The rise of OTT sports has introduced a new wave of competition and innovation into the market, leading traditional suppliers to adapt their pricing, packaging and overall value propositions to stay successful.
Simon Trudelle*
Sport has been a key driver of pay-TV growth for more than two decades. But the rise of OTT sports has introduced a new wave of competition and innovation into the market. As a result, traditional suppliers have been asked to tailor their pricing, packaging, and overall value propositions to stay successful.
Meanwhile, several OTT aggregators specializing in emerging sports are creating global value-for-money offerings, adding level two and three rights not acquired by pay-TV providers. In addition, more than a third of the top 25 football clubs and six of the top ten leagues and federations now offer their own premium OTT services directly to the consumer. Major internet companies are also experimenting with sports content, though their strategies remain unclear.
Of course, this proliferation of sports OTT services and providers potentially reduces the demand for pay TV. But despite this significant market turmoil, traders should not fear a relegation battle for the time being, there are still plenty of opportunities to top the table.
Traditional pay-TV providers are increasingly focusing on top-tier rights: 36 and 34 percent of Sky and BT TV subscribers, respectively, pay to access their sports content, according to the latest report from the Pay-TV Innovation Forum, The Global Market for Premium Sports OTT services.
A new type of "slim package" is also emerging, focusing solely on sports. In Europe, Sky launched sports packages that allow access to the English Premier League via Now TV in the UK and the Bundesliga via Sky Ticket in Germany. This allows consumers to purchase access to tier one sports rights for just one day without signing up for a larger package.
And in terms of distribution, the report found that mobile devices are the top priority for the world's top 65 services (more than 90 percent of services are on iOS and Android), followed by Apple TVs and streaming devices, with Smart TVs having lower priority.
Now, pay-TV companies are well positioned to retain top-tier sports rights. Around the world, providers have been able to subsidize the rising cost of the most valuable live sports rights with high-margin broadband businesses.
In addition, pay-TV providers already have billing relationships with millions of consumers in their key markets. The appreciation of the value of top-tier sports rights over the past two decades has been driven primarily by the pay-TV market for this reason. Pay-TV providers can consolidate by streamlining their investment in tier two sports and entertainment and focusing spending on premium content.
But it's not just opportunities ahead. The proliferation of high-speed broadband and connected devices has made content piracy more accessible than ever, for both pirates and consumers.
As the report highlights, pay-TV providers must continue to take steps to limit the impact of sports streaming piracy.
It is estimated that more than 13 million people worldwide watched an illegal broadcast of Anthony Joshua's heavyweight boxing defeat in June 2019, with 93 percent of the unlicensed audience watching the fight on YouTube.
With 5G adoption levels expected to increase in the coming years, industry participants expect to see an increase in illicit streaming of content.
Faced with this situation, it is vital that distributors, rights owners, social networks and legislators continue to work together to develop and leverage new technology to protect the value of live sports content.
With this context in mind, the report highlights seven main implications of the rise of sports OTT for traditional pay-TV providers:
1. It is essential for operators to retain top-tier sports rights in their packages.
2. Pay-TV operators appear to be well positioned to retain these rights, given their ability to subsidize sports in high-margin broadband companies and their existing billing relationships.
3. The biggest challenges they're likely to face are Amazon's, should it decide to prioritize top-tier sports rights in key markets, or major sports networks like ESPN reserve their key rights for their direct-to-consumer service.
4. Pay-TV providers will consolidate by streamlining their investment in tier two sports and entertainment and focusing spending on premium content.
5. They and other premium sports OTT suppliers will continue to experiment with different prices and packaging models, looking for the right balance between being attractive to cord cutters and being cost-effective.
6. Pay-TV providers will look to evolve their service offerings in response to innovations from agile challenge brands, ranging from shared viewing experiences and personalized content to data services.
7. Finally, addressing live sports piracy is a major priority. And ultimately, collaboration between different industry participants, including rights owners, distribution platforms, and policymakers, is crucial.
The rise of OTT sports has introduced a new wave of competition and innovation into the market, leading traditional suppliers to adapt their pricing, packaging and overall value propositions to stay successful. By understanding the key implications of the growth of sports OTT services, the pay-TV industry together with sports rights holders can seize the sports OTT opportunity and be well prepared for the future.
*Simon Trudelle is Senior Director of Product Marketing at Nagra.
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