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Could we be seeing the end of pay-tv packages?

By 2nd March 2020 No Comments

Tomos Jones, senior associate at Reed Smith, takes a look at the future of sports broadcasting models

What can we learn from recent developments in the pay television sector? Everything from Disney’s deal with Sky to place the new Disney+ service on Sky’s top boxes, to BT’s new packaging structure and the recent news that Amazon’s Prime Video is the fastest growing VOD service in the UK, is symptomatic of the sectors current path.

One underlying factor is the recent topping out of value in sports broadcasting rights, at least in the UK. This is evidenced by the flatlining price of the crown jewel Premier League and UEFA Champions League rights at their last auctions in 2018 and 2019. The stagnation owes much to BT’s growing reluctance to fuel further price inflation, and in that regard its packaging revamp tells only half the story of the deal done with Sky back in 2017 (the intervening gestation period has clearly been painful). The other half is Sky’s new right to retail BT Sports channels on the Sky platform. As Setanta and ESPN found previously, the old truism of pay television in the UK remains – to play in the market for premium sports rights requires broadcasting via Sky.

While not concerning sports content, the need for carriage equally underpins the Disney+ deal. For all the theoretical potential of self-distribution, and even with Disney’s content and brand, the scale of subscriber take-up required to offset revenues sacrificed by not being on the Sky platform is prohibitive. The only mitigating commercial factor is Sky’s reciprocal need to maintain its position as the premium platform, by maintaining access to all major content. All of this begs the question, will Netflix, Disney+ and their ilk end up as the 2020s’ answer to traditional channels – branded bundles of content vying for distribution deals with the major platforms?

And so, to BT TV, the ‘sports lite’ proposition originally aimed at staunching the hemorrhaging of broadband subscribers to Sky. BT’s innovation is undeniably a pay television platform, which does not tie premium sports content to basic entertainment content, and allows subscribers to dip in, Netflix-style, to premium content on a month to month basis. One argument is that BT’s is a triangulation strategy, a flexible, lighter pay television proposition between the ‘full fat’ Sky offering and the truly ‘lite’ streaming services, responding to the growing demands of the new streaming generation. Another is that being neither one nor the other is a difficult position in any market, and how subscriptions to BT Sport hold up alongside those of Sky Sports on BT’s own platform will be instructive.

The entry of the big technology players in the sports rights market remains an undeniably logical theory, which despite long trials, is yet to translate into actual practice. The ECB’s digital package in 2017 was acquired by the BBC, the Premier League failed to sell its two digital packages at auction in 2018, and the price of its rights subsequently acquired by Amazon has never been divulged. There remains an unresolved tension between rights structured and valued for national, premium television markets measured in millions, and borderless, free (or near-free) services that play the scale game and monetise their investments across customer bases measured in billions. Uncoincidentally, Facebook has only ‘gone big’ on sports content for its largest market – its unsuccessful bid for IPL live rights and its acquisition of the ICC’s digital rights package were designed for the Indian subcontinent, where Facebook’s users outnumber their UK counterparts by a factor of ten (and rising).

The reality for such services is that sports content is not essential, and not the equivalent of Mr Murdoch’s battering ram. As Amazon is showing, owners can happily bide their time on the periphery of the rights acquisition scrum until the timing is right, but for now it’s a waiting game.

Images: Shutterstock, Watford 2-3 Everton/Man Utd 0-0 Wolves , 1 Feb 2020

Tomos Jones is a senior associate at Reed Smith

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