Richard Masters, the English Premier League's (EPL) new chief executive, made some interesting observations regarding the dilemma facing content owners of whether to sell content to distributors, or whether to stream content to audiences directly. He said that, had the auction in Singapore failed to generate sufficiently high offers, the EPL was ready to launch a direct-to-consumer (D2C) service, and therefore ending its relationships with Singapore's leading pay-TV service providers to go it alone in serving the small but valuable Singapore audience.
In the end, the EPL ended up extending its relationship with Singtel, prompting the feeling that this won't be the first time the EPL faces a similar situation. EPL's revenue relies on auctions every few years for domestic distribution rights in the UK, and various international distribution rights, packaged by geography. EPL is considered critically important content globally, in many markets buttressing the dominant market leaders in pay TV and commercial broadcast, and this has seen the prices paid for EPL content skyrocket in the last few years. Digital platforms such as Amazon and Facebook have entered the bidding for sports rights, with Amazon winning a couple of days' worth of matches in the UK. But the price rises have started to slow, leaving rights holders to contemplate at what point will it become more profitable to stream live coverage directly to the audience rather than to collect licensing revenue, which may well be trending towards stagnant to negative in the longer term.
Figure 1: Challenging economics for dedicated sports streaming services, resulting in low subscription volumes in Europe
Source: Omdia Forecaster
Dedicated sports OTT streaming services are rare, with the bulk of live sports available on traditional and pay TV services. OTT sports streaming in Europe is currently dominated by pay TV and broadcaster multiscreen services, with DAZN notable as one of very few pure-play streaming platforms. Subscriptions to sports streaming services in Europe are low as a result, with six million expected in 2020, growing to 11.5 million in 2024. While outwardly not a significant opportunity for streaming sports providers, we'd expect a significant volume of pay-TV customers to be addressable for a service dedicated to live EPL coverage. The pricier the rights, the greater the challenge to transition to a D2C channel of comparable financial value.
Masters' comments indicate that the EPL has already started planning for that eventuality, which is sensible given that even just the perception that the EPL is ready to go D2C will drive bidders to stay aggressive at auctions. The reality is that launching a D2C platform with ambitions to replace the financial impact of traditional distributors is a transformational undertaking which would involve rights owners being responsible for countless operational areas in which they have limited expertise, such as streaming infrastructure, customer support, and payments (and much else besides). While understanding shifting audience habits is critical, equally important is ensuring that the rights owners' organizational transformation is progressing at the same pace, and the EPL is fortunate that soccer is one of the sports big enough to be able to seriously contemplate D2C as an option.
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