Live sport proves resilient in the face of seismic change

For a brief moment this month, it felt as though the TV industry had been transported back to the 1990s. Canal+ teasing a movie channel, Warner Bros Discovery explaining the strategic merits of a standalone thematic factual brand and FIFA announcing records broadcast revenues all had a sense of déjà vu about them. All we need now is for someone to launch a new linear kids channel. Oh wait… Sky did that last week.

Much has changed, of course, in the last three decades. But like an endlessly-adaptable gameshow format, there are several core elements to the TV business that have started to re-assert their relevance. Bundling, windowing, basic and premium tiers, content licensing have all once again become key features of the industry’s recent discourse,  as the pendulum has shifted from growth towards monetisation.

The debate around sports rights has been especially intriguing. Historically, live sport was always regarded as the engine room of the TV business; the one genre that could be guaranteed to drive subscriptions and generate ever-increasing ad revenues. Sport, almost single-handedly, facilitated the creation of the PayTV business.

In recent years, the narrative around sport has become more skeptical. Without being too reductionist, this probably has a lot to do with the performance of DAZN and Netflix. Sports-centred DAZN may yet grow into a profitable and sustainable business – but as yet the jury is out on its narrowly-defined business model. Netflix, by contrast, has grown to be the world’s largest streaming platform without sport. As recently as December 2022, co-CEO Ted Sarandos said he was “not anti-sport, but pro-profit”.

The main criticisms against live sport as a business driver in the streaming era are a) that premium rights costs a lot and b) that they are rented rather than owned. Even Warner Bros Discovery CEO David Zaslav recently referenced these issues, despite the fact that his own business continues to invest heavily in the genre.

This month, however, there have been a few reminders that sports rights, like bundling, windowing and so on, remain a critical part of the modern TV ecosystem. Firstly, there’s the FIFA story, which demonstrates that there is continued demand for premium sports rights in every market. This shows no signs of abating. Looking ahead, football’s global governing body expects the $7.6 billion it generated in the last four years prior to Qatar 2022 to rise to $11 billion for the 2023-2026 period.

Then there is Fox’s success with this year’s NFL Superbowl. While everyone else is complaining about weak ad revenues, Fox CEO Lachlan Murdoch has shrugged his shoulders and pointed to a record-breaking $600m in ad revenue (for one night).

In no particular order, we have seen Amazon Prime Video renew its UEFA Champions League rights in Italy, Viaplay consolidate its position in motorsports and Sky rumoured to be on the verge of securing ATP and WTA tennis. WBD, despite the CEO’s observations about sports rights, has breathed new life into its UK JV with BT, the newly-named TNT Sports, and extended its partnership with the US tennis open. Having also recently acquired French Ligue 1 soccer rights for Spain, there is no indication that WBD is planning on backing away from sport in the near future.

In the UK, Virgin Media O2 is using live sport as the basis of an aggressive price promotion against rival Sky. David Bouchier, chief TV & entertainment officer at Virgin Media O2, said: “With so much captivating live sport available to tune in to over the next few months, including the return of the UEFA Champions League and the new Formula 1 season, we want to give sports fans even more reason to feel excited.”

Linear broadcasters (with the possible exception of Austria’s cash-strapped ORF) are also keen to maintain a strong presence in live sport, with the BBC renewing Bellator and Swiss public broadcaster SRG SSR securing rights to UEFA Champions League soccer from 2024/25. In Germany, commercial broadcaster ProSiebenSat1 has recently secured domestic broadcast rights to the popular touring car series DTM.

Rekindled interest in sport goes much wider than these examples. It’s also evident in Disney’s recent restructuring, which makes ESPN one of three core business pillars. Alongside Amazon, Disney, WBD, Sky and Viaplay, the likes of Paramount (IPL cricket in India) and AppleTV+ (MLS soccer rights globally) are betting big on the genre.

As the industry returns to its core learnings, this renewed faith in sport should come as no surprise. While it is often thought of as being a subscription-based play, live sport’s real superpower is that it delivers a dual revenue stream (ads and subs). As streaming platforms go hybrid, sport suddenly looks like a compelling proposition.

There’s also a degree of fallacy in the two arguments that are thrown up against sport. Firstly, cost. Premium sport costs a lot because it delivers a lot. As streamers and studios fall over themselves to axe bloated budget scripted series that don’t deliver ROI, can that really be said to be a better use of resources? Is a $200m moonshot on a straight to platform movie really a better investment than a proven set of sports rights? Disney, for example, recently paid around $250m-$270m for three years’ worth of F1 rights in the US. Even factoring in production costs, that compares well.

Secondly, the rental model. Rental may not provide long-term security, but it can be viewed as an advantage – because it gives broadcasters and platforms an option to renew every 3-5 years. The lifetime value of owning a strong IP catalogue can be tremendous – but there’s also a lot of over-priced content that will only ever be a makeweight. Is it really feasbile, for example, that WBD will recoup much of its $450m investment in Westworld by transforming the series into a FAST channel?

True, there is an argument that Gen Z and younger are losing their attachment to sport – in preference of digital media. But once again this shows the advantage of the rental model. Come the day that live sport really does stop delivering ROI, broadcasters and platform can switch their investment to esports and gaming instead.