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Murray Barnett | The major opportunities in micropayments

The director of specialist, independent OTT and direct-to-consumer media consultancy D2C Sport argues that microtransactions can bring welcome marketing and revenue benefits to sports rights-holders

Murray Barnett

An ongoing debate for sports media rights owners centres around the problem of the ageing sports fan and how younger demographics are less monetisable and engaged. This is not true. They are just as engaged but desire content served in a way that marries their mobile-first, short-form and social viewing preferences. Micropayments might just be the answer to this problem.

Current sports OTT subscription revenues have reached a level of maturity where innovation is required to keep them growing. Pressure on monthly fees and subscriber retention has been growing as the OTT sports market becomes increasingly crowded with both standalone and aggregated players shooting it out for subscribers’ wallets. Innovation in pricing is needed, especially to attract younger audiences.

Micropayments present an interesting dynamic in sports direct-to-consumer media, offering the chance to generate incremental income, widen audiences and reduce piracy. As well as leagues and aggregators, there are also third-party apps helping to drive change. They offer additional benefits such as increased ‘shareability’, diversified marketing platforms and new audiences.

In 2018, the NBA was one of the first to look at micropayment pricing strategies including allowing fans to buy 10 minutes of a game or the last quarter, for a much-reduced price (without being tied to a subscription). This was driven largely by two factors: the desire to increase reach and the deregulation of betting in the US.

Up until recently, micropayments were difficult to develop for several reasons. These included high individual transaction charges from banks, customers unused to parting with payment details for online transactions (not to mention complex processes), and the inflexibility of existing media rights agreements.

Changes in the way financial institutions charge for transactions along with digital, web-savvy audiences (who also happen to sit in hard-to-reach demographics) have created opportunities to develop micropayments. Rights-holders are also increasingly aware of the opportunities and are adjusting their media rights sales strategies accordingly.

Third-party platforms and apps are now emerging to harness the benefits of micropayments. Recast and Buzzer are just two great examples of services that use micropayments to increase the reach of content (live and delayed) especially to a younger demographic. They also offer friction-reduced micropayment solutions.

Micropayments are not just about incremental revenue or reducing piracy. For younger generations of cord cutters this may be the only way to reach them. They are mobile-first. They are the “House of Highlights” generation. Clips and short-form content are their thing. They are not inclined towards, nor able to pay, a substantial monthly subscription. In addition to betting, the NBA were no doubt thinking about this. As is often the case, they were at the vanguard of innovative thinking for sports leagues.

Recently, everyone was talking about Cristiano Ronaldo’s return to Manchester United and him scoring not one but two goals on his debut. It’s easy to imagine people who weren’t even Manchester United fans would still have had an interest in seeing those goals. However, people in certain markets would have been met with a message saying the content was either unavailable in their territory or another saying it had been taken down for copyright infringement. Wouldn’t it have been a useful feature to be able to pay £1/€1/$1 to watch the goals in a high-quality and nicely edited format? If you could also easily share that clip with your friends (allowing them to watch for £1) accompanied by your thoughts and comments, that would also be a bonus.

I know from my own experience I am only driven to illegal and often poor resolution online video when I’m not able to access official sources quickly and easily. What if I don’t want to subscribe to Discovery+ but my Italian friends are talking about their stunning 4x100m relay win at the Olympics? I want to see the clip quickly to be part of the conversation. Convoluted registration processes or unwieldy UX makes accessing content or clips cumbersome. Micropayments with intuitive and frictionless UX can be a solution with multiple benefits for rights-holders and/or content owners.

There may also be a significant group of moderate fans who can be motivated to become consistent subscribers through direct marketing based on the data these apps can provide. There is the potential to draw those fans into the funnel in the form of a message saying: ‘did you know this is the fifth clip of the NBA you’ve watched – why don’t you subscribe for the same amount and get all of our content from clips to full games?’”

Focusing on the two companies mentioned above, Recast is essentially an aggregated OTT platform, allowing content owners to upload and monetise content (they also control the cost). The smart bit is users can ‘recast’ content and earn credits from their users viewing that content. Users can also create user-generated content which they can monetise. Additionally, advertisers can ’buy’ audiences who in turn earn credits for watching advertisements. Everyone benefits.

Buzzer is a live, in-game, direct-to-consumer app that alerts fans to key moments in live games and matches. Content is viewed through existing subscriptions or by using micropayments. An obvious application for Buzzer is the betting industry and that might be its killer application. The fact that it also appeals to short-form content consumers on the go (for example Millennials and younger) can’t hurt either. Unfortunately, it is currently only available in the US.

For second- and third-tier rights-holders both platforms offer a gateway to better exploiting rights and potentially reaching a wider audience; if you can get over the initial hurdle of getting a subscriber to register on your platform, a micro-subscription offering provides a very low bar to clear to get to the next level of engagement. For top-tier rights-holders, this is an opportunity to super serve existing subscribers (reminding them how useful their monthly subscription is through alerts), monetise a non-core fanbase, and tap into fans who can extend their reach through social sharing.

With Recast, there is also the ability to reach a sportsperson’s social following. Take Lando Norris from Formula 1. He could ‘recast’ unique behind-the-scenes content and receive revenue from it. Currently content providers can monetise YouTube, for example, but it is tough to see this as a really viable revenue platform, unless there is enormous scale. An even better option would see Norris partner with Formula 1 to post contextualised clips and highlights on Recast which would generate revenue and increase marketing reach for Formula 1.

Another example resides in Lionel Messi’s transfer to PSG. Imagine you are on the move (and probably mobile-first anyway) but want to see clips from his first game. Apps like Buzzer offer a convenient, friction-reduced experience, whether you are an existing pay-subscriber or not. Additionally, in the case of Recast, influencers can share clips without breaching any copyright. This gives a unique opportunity for rights-holders to create a new marketing platform to drive revenues as well as reach.

Micropayments can also monetise content otherwise not sold (for example training ground, behind-the-scenes or interview content). Marquee match clips and content will always be the driver, but there are other opportunities, and these are not limited to rights-holders either.

Broadcasters and MVPDs (multi-channel video programming distributors) can benefit as well. Push notifications remind existing subscribers of the great content they have access to, and non-subscribers contribute with (albeit probably small) additional revenue. Also, there is a case to be made that both Recast and Buzzer significantly reduce piracy by making killer content available at reasonable prices in high quality.

There are several players in this space. Buzzer and Recast represent two interesting takes on the utilisation of micropayments and linking them to new audiences with different viewing habits and needs. They shouldn’t be seen as a threat by existing networks, such as MVPDs, RSNs, OTT platforms or virtual MVPDs [streaming TV services]. They are a great marketing tool to reach the next generation of fans, as well as drawing casual fans deeper into the marketing funnel (in the case of Buzzer, it is also a retailer of the NBA League Pass).

With anything new, the first step is the most challenging: registering on these new services and inputting details on subscriptions and/or payment details adds friction. The challenge for growth will be ease of use and a clear articulation of the benefits to consumers. Frequently good ideas fail because they don’t solve a genuine consumer need. Micropayments won’t replace broadcast or OTT subscriptions but instead offer some extra revenue, reach and perhaps more important than anything, relevance.

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