The democratisation of sports content

By Rick Allen, CEO of ViewLift.

Whenever European visitors to the US find themselves scrolling through the extremely lengthy list of cable and satellite channels on offer in search of a sports fix, they are likely to notice the typically American localised approach to its distribution.

At the heart of this sits Uncle Sam’s Regional Sports Networks (RSNs) whose core content is typically live coverage of the professional teams based in, and restricted to, the geographic areas that are their common homes. That’s because the size of the US market allowed the top-tier pro leagues to divide rights into national packages licensed to broadcasters and streamers, with the revenue split equally among teams, and local packages – controlled by each team – airing the bulk of a team’s season within a geographically limited reach, and representing its second or third largest revenue source.  Fans outside those areas (estimated as being around half of all fans) must purchase ‘out-of-market’ packages (such as NBA League Pass or MLB.tv) to watch their favourites.

For most of this century, the majority of the local packages were licensed to RSNs, which aggregated teams’ local packages within their own geographically bound markets, under a twin-revenue stream business model involving: 1) collecting carriage fees from a large base of bundled cable subscribers, regardless of whether they actively watch sports, and 2) selling advertising inventory within the games and other programming.

In recent years, the status quo of this regional approach has been disrupted, with many RSNs feeling the pinch financially, and others facing bankruptcy. The drivers of this disarray – and in some cases, crisis – have included the escalating costs of live rights (with many RSNs locked into expensive deals), the changing habits of increasingly fragmented viewers (who are no longer constrained to their television sets during a live game), and the prevalence of cord cutting (whereby customers ditch cable services in order to stream sports instead on digital devices – if they were actually corded in the first place of course).

Managing disruption

But it’s not all doom and gloom – every disruption brings opportunity after all. Forward-facing players in the sports content ecosystem can adapt to this new reality of demand and distribution by shaking up their traditional ways of operating and pivoting towards a ‘new normal’ that prioritises rich content and better targets fans. Equally, teams and leagues can take back control of their content and ‘own’ their fans by bypassing erstwhile distribution models that no longer serve them (or that may even disappear completely).

Enter direct-to-consumer (DTC) over-the-top (OTT) streaming solutions, which are turning traditional sports broadcasting on its head through democratising sports content distribution and providing the flexibility to reach changing markets more effectively. Business models can be subscription-based (SVOD), advertising-based (AVOD) or a hybrid of both, and DTC streaming is generally paired with traditional linear distribution, often with a local over-the-air broadcaster.

In that combined approach, linear distribution provides reach, while DTC allows for the collection of rich data, super-serving the most passionate fans, and often at the higher revenue-per-user that SVOD allows. On all continents, teams and leagues that have licensed to linear distributors know precious little about each viewer and have no communications and/or monetisation channel that they control.  DTC solves that: the rights owner positions its brand precisely as it wishes; develops deep and individualised pictures of each fan’s behaviour; personalises content offerings down to the individual level; and upsells all other lines of revenue (tickets, merchandise, experiences, etc).

As a strategic proposition, DTC has opened up a vibrant world of insight, personalisation, interaction and reach that provides a deeper experience for fans, uniquely tailored to their needs. Think live and on-demand programming across multiple devices, exclusive behind-the-scenes content, real-time stats, interactive features such as a choice of commentators, camera angles and timelines, direct access to merchandise and related experiences, all finely tuned towards the individual. And the interactivity of the direct digital world offers not only multiple ways to view games, but the foundation for loyalty programmes encouraging greater fan engagement at all levels.

Although it’s record-setting league national licences that garner the headlines, like the NBA’s 11-year, $76 billion deal with three distributors starting next season, complementary innovation has occurred at the local level. The strongest financial results have come where teams own their own RSNs and DTC services, often in multiple-team, multiple-sport groups.  Our clients in New England (NESN, owned by the MLB Red Sox and NHL Bruins); Washington DC (Monumental Sports, which also owns the NHL Capitals, NBA Wizards and WNBA Mystics); Chicago (CHSN, from the owners of the NBA Bulls, NHL Blackhawks and MLB White Sox); Denver (Altitude Sports, with the NBA Nuggets and NHL Avalanche) and Seattle (Root Sports, from the MLB Mariners) are great examples of this trend. They eliminated intermediaries and gave their fans options – not only what to watch (with multiple camera angles, additional audio choices, data overlays and more) but on what device and under what business model.

“As a strategic proposition, DTC has opened up a vibrant world of insight, personalisation, interaction and reach that provides a deeper experience for fans, uniquely tailored to their needs”

But single teams have choices, too.  Many have preserved their legacy RSN licensing, albeit at 20% discounted fees, or lower. Others have combined local linear deals with local TV stations, with their own DTC services.

Although the pay-TV landscape in Europe is different to that in the US, the sports broadcasting market there also faces pressures from evolving viewing habits and subscription fatigue. Leagues and clubs therefore should not assume that the traditional broadcast models they enjoy in Europe will remain stable. The message for European and other sports rights holders here is simple: think of moving beyond single exclusive national licensing deals to a layered approach that combines linear licensing and DTC streaming.  Such planning will enable them to create vibrant communities among their fans that extend way beyond live programming, rather than waiting to adapt or pivot until traditional revenue streams significantly diminish.

Streaming can also be an answer for European teams, who largely do not own the live rights to their games, but want to extend their existing team websites into broader apps that connect them more closely to their fans, with additional video content around games, highlights, more material about their players (from lifestyle to training regimes), and the full gamut of experiences and commerce.

Diversifying distribution beyond reliance on a few, large, linear broadcasters is a savvy play for all sports rights owners no matter where they are based, with OTT as a key attraction, able to create and deepen the bonds between clubs and fans. The message from this side of the pond is that those who don’t adapt – whether they are broadcasters or teams/leagues – are at best likely to miss out, and at worst, unlikely to survive.