the longer term.
So whether or not Ted Sarandos comes to see sport as a little more rational and takes Netflix into the market, sports media continues to evolve bit-by-bit, creating new opportunities for those who understand the value of content and how to deliver it most effectively to the right audience at the right price. And that sounds a lot like the rational people at Perform.