#45 Polarization of Sports Rights Valuations and Re-Thinking the Multi-Sports Subscription

Supercharged by the global COVID-19 pandemic, both the penetration as well as the profitability of traditional pay-TV erode and incumbent rights holders are expected to recalibrate investment and editorial resources on strategically important, needle-moving T1-assets, which continue to be able to drive higher-margin subscriptions of bundled services. T2-assets, such as non-domestic Big-5 football leagues, which experienced skyrocketing, but unsustainable growth in rights fees recently, instead, could experience a significant correction in market value—and are likely to shift to rights holders with an OTT-centric business model to a large extent going forward. Inevitably, the future (“Over-the-Top, Direct-to-Consumer & A-la-Carte Options”) will not be as lucrative as the past (“Satellite / Cable Pay-TV, Business-to-Consumer & Bundled Services”) of sports media: In need for initial consumer take-up, digital-first rights holders have entered the sports media market with offerings of hyper-attractive, but economically unsustainable price-to-value ratios to capture consumer’s wallet share, but the path to profitability seems less promising than ever.

Going forward, I expect a premium will be paid for T-1 assets as superior monetization around bundled services continues to warrant sustaining the current level of rights fees for those assets that generate mainstream interest. The current price-to-value ratio of multi-sports and/or -league subscription packages built around T2-assets and long-tail programming, however, will have to change due to economic pressure: either monthly prices must increase or the value in terms of the offered programming for that price must decrease as cost-cutting moves become inevitable given the less attractive content monetization through OTT (e.g. lower ARPU, CLV) due to short-term contracts and aggressive pricing—as detailed in previous blog posts (#44 Thoughts on OTT/D2C in the Sports Media Landscape — 2nd Edition).

In a nutshell, a polarisation in the market value of rights, with greater spending on must-have content and cost-cutting on the fringes seems a likely scenario over the next couple of years. However, improving the exploitation of rights could provide a counter-force against any market reset: The current industry standard of "all-you-can-eat" pure-sports subscriptions certainly does not maximize market welfare and offer untapped potential to increase the intrinsic value of rights by re-thinking the current form of exploitation.

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MARKET IN TURMOIL: INCUMBENTS RE-FOCUSING ON T-1 ASSETS

As of today, sports rights valuations include a massive premium based on competitive and strategic implications—becoming increasingly decoupled from their intrinsic value (as determined by potential of monetization vis-a-vis the end consumer). Incumbents paid for retaining their current position, new challengers paid above-market prices to gain a toe-hold and immediate awareness or even relevance from the consumer's point of view. Whereas T1-assets were largely retained by incumbents, due to the required financial investments which were often unbearable for new, unestablished players and long-tail properties not contributing to the strategic objectives of either party, the most competitive bidding focused on T2-assets over the last few years—with non-domestic Big-5 football leagues as a good example of properties which experienced significant growth in their international media rights revenues.

Especially in Europe, where media rights deals are generally of shorter-term nature compared to North America, many properties have been or are going to be up for renewal soon—for the first time since many sports properties benefitted greatly from increased demand for live (sports) programming in form of major price inflation as the nature of infinite distribution through OTT eliminated the inherent constraints of limited shelf space in linear/analog TV distribution.

Thus, European rights holders will have the opportunity to re-assess their spending on sports rights soon. In the past, the most recent deal seemed to have always been the most lucrative one and rights owners could not wait to get back to market with their audiovisual rights.

Now, a process of recalibration, which would have happened regardless but is certainly supercharged by the novel coronavirus pandemic, is about to start: Obviously, shorter rights cycles allow for faster adjustments of any market valuation—in both directions. Moving from the "Pay-TV Everywhere Era" which incorporated OTT as a distribution technology to the "Emergence of the OTT Business Model" starting around 2016 (#43 Ist eine Korrektur im Sportrechtemarkt notwendig (und gesund)?), these circumstances provided an opportunity for new market entrants to scoop up relevant sports programming on comparably short notice and for rights owners to quickly benefit from an increasingly competitive landscape. (Link: Twitterpost ⤵️)

Not coincidentally, the current sports media landscape in North America continues to be dominated by traditional players, or their complementary OTT streaming services. New players rarely having gained any foothold in the world's biggest sports media market. The long-term lock-up of first-tier properties (i.e. NFL, NBA, MLB, NHL, NCAA, EPL) combined with the significantly higher price level and the already hyper-competitive marketplace has created insurmountable entry barriers—even for "Big-Tech" (assuming there is an interest in the first place, which remains questionable as sports rights most likely do not present the best return on investment among their multitude of potential investment opportunities). With a re-evaluation of their worth, European rights owners now reportedly starting to embrace longer-term rights cycles is just another sign of changing, more challenging market environment and one of several moves as of late, including increased match inventory, or scope and delivery methods of media assets available to rights holders, to facilitate a more favourable investment environment for potential bidders and boost (or at least sustain) the current level of bids.

Even worse for original rights owners in the short term: The interest by „Big Tech“ has not become the desired (and much-needed) catalysts to further drive rights fees upwards and instead even served as a deflationary force as sports leagues and organizations have been willing to sacrifice short-term revenues to partner with new-media companies for broader access and visibility among the sought-after younger demographics or to merely start establishing a business relationship with the rights buyers of the future as early as possible — hoping that the big payday will come further down the road. As a matter of fact, globally-operating platforms do not even deal with cash as their primary currency when they talk to sports leagues and organizations. Instead, purely advertising-based digital platforms like Twitter or Facebook trade their reach and distribution among sought-after audiences in exchange for the right to broadcast, or rather simulcast, live sports programming. Some rights owners have been more willing to experiment with this new distribution and monetization model (e.g. NBA, LaLiga) than others (e.g. Premier League, NFL). However, even streaming services that benefit from a dual revenue stream of advertising and subscription revenue, most notably Amazon, are able to pull-off highly discounted deals with rights owners given the rights owners’ desire to get into business with and learnings from new-media companies. (Link: Twitterpost ⤵️)

Traditional market incumbents (i.e. satellite/cable Pay-TV) will adjust their risk- and cash-management by re-focusing even more on premium properties with mainstream interest and ability to drive multi-channel/-service subscriptions with sufficiently high margins. However, these bundles will probably need to look quite different in the future: Triple-/quadruple-plays of telecommunication services are the highest-margin products, but a decreasing product-market-fit due to changed consumption habits and needs resulted in a significantly lower market penetration of such all-in-one offerings. Additionally, increasing programming costs (i.e. rights fees) start to further make the traditional ballooned multi-channel pay-TV bundle less profitable. With the pay-TV (bundle) model already under margin-pressure, sports has now essentially become unbundled from any complementary TV programming (e.g. non-sports, entertainment channels) or services (e.g. mobile, telephone, broadband)—being increasingly available on a stand-alone basis: the unbundling of sports. Nonetheless, I expect the drawing power of T1 sports properties to be leveraged for new "digital bundles" to maximize ARPUs and reduce churn going forward—the composition of bundles will simply adjust to a new digital landscape and consumer preferences.

Such a premium strategy will result in an ever more disciplined re-allocation of financial and editorial resources on needle-moving properties and cost-cutting on non-essential live programming by market incumbents—although that has already been the go-to strategy of players like Sky DE (Germany), Canal+ (France), and BT Sport (UK) for some time, often being unwilling to match the price inflation of T2 properties due to new competition.

The degree of market-forced unbundling of product offerings, along the spectrum from the (1) quadruple-/triple-plays, to the (2) dual-play of broadband and pay-TV, to the (3) multi-channel TV-only programming bundle and ultimately (4) the detachment of sports programming from other channels as standalone or add-on services—converging towards the above-mentioned stand-alone valuation of rights in the OTT space—provide an anecdotal glance at the competitive landscape and how much bargaining power any given rights holder continues to have vis-a-vis end consumers.

BUNDLING AS MEASURE OF MARKET DOMINANCE AMONG RIGHTS HOLDERS

In this regard, the US pay-TV channels (e.g. ESPN, Fox Sports) remaining exclusively tethered to the traditional (virtual) multi-channel video programming distribution (MVPD) stands out. Spanish market leader Telèfonica and its pay-TV channel Movistar Plus seem to have even more pricing power and continue to bundle its live sports programming with its broadband services, as well as the mobile/telephone products in many cases. Telèfonica's near-monopoly on sports rights in Spain and, as a result, already capturing the majority of available disposable income from sports fans, also heavily contributes to DAZN not gaining any significant subscriber base, currently pegged at around 280,000 homes—putting the decision by the multi-territory sports streamer to enter a concentrated market like Spain in the first place into question. The comfortable situation did not only allow Telefònica to not focus solely on T1 sports properties but untether its abundance of T2 assets from their core services and offer them separately as stand-alone, overflow OTT streaming service ("Movistar LITE") for incremental monetization while premium assets (incl. La Liga, UEFA Champions League) reliably draw and retain customers for the broader telecommunication services. The similarities to ESPN and ESPN+ are glaring, although the branding (PLUS vs. LITE) already alludes to the fundamental difference: ESPN+ offers exclusive, incremental live sports programming whereas Movistar LITE is a slimmed-down and, therefore, much cheaper version of the company's main product, but without the real crown jewels. However, such a dominating market position has become the exception and most of Telèfonica's peers (e.g. Sky UK/DE/IT, BT Sport, Canal+) have been forced to adopt a more focused premium strategy amidst increased competition—and not only as a hedge for an OTT-first business model in the future.

Since almost all market incumbents outside of North America were forced to unbundle sports from the multi-channel television packages and embrace a platform-agnostic distribution and monetization strategy (i.e. business model), much of the cross-subsidization of sports broadcasting rights that has existed in the past has been eliminated. Another implication of unbundling, which is a clear sign of the empowerment of consumers over the past few years, has been the increased susceptibility to the ongoing sports hiatus amidst COVID19. In reality, that is the difference between either (1) continuing to reap hundreds of millions in subscription revenue while providing very limited live sports programming (e.g. ESPN), at least until postponements of sports events become cancellations, (2) consumers putting any payments on hold for the time being (e.g. Sky UK), or, even worse, (3) facing massive customer churn in the case of pure-sports streamers (e.g. DAZN). (Link: Twitterpost ⤵️)

In a nutshell, market values of T1-assets will remain relatively constant for the foreseeable future as their intrinsic value to market incumbents continues to be high.

MARKET IN TURMOIL: PURE-SPORTS STREAMER'S COST-CUTTING

With the emergence of OTT as a business model, market entry barriers were lowered significantly and the market entry strategy for new players in the sports broadcasting market followed mostly one of following two approaches: Either positioning themselves as a (1) challenger of market incumbents and, with T1-assets often out of budget initially, focussing on a few T2-assets as core rights to achieve immediate relevance in the eye of mainstream sports fans (e.g. DAZN, Eleven Sports) or (2) a destination for previously under-served long-tail content to monetize small niches of vivid hardcore fans (e.g. FloSports, MyCujoo.TV).

As the former inevitably competed with market incumbents, both in terms of rights acquisitions and subsequently the limited resources of the same consumers, they needed to offer their multi-sports/-league subscription packages at attractive but unsustainable price points aimed at ensuring initial customer take-up. The nature of unlimited shelf space, infinite distribution, and increased urgency to constantly provide value to subscribers in order to avoid churn incentivized flat-fee subscription-based streaming services to endlessly adding to their content portfolio—which made the discovery and proper exploitation of individual assets inevitably more complex and difficult. (This new situation has been a stark contrast to the linear past, in which it was only about filling a finite number of available programming slots.) The result has often been a lot of additionally but not fundamentally-important programming which does not offer incremental pay-value from many consumer’s point of view, while adding to the enormity of rights-holding streamer's content spending and its ever-growing bill payable to rights owners. The rationale of building-up a lot of mid-/long-tail around a few selected core rights in order to create a balanced portfolio on aggregate during the entire sports year is a valid one and helps to reach a minimum level of engagement that reduces the risk of churn (think: two hours per month for every dollar/euro spent on the monthly subscription) by constantly delivering value—with significantly decreasing marginal utility of each incremental piece of long-tail content for the subscriber though. The challenge, however, is that prices of subscription-based streamers have not increased proportionally to the costs side while doing so and have resulted in an attractive but unsustainable price-to-value ratio.

This lack of content monetization leaves pure-sports streamers with two options to balance revenue and costs going forward: (1) increasing prices or (2) cutting costs. The former makes them uncompetitive amidst fierce competition for consumer's mind and wallet share. The latter implies decreased demand for second-tier assets from rights buyers since long-tail properties have not sufficiently appreciated in rights fees to result in material costs reductions if relinquished.

OTT ECONOMICS NOT WARRANTING CURRENT LEVEL OF RIGHTS FEE

To clarify, the future (“Over-the-Top, Direct-to-Consumer & A-la-Carte Options”) will not be as lucrative as the past (“Satellite / Cable Pay-TV, Business-to-Consumer & Bundled Services”) of sports media. I tackled these less profitable "OTT Economics" (i.e. the scary-looking equation of CAC and CLV in the digital space amidst skyrocketing rights fees and fierce competition for consumer's mind and wallet share by other sports and non-sports content) to great depth in previous articles. However, there is one angle I have touched on only tangentially, although it will certainly put additional downward-pressure on the profitability of rights-holding pure-streamers: the fight over owning the customer relationship between these rights-holding content creators who aim at integrating forward by owning the distribution of content as well on the one side and the players who have traditionally served the role as distributors and aggregators on the other side. The former faces the challenge that building up an own audience or subscriber base is immensely expensive, and they are essentially starting from scratch whenever they launch a new owned and operated streaming service. Even in a media landscape dominated by direct-to-consumer relationships, the abundance and fragmentation of digital content will require "super-aggregators"—a role which telecommunication service companies have already started to embrace as the secular decline of their traditional pay-TV business continues, and platforms (eg. Apple TV, Roku TV) are happy to take this role over as well. The implication for stand-alone pure-sports streamers: In addition to the hyper-aggressive pricing in order to either (1) gain wallet share from other (video/music) streaming services or (2) capture freed-up disposable income from cord-cutters/-shavers, undercutting any pricing of the own offering on third-party distributors with their owned and operated service in order to incentivize customers to have a direct relationship instead of one that is brokered by an intermediary foreshadows another contributor to the never-ending spiral of discounting ARPUs for the foreseeable future. One of the often-cited benefits of going "Over-the-Top" has been the opportunity of owning said customer relationship—and all the higher-margin revenues and data that comes along with that. In reality, however, it is really just an opportunity but should not be taken as a given. Distribution deals are key for gaining scale in video streaming, but represent a trade-off with the concept of a true direct-to-consumer business.

As a result, OTT streaming services will mostly pay for distribution just like they did in traditional pay-TV. Intermediaries, who ultimately have the customer ownership including the billing information and data such as consumption patterns, have simply been replaced with new ones in the digital space. (Link: Twitterpost ⤵️)

In the long-run, rights holders will only be able to invest in the (B2B) sports rights market what they can recoup on the other end of the equation on the (B2B/B2C) sports programming market, either from intermediating distributors and directly from the end consumers.

I expect any decreased overall spending on content will disproportionally hit second-tier properties, whose valuations have soured to an unjustifiable degree and currently include an enormous strategic and competitive premium that is not warranted by the demand shown by the end consumers and, thus, the value provided to the rights holders: B2C demand translates non-linear (i.e. over-proportionally) to value for rights holders, which makes first-tier, tentpole properties much more valuable in the B2B/B2C marketplace; for example, by being able to hold together the traditional pay-TV bundle.

To date, multi-sports/-league subscriptions streaming services have tried to compensate lower per-asset-value through volume—which is simply not sustainable as long as rights acquisition costs for second-tier and true must-have properties grow at similar rates (i.e. not reflecting differences in intrinsic value). As far as long-tail sports properties are concerned, having almost zero-value to rights holders, especially when it comes to subscriber additions while there is some value in retention, is a minor problem as rights fees have not grown significantly over the past few years.

As a result, I can foresee a scenario in which an oversupply of non-premium sports assets will outweigh demand amidst a market consolidation among rights buyers—having the potential for a broader reset of the entire sports ecosystem given the enormous reliance of professional sports on media rights revenues. Even then, first-tier assets with mainstream interest and cross-over potential will prove to be the most resilient ones thanks to their intrinsic value to well-financed market incumbents. Lower-tier assets, for their part, largely benefitted in the form of event production and increased distribution from the rise of OTT instead of direct media rights revenues.

Fundamentally less profitable “OTT economics” and increasingly competing on prices will put further deflationary pressure on rights valuation once OTT, instead of the integrated model of traditional pay-TV, becomes the dominant business model (i.e. lower ARPUs, higher churn) amidst evolving consumer demands and habits—resulting in an across-the-board depreciation of sport's value to rights holders. As it will turn out, that intrinsic value of non-premium sports rights will be significantly lower than recently-paid rights fees.

RE-THINKING THE MULTI-SPORTS SUBSCRIPTION

However, that does not mean rights holders should not look for new ways that maximize their level of monetization as part of an OTT business model—by actually using the nature of being a pure-streamer to their own benefit. Unlocking new revenue streams will unquestionably improve ancillary monetization, as I laid out before as part of the concept of the triple-revenue-stream model: subscriptions + advertising + two-way interactive or add-on integrations such as in-player betting, customized commentary feeds, access to interactive statistics, or cross-selling of merchandising or tickets. (#42 OTT Trends in 2020: Implications of Moving from B2B to a D2C Business in Live Sports Broadcasting)

In this blog post, though, I want to share some thoughts around how to potentially maximize the stand-alone pay-value of sports properties and events, re-thinking the current industry standard of horizontal multi-sports subscription services. Thus, I will only tackle the subscription-part of the above-stated equation. Nonetheless, it should be noted that regardless of to which degree the consumer's willingness to directly pay for the "same" content can be maximized, any OTT-based single- or dual-revenue-stream model remains mostly uncompetitive in the long-run in comparison to bundled subscriptions services around first-tier assets of market incumbents or inferior to other pure-sports streamers who are able to establish a fully-exploited triple-revenue-model—let alone players who actually compete in the "ecosystem wars" instead of only "streaming wars" and create an ecosystem of revenue streams around content, IP, or other online and offline services, in which live sports programming is cross-subsidized and a mere feature instead of the fundament of someone's business model: Amazon's 20-match-per-season schedule in the English Premier League is an obvious example for such featurization of sports. (Link: Twitterpost ⤵️)

The idea that a balanced and diversified portfolio would reduce churn and maximize the size of the addressable audience stands in contrast to the still relatively high entry barriers: Current subscription price points and terms for the all-access to essentially everything the pure-sports streamer has in the library still requires a certain level of commitment by the consumer—despite widely established customer acquisition vehicles such as free trials. One of the inherent competitive advantages of OTTs, the detailed analytics, should allow identifying a better way to monetize content. So far, the vast amount of data seems to have mostly been used to inform rights acquisitions or renewals (think: expected impact of not renewing a rights deal on customer churn) but not really been leveraged when it comes to rights monetization and fully exploiting the available content.

In this regard, there are two competing models: subscriptions vs. a-la-carte options—whereas the former has been associated with much higher average revenues per user (ARPU) and customer lifetime value (CLV). Different individual products are bundled together, with the idea of hopefully providing better value since they can be bought at a lower price than if they would be bought individually. The rest of the rationale for these flat-fee multi-sports/league subscription services has been outlaid above.

However, can the actual number of customers be increased to an extent that sustains or even increases total revenues while streamlining costs through a better product-market-fit? The fact is that the current “all-you-can-eat” subscriptions lack product and price differentiation and, as a result, do not maximize the subjective pay-value of individual assets from the consumer’s point of view. It should be noted that I refer to the consumer's subjective willingness to pay: People feel simply much better if they are mostly paying for what satisfies their needs, even though the total price would be only marginally lower compared to current price points that allow access to the full slate of content. By implication, a-la-carte options aim at capturing value by exploiting the fact that consumers tend towards putting a premium on the ability to buy what they need, when they need it, even if it costs them a little bit more. However, an ideal mix of both models has not been established yet.

Even though the emergence of the OTT business model has brought significant improvement for consumers in terms affordability, flexibility, convenience, and accessibility of live sports compared to the traditional pay-TV, the current OTT industry standard skews towards the pure-subscription business, whose products and prices simply do not optimize for total market welfare, the sum of consumer and rights holder surplus. To this end, I do see opportunities to engineer product compositions that reduce content acquisition costs greatly while reducing the subjective value to the consumer only marginally—which allows for retaining significant pricing power: vertical (instead of horizontal) packaging around fan interests and affiliation (e.g. teams, leagues, players), combined with the entire spectrum from micro-transactions to year-long commitments. Thereby, complexity needs to be limited, though, both in the interest of a rights holder's operations and consumer's ability to not become overwhelmed or straight-out confused by any innovative or unfamiliar way to access and consume live sports programming. Despite the increased desire for autonomy by consumers, they still need and actually like guidance, as long as the provided options satisfy their individual needs. Thus, we are not at the stage of "personalized" subscriptions yet (think: algorithmically composed and priced subscriptions), but are at least adding "customized" subscriptions which should allow for creating (for consumers) and capturing (by rights holders) incremental value.

VERTICAL PACKAGING: MICRO-TRANSACTIONS AND RELEVANT SUBSCRIPTIONS

The objective of packaging any available content should be to use price and product differentiation to best serve consumer's needs while achieving the highest monetization of such content—which is obviously a trade-off. Nonetheless, current offerings are not optimizing for that trade-off yet.

As the willingness to pay for digital content had been established in the mainstream, especially among Gen Z & Y, purchase decisions have become discrete instead of abstract decisions: Am I willing to pay this price for this value?

As said before, I think there are opportunities for decreasing input costs greatly while maintaining the majority of (perceived) value and, thus, retaining pricing power. For example, micro-transactional products such as pay-per-views (i.e. full games, second half, 10-minute real-time access; see: NBA League Pass) would allow for a higher transaction volume by capturing the transient, casual sports fan through the flexible, low-commitment nature of the product that is offering instant gratification. The improved product-market-fit aims at increasing the total number of consumers in order to increase total revenues through incremental sales (i.e. higher market penetration)—including through capturing revenues previously lost to piracy. In this regard, best-practices from e-commerce have not been really adopted by sports rights holders, as such offerings will only realize their enormous potential with frictionless, super-compressed purchase funnels—from attention to solution.

When it comes to subscriptions, team- or league-only seasonal passes (see: EFL's iFollow) are one way to maximize relevance to the consumer and retain pricing power while lowering input costs significantly. I would assume a similar willingness to pay for such "narrow subscriptions" in comparison to “all-you-can-eat” multi-league/-sports subscriptions since the incremental content of the latter offers limited marginal utility to many consumers. By implication, the potential return on the investment in sports rights would increase by actually "unbundling the portfolio of rights."

Theoretically, and besides other considerations as mentioned above (e.g. operational complexity, overloading consumers with optionality), several offerings can co-exist as long as sufficient product and price differentiation are given—which would, for example, be a serious question when offering PPVs as well as monthly team-passes in case of football leagues, where clubs play up to five games per month at most. Given increasingly heterogenous consumer needs and preferences, different cohorts will simply prefer different offerings, through which everyone maximizes the perceived value for their money.

Vertical instead of horizontal packaging also lessens the need for building critical and constant mass of available live content to ensure the stickiness of the subscription (think: portfolio - approach). Usually, a constant level of engagement that makes subscribers feel better about renewing every single month is essential: Not selling a slate of content (= proposition) any longer, but individual events or moments of entertainment and excitement (= product) should change the equation. Whereas the technical infrastructure might have been a limiting factor for increasing the granularity of products in the past, this should no longer be an excuse for rights holders to not innovate their market offerings—both in their own interest and the interest of consumers (think: maximizing market welfare).

One disclaimer: Leveraging emotions (i.e. micro-transactions; via flexible, low-commitment and instant transactions) and fan affiliation (i.e. highly-relevant packages; via team- or league-only passes) to maximize monetizability of single assets will most likely require the above-mentioned customer agency (i.e. owning the direct relationship) in order to ensure the instant, segmented, and constant addressability of potential customers. Traditional multi-channel pay-TV remains the most profitable business model, but the previously built-in max-distribution and -monetization declines as the number of pay-TV households decline. In an OTT-centric business model, the enabling differentiator in order to maximize the level of monetization will be being able to know and access potential clients—as the previous scale, on which the entire cable and satellite pay-TV model was built upon, will never be reached again.

EXTRA: IMPACT OF COVID-19 AS AN ACCELERANT

The described hypotheses were already applicable before the current global pandemic and COVID-19 only serves as an accelerant of pre-existing trends along the entire value, including for the three main market participants:

• RIGHTS OWNERS - Increased risk aversion: The evidenced frugality of sports ecosystem, which emphasized the necessity to steer the ecosystem based on cash flows instead of artificial accounting numbers, and the dependence on media rights revenue will decelerate any own direct-to-consumer ambitions and serve as an incentive for doubling down on the wholesale model (i.e. complete buyout of media rights through third parties), both in terms of rationalizing the level of bids deemed satisfactory (= lowering reserve price) and increasing the length of rights cycles (= enabling rights holder’s prospects of profitability). Within those wholesaling relationships, the already increasing preference for having direct relationships with the rights holders should become even stronger—eliminating any intermediaries such as agencies who add further transaction risk in the middle of the value chain.

• RIGHTS HOLDERS - Re-examination of content spending: The unplanned declines in (already low-margin) revenues will inevitably result in cost-cutting decisions—which will cement the status quo and lessen the mobility of aspiring rights buyers as new players are dissuaded to enter the market given the harsh investment environment. The ecosystem as a whole becomes more risk-averse and doubles down on existing, long-standing partnerships. Rights-holding media companies might have an increased willingness to share rights since pure exclusivity is not only costly but does not make sense in the ever-more fragmented and diverse landscape of digital platforms that address different audiences and require different expertise to optimize overall rights exploitation (think: carve-outs for Snapchat). Global technology companies, for their part, might focus on other areas that offer greater returns on investments.

• CONSUMER - Acceleration of secular shifts: Any economic recession has served as an accelerant for evolving shifts in consumer (and corporate) behaviour. This time, the permanent shift to streaming, cord-cutting, re-assessment of relative money for value hierarchies, and adoption of digital payment methods are among the implications that are relevant to the sports/media industrial complex.

MICRO-TRANSACTIONS AND PERSONALIZED SUBSCRIPTIONS ONLY ONE PART OF THE CHESSBOARD

In the grand scheme of re-thinking the multi-sports subscription, much more levers can be pulled than only revising the packaging of paid access to the live product: Thanks to the live nature and ability to reach diverse audiences at large scale, advertising remains a fundamental revenue driver for sports programming, although the recovery of the advertising industry will lag the return of sports amidst or after the current pandemic and although the newly-sought-after direct-response category is no perfect fit for live sports programming. Add-on integrations are inevitable, but will not be implemented on large scale in short order. Further incremental monetization will also happen when it comes to highlights: The primary purpose of post-game highlights finally moved towards top-of-funnel marketing and has mostly been pulled in front of the paywall. However, as production and distribution technology improves, new monetizable products such as near-live / in-game highlights that could have perceived pay value (think: subscription for getting automated video push notifications of goals with latency measured in single-digit seconds)—in contrast to post-game highlights which should rather be used as top-of-funnel marketing for the actually monetizable products such as the live watch (= paid streaming) or in-stadium (= ticketing) experience and merchandise instead of pressing for immediate monetization through exclusive distribution and restricting broader access. (Link: Twitterpost ⤵️)

In general, I do expect, due to the fundamental challenges to the sports media industry, an unprecedented degree of innovation over the next few years that will revolutionize all relationships within the sports/media - industrial complex, including rights owners, rights holders, intermediaries (e.g. agencies, content distributors), the advertising industry, fans, and other stakeholders such as data providers, agencies, content distributors, streaming technology providers, or betting companies.

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