- Sports rights value is becoming increasingly concentrated in a small number of premium properties
- Experts are divided on how much second-tier sports can gain from using them as models
- Rights-holders at all levels will increase OTT roll-out but it is not a panacea for smaller properties
The value of the global sports-rights market is set to break the $50bn (€40.6bn) barrier in 2019, according to the 2017 TVSM Global Report. Yet only about a third of sports federations make money from selling their media rights. The world’s top leagues and events earn billions of dollars from the global distribution of their rights. Yet many smaller leagues and minor sports struggle to earn anything.
Learning from winners is ingrained in the culture of sport. Not just for players and coaches. Every club, league and federation is engaged in benchmarking activities on commercial performance, hoping to learn from best practice. Many second-level and minor leagues study examples like the Premier League, the NBA and Formula One in search of a winning formula they can adapt to their own sport. And many of those struggling to secure big rights fees from traditional linear broadcasters have been looking to creating their own OTT platforms instead. But can either activity really make a difference in driving revenues?
SportBusiness International talked to three experts about benchmarks for global rights strategies, how much expertise is transferable down the pyramid and how OTT can fit into future strategies.
Frank Leenders (above) has been director general of Media & Marketing Services at the International Basketball Federation (Fiba) since 2012. From 2002 to 2010, he was managing director of Team Marketing, the agency which distributes the rights to the Uefa Champions League.
Jörg Daubitzer (immediately above) was responsible for the international distribution of Bundesliga rights from 2010 to 2017, first as managing director of DFL Sports Enterprises, later as chief executive of Bundesliga International.
Enzo Morelli is a Milan-based lawyer who was involved in drafting Italy’s 2008 Melandri Law, which centralised the sale of sports rights. He works as a legal adviser to the Infront agency on the rights to football’s Lega Serie A. He also advises Italy’s top basketball league, Lega Basket, and the country’s top women’s volleyball league, Lega Pallavolo Serie A Femminile.
Who are the benchmarks for global rights distribution? Can second- and third-tier sports properties learn anything from them?
Jörg Daubitzer: It’s common to say that the global distribution of media rights is successful if the rights-holder earns big money. This would mean only properties with huge revenues are the benchmarks. In reality, they are only benchmarks because of their inherent sporting value.
There are several B2B and B2C criteria which you can use to measure success and determine whether someone is a benchmark for others. These include the sales strategy, consumer-orientated production and support programmes, creating unilateral opportunities for broadcasters, delivering marketing support and cooperation over all platforms, creating an intelligent combination with news programmes, and the integration of sponsor partners.
The early investments by the MLB in digital stand out. They had already started investing heavily in their own digital platforms such as mlb.com and Bamtech at the beginning of the last decade. They had the vision to make the most of that technological opportunity.
Around 2008 or 2009, the Premier League started to build its own 24/7 channel which they sold at a time when the telcos and digital players were coming into the market. These were often people who didn’t have the knowledge and experience to build their own channels around rights. The Premier League delivered a ready-made channel for them. They could still sell rights to traditional broadcasters. This gave the league a lot of opportunity for growth and made it less dependent on a small number of traditional players in each market.
The Uefa Champions League is an excellent benchmark for building a sports property from scratch, especially by defining the right balance between free-to-air and pay-television broadcasts and through the successful integration of sponsors and suppliers.
The NBA in China is a perfect example of how to build up high interest and sustainable value for the property through very close cooperation with local media partners and the local fan community.
Super-premium or long-established properties are a good example of how the business works in all areas – what has been successful and what didn’t work out. However, super-premium properties often run the risk of focusing only on rapid and substantial economic growth, forgetting about the consumer experience, innovation and development.
It’s natural to look at the number one or number two properties and only see their advantages over the smaller properties. What people don’t always see is the pressure they are under to continually deliver big economic growth. This pressure reduces the flexibility you need to develop the product. It’s just: money, money, money. Every day. That’s the focus.
The opportunity that second- and third-tier properties have is that having less pressure gives them more flexibility to be creative, to try something new, to change something dramatically. The challenger properties can do something different.
Some second- and third-tier properties – despite having fewer resources – have come up with inspiring and trend-setting activities. Years ago, before it was established, WWE was a good example of an upcoming property using new approaches. The Americas Cup or the Tour de France have built up excellent worldwide distribution because they created technical and production solutions, such as digital and data enhancements, to make their content more interesting and entertaining for viewers.
Frank Leenders: It’s clear that the big football franchises, Formula One, the International Olympic Committee and the top four US leagues are in a different category to everyone else in terms of the scope and resources to set up their own internal structures and to invest in technology and product development.
Medium-tier sports rights-holders generally have the problem that they operate limited commercial programmes. They focus on deriving immediate revenues from the sale of traditional sponsorship and broadcast rights packages. They traditionally do this on a cycle-by-cycle basis and often outsource these activities to an intermediary.
In order to make a difference and get to the next level, they should consider the following:
- going beyond the (cycle-by-cycle) sale of traditional linear TV rights
- investing in the product
- continuously developing the digital ecosystem
- experimenting – digital is ideally suited to this
- considering long-term strategic alliances with partners which can provide ‘firepower’ and security: human resources, a global network, financial investment, and stability (through guaranteed income).
Fiba’s long-term partnerships with [digital specialists] Perform (through Fiba Media) and Infront/Wanda (through Fiba Marketing) have done that: more resources than ever are available around the world and there is access to an unprecedented network of expertise.
In a normal federation there are limits to the scope of what you can do in-house. If you have 50 people working for the federation, you can’t put 40 of them on media and marketing. The primary mission is to develop the sport. It’s about financial resources but also the balance within the organisation.
Enzo Morelli: The Premier League, the NBA and F1 are the benchmarks for how to manage a successful global distribution. A second-tier football league or basketball league cannot simply copy their distribution strategies and expect to have success. The inherent sporting value in the top properties means that there is a difference in the demand for the products which requires a difference in the approach to the supply.
The differences in resources, both financial and human, is a reason why copying the model of the NBA and the Premier League won’t work, but it is not the main one. That is the level of interest in the league itself.
Premium properties can exploit strong competition for their rights. Their strategies are based on maximising this competition. For properties in the second and third tier and below, you don’t have that competition. So you need a totally different strategy. It’s pointless a second-division football league somewhere saying: we will use the Premier League model. It will make no difference.
Where is the value in lower-level leagues? In most cases there will be value in a handful of specific markets because of players from that country participating in the league. And if you have a competition with a good volume of events there is value in the betting rights. So you need a solution which focuses on those things. In most cases, it will mean working with an agency which can bundle your rights with the rights to more valuable content.
You can either just sell the rights or create a block of programming. Agencies like Infront, Mediapro and IMG have been working on developing this kind of content for a long time. Agencies are also paying decent fees for betting rights to build a critical mass of betting streaming content to take to that market.
Where second- and third-tier properties can learn from premium properties, and put that into action, is in improving the television product. A small football league might never reach the same broadcast specifications as the Champions League, but they can look at what the Champions League is doing and improve their coverage as far as their budget allows.
Are direct-to-consumer OTT platforms the future? Will rights-holders, big and small, cut out aggregators completely?
Daubitzer: We had a lot of international discussions at the Bundesliga about this. I was a little bit sceptical. It seemed to me that all the positive examples were coming from the major North American properties. They had built up their own direct-to-consumer platforms primarily to service their domestic market. The original intention was not to build up a worldwide service. If you can make revenues out of a domestic market of over 300 million people, it’s easy to add the international distribution because you have everything from the production to the payment systems already in place.
I think it could work in a similar way in China. The Chinese Super League, for example, could do something like that. There’s a market of 1.5bn people and a huge affinity with OTT. Then they could take it out to the overseas market. But if you look at other properties that cannot build an OTT service out of a huge domestic market, it is a completely different scenario. It could work for F1. They don’t have a specific domestic market but with 19 or 20 races it’s like having that many quasi-domestic markets. But it would be difficult for most other properties.
Leenders: The idea that OTT will result in rights-holders eliminating broadcasters and platforms across the board, all ‘going direct’, is one of the main misconceptions in international sports today. It is an illusion to believe that every single federation, league, competition or club can build up such a proprietary system replacing all the other distribution partnerships. Technology may provide such opportunities, but there is much more to consider.
First, the vast majority of rights-holders do not have the critical mass to fill up such a platform all year round. They also do not have the means to provide the editorial content and curation at the highest level in a multi-lingual, multi-cultural environment on a global scale. Second, there is the crucial element of marketing and promotion. Broadcasters and platforms have established brand names and marketing power which rights-holder start-ups cannot match. Third, and arguably most important: consumers and fans do not want to sign up to tens or hundreds of different platforms. They want a limited number of platforms, ideally a one-stop shop which gives them the content they want at an affordable price.
OTT will certainly be a game changer for international sports at all levels, but it will not mean that every rights-holder needs to operate its own media platform. Established broadcasters such as Sky and Canal Plus, as well as interesting new players – which can be OTT-only such as DAZN, platform-agnostic such as Eleven or unicorns such Amazon and Facebook – will all use that opportunity.
For rights-holders, a proprietary OTT platform can occupy a very valuable place in the overall distribution mix. For Fiba for instance, the livebasketball.tv platform plays a significant, complementary role in the overall exposure and visibility of the competitions.
Morelli: Media groups are no longer in a position to make big splashes when acquiring rights. What happened with the Premier League’s domestic rights auction should set alarm bells ringing. Competition between one or two pay-television operators is no longer delivering value. Offering high levels of exclusivity to one or two partners no longer makes sense.
[European pay-television platform] Sky is making incredible efforts to grow in the OTT market, including its commercial agreements like the recent one with Netflix. But this looks to be too late: rights-holders are taking a different direction, as they grant their fans an interactive experience which brings them close and closer to their team. Rights-holders like F1 and LaLiga are increasingly looking at going direct to consumers. This seems the only way to keep the rights value high. The income no longer comes from the broadcasters but directly from the fans.
Premium rights-holders can create both linear channels, for distribution on third-party platforms, and a direct-to-consumer product. The two can coexist, especially in the domestic market where there is highest demand.
For example, in Italy, Serie A could have a channel which is distributed across all the major platforms and on all technologies. It could also have a direct-to-consumer OTT product. This would not cannibalise the pay-television business. Most fans would look to the OTT service to deliver the live match. They want to be able to see the match wherever they are and on any device. But when it’s over, they switch off. People subscribe to pay-television because there is a much broader and richer offering. Serie A on Sky Italia is not just about the 90 minutes: there is a huge amount of programming around it that people want to see. And there is a huge volume of other content around that.
For many smaller sports properties creating a direct-to-consumer is the obvious solution. If you are a minor league, a domestic broadcaster might offer you a few hundred thousand euros a season. That’s nothing. Creating your own OTT service is not just about replacing those revenues. It gives you a direct relationship with the fan which gives you data. You can build a business around having that data, whether it is by marketing directly to your fans, with ticketing or merchandising, or improving commercial revenues through highly-targeted sponsorship deals.