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Pay TV urged to package content for cord-cutters and super-fans in response to DTC growth

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The direct-to-consumer trend sweeping the recorded entertainment content market first began in sports, and the momentum towards franchise and club owned OTT is accelerating, according to new research. The development puts further onus on Pay TV operators to protect exclusive access to the most prestigious live sports and innovate packaging and pricing to fight against the real and present threat from global Internet giants like Amazon Prime.

The insights form part of a new report by NAGRA, the Kudelski Group-owned Pay TV and OTT solutions provider, which assesses the impact standalone sports streaming services are having on Pay TV. “Tier-one sports rights are critical to the future of Pay TV providers, who are increasingly consolidating their investments,” the report states. Operators are urged to look at different ways to package this content to make it more attractive to cord-cutters and to support super-fan needs.

The report, titled ‘The Global Market for Premium Sports OTT Services’, notes that an increasing number of sports rights holders are launching premium OTT services to drive additional engagement and revenues from their most loyal fans. More than a third of the world’s top soccer clubs, and six of the top ten largest leagues and federations, now offer premium OTT streaming services.

Of the new rights holder-owned services to hit the market, nearly half were launched in the past two years, a statistic which underlines the rapid growth seen in the OTT sports sector. Among the most recent and most ambitious is the international OTT platform debuted by English Premier League (EPL) champions Manchester City. ‘Man City for TV’ ‘ live streamed several of the club’s pre-season fixtures and shows live matches of its Women’s and Academy teams along with bespoke content.

Nuria Tarre, CMO at Manchester City, said: “By becoming a central hub for Manchester City content, we want to push the boundaries in technology and sports consumption and provide an immersive entertainment experience for our loyal fanbase, wherever they are.”

In North America, all four of the major sports leagues have long operated their own streaming services that show live and archived games both domestically and internationally. Of Europe’s top domestic soccer competitions, four of which rank inside the world’s top ten leagues and federations by revenue, only Italy’s Serie A currently transmits live match action via its own OTT service. Spain’s La Liga already operates LaLigaSportsTV, a free service that provides coverage of Spanish sports content but has yet to stream live La Liga games. The EPL is reportedly considering launching its own streaming platform.

Another property that ranks among the world’s top ten by revenue, but which has yet to be shown via a standalone streaming service, is the UEFA Champions League – although UEFA, European soccer’s governing body, announced the launch of UEFA.tv in June. That service will initially offer live match streaming from UEFA’s women’s, youth, and futsal competitions in certain markets, as well as carrying a channel dedicated to the Bundesliga, German soccer’s top club competition.

At the club level, half of the top ten soccer sides by revenue, and a third of the top 25, now operate a paid OTT service, the NAGRA report notes. These services typically offer complementary programming such as behind the scenes footage, interviews and original shows, as well as live coverage of non-first team matches or pre-season matches.

Formula 1’s F1 TV Pro is an exception to the general rule of leaving the best content out of the direct-to-consumer offers, featuring live races in markets where they have retained digital rights.

While many more clubs and leagues are investing in DTC services, the NAGRA report notes that rights holders “must weigh the benefits of DTC revenues against the risk of diminishing the value of the rights packages they sell to distributors”. It adds: “To date, [rights holders] have mainly chosen to leave their rights deals intact and focus instead on creating supplementary, value-added content for loyal fans.”

Tier-one sports could be lured away from Pay TV by global digital giants, which have the deep pockets to outbid operators like BT Sport or NBCU in future rights rounds. However, their strategies remain unclear. To date, Google and Facebook have focused more on partnering (e.g. YouTube’s Champions League partnership with BT in the UK, in which it shows live matches free-to-air), whilst Amazon has acquired some tier-one content, including a small package of EPL content in the UK.

As Pay TV providers increasingly focus on tier-one rights they are leaving a gap for lower tier rights to be snapped up by OTT sports aggregators including DAZN, Eleven Sports and FloSports. These disruptors, as well as clubs with DTC offers, are experimenting with different pricing and packaging models, which is something Pay TV operators need to emulate.

The report urges Pay TV providers to “evolve their service offerings in response to agile challenger brands who are offering innovative viewing experiences for sports fans.” There is some evidence this is happening. Some Pay TV operators are experimenting with skinny bundles to attract consumers unwilling to pay for full-fixed contracts. These bundles come in a variety of flavours, from OTT-only bundles of a whole Pay TV package to sports-only bundles such as Foxtel’s Kayo Sports in Australia.

However, skinny Pay-TV bundles tend to be the most expensive. The report compares DirecTV Now (AT&T TV NOW)’s premium OTT offer in the U.S. of $50 per month to club services like Manchester City at £1.99 ($3) per month and the NBA, which offers a single game for $6.99 and a last quarter pass for $1.99.

Most of the major players have a wide range of tiered prices and packages and there is considerable innovation, the report warned. ‘Innovative pricing and packaging models are critical [for Pay TV] to attracting cord-cutters and younger viewers.”

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