• League has brought in consultants Alvarez & Marsal to advise on OTT platform
• New distribution strategy will be in place for the next rights cycle, from 2022-23 season
• Biggest question for the league is whether to overhaul strategy for the UK market
England’s Premier League is working with global professional services firm Alvarez & Marsal on evaluating alternatives to traditional rights sales from 2022-23 onward. According to one well-placed source, the league is “quite some way down the road of having an OTT offering ready to go for the start of the next cycle”.
The league is currently selling its international rights in many territories for the next three seasons, from 2019-20 to 2021-22. It has enjoyed uplifts in markets like China, Brazil, and the DACH region, but is understood to be disappointed by the level of bids in many Asian markets.
The rate of growth in the league’s international rights over the last 20 years has been spectacular. But many independent experts believe that the rate of growth is about to slow, possibly dramatically, in many territories.
The tougher-than-expected international sales process follows a drop in the value of the league’s domestic live rights in its renewals with pay-television operators Sky and BT for the next three-season cycle. The announcement yesterday (Wednesday) that BT and Sky plan to extend their channel cross-supply deal from the UK to Ireland suggests the next domestic cycle will not be any easier.
In such circumstances, it would be a surprise if the league were not evaluating OTT and other new distribution models.
The league is faced with a number of important questions regarding its future media-rights strategy, including:
• Is it time to consider an entirely different strategy for the UK, with a direct-to-consumer element?
• Would the league seek upfront financing from an agency or a private equity fund to reduce its risk?
• Should the league continue to look for an exclusivity premium or shift to volume distribution?
• Could the league create a single global OTT product or would content need to be localised?
• How would the league work with local partners in each market?
• Who would bear the costs of marketing a new OTT service?
SportBusiness put these questions to four experts on league football rights and channel distribution: Phil Lines, the former director of international broadcasting and media operations at the Premier League; Jörg Daubitzer, former chief executive of Bundesliga International; Marco Bogarelli, former president of Infront Italy, the media-rights adviser to Serie A; and William Field, former adviser to the Premier League on new technologies.
What a broadcaster like Sky [in the UK] will pay for the rights is not just based on what they can earn from their sports channels, it’s based on much more. Recently they were in a broadband war with BT and the Premier League was the beneficiary. But that war is over.
If rights fees continue to go down, which I think they will, there will come a point at which they are only being valued on a very simple basis of the number of subscribers to those channels. No other considerations. At that point it does become logical for the Premier League to do their own thing. There is still a risk factor, but it becomes a lot more plausible.
If you are selling B2B, you do your rights deals with broadcasters, and you know what income you have, which football clubs love. If you are doing B2C, you have no idea. It is all based on projections and there is an element of risk. It’s much harder for clubs to plan, to know what portion of their budget is available for players and so on.
This is a reaction to what is happening [in the current sales cycle], primarily in Asia. If the Premier League could have, it would have stopped the clock the cycle before last – that was when TV rights were at their absolute height. They would stop the clock right now if they could because it could get a lot worse.
Rights-holders and agencies keep waiting for FAANG (Facebook, Apple, Amazon, Netflix and Google) to ride to the rescue but they’re not doing it, beyond dipping their toe in the water, testing a few markets where they can pick up rights relatively cheaply. They will sit and wait. They can see the way the market is going: that traditional broadcasters, like Sky in the UK, are pulling rights fees down. Why would they want to come in now and keep rights prices at high levels?
The question of risk is a crucial point in all these discussions with clubs. On one hand, they want to move forward and develop. On the other hand, they need economic security to run their business. In general, if you decide to move in this direction, to build up your own platform and services, you have to accept that the level of economic security might not be the same as before.
At the outset, it might be smarter to have a mixture of your own products and traditional licence agreements. That way, the risk is shared. For example, the Premier League earns such huge rights fees from sub-Saharan Africa that it would make sense to maintain the economic guarantees of selling in the traditional way.
I don’t think it will be black and white, where the league will do something 100 per cent. There is something in between, where you can build something for the future while keeping risk at a reasonable level. No OTT operator or league channel has gone out and started with the whole world. Nobody is taking the risk of going entirely with their own operation from day one.
Marketing costs would be substantial but in a globalised, digital world, things are very different to how they were a few years ago. You can now communicate with your consumers all over the world in a very easy, cost-effective way. Social media provides a great global communications platform. The Premier League would not be the first OTT platform in the world. A lot of the work about informing consumers on how everything works has already been done.
Having ownership of consumer data is increasingly important. If it is not currently the reason for doing these things, it will become so in the future. Nothing is more valuable than knowledge about your fans – how old they are, where they live, their consumer preferences and so on. If you have that information, you are well prepared for the future.
This is what I have been trying to do for several years in Italy but without success. It’s all the more relevant in the UK because the market there is saturated. All football fans who might subscribe to a pay-television service already do so. It’s difficult for anyone to add new subscribers with football. The only way for rights-holders to grow is to disintermediate and go direct to the consumer.
In doing this, you are still subject to the laws of the market, which can go up and down. Clubs need guaranteed income, so the only place that can come from is the financial markets. Not from private equity – their expectation on earnings risks eating up a big part of your upside.
Whoever provides this kind of financial support is providing money that has to be paid for. But the financial markets are not only made up of private equity firms. There are bond funds and other kinds of investment partners who want a long-term revenue stream. Because there is a lot of liquidity on the financial markets, you can find investors that will look to share the upside season by season. The cost of money is currently very low.
For global distribution, whatever your platform, it will always be market by market, with payments passing through local operators. They will still need a local distributor, whether that is for a single country or a region like Latin America.
Customising content for each of those markets has never been easier. It makes sense to do it for major markets, like China, but probably not for a market where there are just a couple of million people. The costs involved are nothing compared to additional revenues you can make from having localised content in a major market.
A financial partner might take four or five per cent on what they lend you. The question is whether that is more than what a broadcaster would earn in upside if they bought out your rights. If you are distributing a channel, rather than selling rights, and you don’t have a financial partner on a global level, you have to find a way to share the risk with the carrier, but the exact model is going to depend on the market.
Going direct to consumer makes sense for the Premier League domestically, because the last tender showed that in the absence of competition between platforms the price goes down. The league would get to earn the margin it is not getting from the platforms. Internationally, I would take a mixed approach. Where there are players who will guarantee you a big penetration in important markets like the Americas it makes sense to work with them.
I’m sure [launching in the UK] is part of the thinking. While it is a massive challenge to build an understanding of customers and the ability and culture to manage paying customers, it will be easier to do this in a single, home, market than in multiple countries, with different languages and cultures. That’s the bit of this that concerns me most. Anyone, in principle, can build a live streaming platform. It takes great skill and massive focus to deal directly with real human beings. That’s not something the Premier League has done before.
The best example outside the US is probably ATP Media’s TennisTV, but that is offered alongside traditional broadcast rights deals in most major markets. Of course, that may be where the Premier League OTT service starts, as an adjunct to a broadcast deal. But in that case, how easy will it be for them to create real price pressure for the broadcast deal?
It is difficult to argue against them dipping a toe into the water, but it will be interesting to see what stakeholder expectations are being set and how it will play out. Those waters are uncharted.
If you look at the way the major US leagues are organised, they have all gone some way to developing customer-facing departments and capabilities – as well as in-region departments with some big-hitting hires, for example Ralph Rivera going to the NBA as its managing director in Europe and the Middle East. The Premier League is at a much earlier stage yet is arguably a bigger global property than the US leagues, so this is no small task – financially, organisationally and culturally.
How far should it go and how quickly? This is the issue that will dominate the incoming Premier League chief executive’s time for many years to come.