A sporting chance

Live sport is emerging as a key online battleground as traditional media companies look to launch direct-to-consumer offerings, writes Kate Bulkley.

It often seems that it’s only a matter of time before the fashions and trends of yesteryear return to our lives again and the television business is no different. The latest example is the importance of live sports and exclusive content in the burgeoning battle between the legacy media companies and digital giants like Netflix and Amazon.

In the last couple of months Disney and Turner have said they will use sport and their own original content to spearhead moves into the OTT space. They are not the first: similar moves into direct-to-consumer are well underway from Discovery, HBO and others.

Disney, with its ESPN brand, and Turner, with its basketball and golf relationships, are both big players. The move to expand their OTT offerings in sport, and beyond, signals that the legacy media companies are starting to re-think how to navigate the new world of content consumption.

Disney is creating both a sports streaming service and a separate family-oriented offer to be built around its Pixar, Marvel, Disney and ABC TV content. To power both, it is also taking control of BAMTech, the streaming technology company that handles the video offerings of US Major League Baseball. Disney will also no longer license its content to Netflix. It clearly wants to out-Netflix Netflix.

The reason is clear: legacy media companies are seeing falling profits as customers shift away from all-inclusive pay TV bundles. Thanks to Netflix and others, consumers can now ‘pick and mix’ the content they want.

The answer for the big legacy players is to create Netflix-style offers that will help them match the rising power of the digital giants. It’s about offering exclusive and original content and it’s about controlling the experience and the data that they can glean from how people consume their offerings.

It’s about time. Amazon, Netflix and Hulu have moved on from simply acquiring rights to focus on commissioning original fare. Netflix’s appetite for episodic content has driven a ramping up of the cost of making premium drama and led to speculation about the dangers of a ‘drama bubble’. What is clear is that the appetite for high-quality drama has driven up the cost of making it and that has caused drama producers to re-think how they fund productions, including how fast they green-light projects and who they partner with. One reason that 21st Century Fox is keen to roll Sky wholly into the fold is to expand its ability to finance original content across its many pay TV platforms around the world, something that Netflix already does.

Live sport now seems to be next target for the global streaming platforms with Amazon, Facebook and Twitter all starting to buy sports rights as a way to differentiate.

We’ve seen this before. Sport, along with movies, built the likes of Sky, Canal+ and others. Pay TV platforms then expanded into original content as a way of strengthening their lock on customers’ cash. Others, like Comcast and Virgin Media, focused on bundling TV with broadband and telephony.

Perhaps with sport, legacy media companies can now fight back more effectively, given what they have already learned about premium drama. By acting fast they have a fighting chance. But sport is even more expensive and certainly more ethereal than House of Cards or Game of Thrones.

The cost of sports rights continued to rise as pay TV platforms and telcos have battled it out. Now, however, the bitter fight for top-tier sports is about to intensify.

Digital companies like Twitter and Yahoo have dipped their toes in OTT sports in recent times and now Amazon and its subsidiary Twitch are buying up rights to eSports, while Amazon recently outbid Sky for the rights to the ATP Tour, the principal men’s tennis tour for the UK. Analysts predict that the e-retail giant will be a bidder for the next round of English Premier League rights.

Recent OTT moves by Disney and Discovery, which has secured rights to the Olympics across most of Europe for its Eurosport service, are emblematic of this shift. CBS is also looking to launch a sport service to complement its CBS All Access and Showtime streaming services. Given where we are with technology, why allow the digital platforms to use your content to build their own subscriber bases when you can build your own?

It’s a shot across the bows of its digital opponents and also a wakeup call that the traditional pay platforms ignore at their peril. So-called skinny bundles, which offer less at a lower price for consumers, are a must-have for all pay TV providers who want still to be in business in five years.

It wasn’t so long ago that the BBC simply licensed its programmes to the highest bidder. This was a boon to the then-fledgling Discovery, which built its business and reach on the back of BBC fare. Now of course there is BBC America and other BBC branded channels as well as BritBox, the online subscription brand recently launched by the BBC and ITV. The fight back has begun but it’s far from over.