Sports broadcasting in the tech era: recent trends, exclusivity and COVID-19 implications

With technology and innovation at the heart of the modern world, it came as no surprise, pre-COVID-19, that online-streaming giants such as Netflix, Amazon Prime Video and YouTube had been taking centre-stage in the television industry. This trend away from traditional broadcasting in favour of over-the-top (OTT) broadcasting (online-streaming) was also replicated on the sports field, with the likes of Amazon Prime Video and DAZN competing with traditional TV broadcasting models (such as Sky, BT and ESPN) for exclusive rights to broadcast and stream live professional sporting events.

The success enjoyed by online-streaming platforms, promoted as a more efficient and practical way to reach global audiences, has led to some of the more established players looking to cash in on the latest wave. In recent times, both Sky and BT have sought to increase their online presence by showcasing sporting events, both live and on-demand, online.

It is still too soon to understand the full extent of COVID-19’s impact on the future of sports broadcasting, but one thing is clear: the suspension of sporting fixtures has tested even the deepest of pockets. While some sport has resumed, further disruption to sporting schedules seems inevitable. In a post-pandemic world, will we see a departure from, or an acceleration of, the recent shift towards online-streaming providers in sport?

The recent shift away from traditional sports broadcasting

Traditional sports broadcasters are accustomed to having exclusive rights for broadcasting premium live sporting events. In the UK, Sky and BT are the primary broadcasters for a range of sports including, most lucratively, football. However, a focus on innovation, increased high-speed internet connectivity and the impact of globalisation have contributed to the shift towards and growth of online-streaming. The likes of Netflix, Amazon Prime Video, DAZN, Facebook and YouTube have brought a seismic change to the television industry. For instance, according to Ofcom, almost half of UK households now have subscriptions with some of the most popular online-streaming providers such as Netflix and Amazon Prime Video. These online-streaming providers are not only competing with the more traditional sports broadcasters. It can be argued that they – and even more recently, COVID-19 – have also influenced the incumbents to innovate and adapt their existing broadcasting models through competition and/or partnership.

For example, traditional sports broadcasters have created online-streaming and on-demand platforms (i.e. Sky Go app, BT Sport app and Sky’s online-streaming platform, Now TV) or have partnered with existing online-streaming providers (i.e. YouTube). This has enabled customers to have more flexibility in how and when they view existing and new sports content. The importance of advertising revenue is also at play here. Increasing subscriptions for online-streaming providers together with (pre-pandemic) declining viewership figures for traditional broadcasters can affect demand for advertising slots and, in turn, revenue generated through advertising.

In addition, some of these streaming providers, in particular Amazon Prime Video, Facebook and YouTube, have a very strong position in other markets related to online sales and social media. In combination with their wealth of access to consumer data, the ‘new kids on the block’ may leverage these tools to strengthen their position in sports broadcasting. For example, the millions of Amazon users who subscribe to Amazon Prime for better delivery times also get free access to the sports broadcasting offered by Amazon Prime Video.

Online-streaming providers in sport

There has been a noticeable shift towards coverage of live sports via online-streaming providers. One notable example is Amazon’s £90 million purchase of exclusive broadcasting rights for 20 English Premier League (EPL) football matches in December 2019, with the iconic Boxing Day fixtures being broadcast by an online-streaming provider for the very first time. What’s more, in February, before the UK felt the full force of the pandemic, the chief executive of the EPL, Richard Masters, announced that the EPL is intending to launch its own online-streaming service through which it will sell live games directly to fans. The so-called Premflix streaming service, which is initially intended to be trialled overseas, would have the effect of removing traditional sports broadcasters from the fold and further disrupting the sports broadcasting industry.

This perceptible shift is particularly evident in the hospitality space, with pubs, bars and clubs incorporating online-streaming of sports into their offerings to customers. For example, in the UK, Premier Sports (which holds rights to broadcast various sports including PRO14 Rugby, Serie A football and Motorsports) has partnered with Screach (a digital marketing and commercial live streaming solution), demonstrating the prominence of OTT broadcasting in the hospitality space. Moreover, Amazon Prime Video’s Premier League Pass package, which is a commercial viewing arrangement that Amazon set up in partnership with BT Sport, has enabled pubs, bars and clubs to show Amazon Prime Video’s sports content on their premises.

Amazon’s venture into the sports broadcasting market extends beyond football, and online-streaming providers’ coverage has expanded to football, tennis, NFL, boxing, esports and more. For example, prior to the pandemic:

• Amazon had purchased the exclusive broadcasting rights of several international tennis events due to take place between 2021 to 2023, including the US Open, the Laver Cup, the French Open and the ATP and WTA tours due to take place in the UK. During the pandemic, it also secured the exclusive broadcasting rights to live-stream the recent Schroders Battle of the Brits exhibition tennis tournament.
• In 2017, Amazon acquired the exclusive broadcasting rights for Thursday Night Football NFL matches, which was renewed for the 2018 and 2019 NFL seasons. It was recently announced that Amazon secured a three-year contract extension to continue streaming Thursday Night Football NFL matches up until the 2022 season.
• In boxing, the launch of the online-streaming platform DAZN has further shaken up the broadcasting industry. DAZN has also delved into the esports space, having recently acquired the exclusive broadcasting rights for the Brazilian Blast Premier League (an esports league for the popular computer game Counter-Strike).
• DAZN also acquired broadcasting rights to show EPL football fixtures in various overseas countries including Brazil, Canada, Japan and Spain, and, since the restart of the EPL on 17 June, has continued its coverage. DAZN announced its intention to expand its streaming services to over 200 countries and territories, further adding to the view that there is an increasing appetite amongst online-streaming providers to disrupt the traditional sports broadcasting market.
• YouTube’s exclusive rights for streaming certain esports events, coupled with its previous live streaming of the UEFA Champions League final (in partnership with BT Sport) adds momentum to this shift.

Exclusivity arrangements

A fundamental provision of any licensing agreement, including broadcasting rights contracts, is the concept of exclusivity, namely:

1. does exclusivity exist and what form does it take;
2. if it does exist, what does the exclusivity relate to;
3. what is the geographic scope of the exclusivity; and
4. what is the duration of any such exclusivity?

In the sports sector, broadcasters enter into licensing arrangements with the owners of sports content (i.e. sports governing bodies and other content creators) to set out the terms and conditions for broadcasting their content to audiences. In football, these licensing arrangements are typically provided on an exclusive basis – with the geographic scope, length and form of exclusivity varying from contract to contract and dependent on the bargaining strength of the parties involved.

Prior to the pandemic, exclusive broadcasting rights for the EPL were split (until 2022) between Sky Sports, BT Sport, Amazon Prime Video and BBC Sport – with the latter holding rights only to broadcast highlights of EPL fixtures rather than live games. However, with the recent resumption of English football on 17 June, the EPL announced that all 92 remaining fixtures in the 2019-20 season would be broadcast live across the four channels, with BBC Sport showing live EPL matches for the very first time. The return of free-to-air matches (albeit on a temporary basis), together with the recent trend towards online-streaming providers in sport, may mean that the current split of fixtures becomes even more pronounced when the current rights deal ends and the next bidding round kicks-off.

Anticipated impact of COVID-19

It will be several months before we are able to fully appreciate the impact of COVID-19 on the recent trend towards online-streaming. However, in the last few months alone, we have already seen numerous complex legal and commercial questions arise. The economic impact has been plain to see: on sports clubs’ cash flow and the sport industry’s access to financial support, as well as on deal activity and the application of FFP regimes. Employment law considerations are also at the forefront, in relation to player contracts and job retention schemes. What is also clear is that this will not be limited to certain leagues or jurisdictions; the impact of COVID-19 is global and each country, federation or league will have their own views as to how best to deal with the fall-out.

Widespread disruption to sporting events has meant that some online-streaming providers that had secured broadcasting rights for sporting fixtures have had to negotiate waivers or deferrals of payment obligations in broadcasting contracts. For example, it was recently announced that DAZN had sought to defer its payment obligations under its broadcasting contracts with various professional sport leagues (including the EPL) while fixtures were suspended due to COVID-19. It remains to be seen what impact this might have on the appetite of online-streaming providers to bid for sports broadcasting rights once lockdown measures are eased, and normality resumes. However, recent evidence seems to suggest the disruption isn’t impeding the long-term planning of some online-streaming providers such as Amazon Prime Video and DAZN: both acquired non-exclusive broadcasting rights from the German Football League (DFL) to show a single Bundesliga fixture, with each of Amazon Prime Video and DAZN subsequently agreeing an extension covering the remaining fixtures of the current Bundesliga season. In addition, Sky and DAZN have recently acquired the broadcasting rights for the DFL for four years, as of the 2021-22 season. The announcement supports the view that the enthusiasm of online streaming providers has not waned, despite the impact of COVID-19. On the other hand, the pandemic may have at least a short-term effect on the perceived value of sports broadcasting; the total amount paid by Sky and DAZN for the DFL rights is approximately €200 million less than the previous rights package agreed in 2016.

More generally, the sports broadcasting industry appears to be taking a heavy financial hit due to the suspension of live sporting events. In football, for example, UK traditional sports broadcasters such as Sky and BT are due to pay licence fees to the EPL for the first half of fixtures of the 2020-21 season. It was also recently announced that Sky is due to receive a rebate of up to £330 million from various sports organisations such as the EPL, which itself has agreed to a rebate of £170 million to Sky. In France, the Professional Football League recently adopted a resolution that will enable it to obtain loans guaranteed by the French government to cover the deficit in broadcasting rights fees occurring as a result of the termination of the 2019-20 season due to COVID-19. It is understood that the loans, which will amount to approximately €224.5 million, will cover remaining broadcasting payments meant to be made by sports broadcasters, Canal Plus and beIN Sports, for the 2019-20 season and is to be paid to clubs in Ligue 1 and Ligue 2.

Comment

Prior to the pandemic, online-streaming had been making significant inroads in the sports broadcasting market. The shift away from traditional sports broadcasting towards online-streaming can be seen as a positive disrupter to an industry that has an increasingly global audience. The anticipated impact of COVID-19 on this trend is likely to incentivise online-streaming providers to take stock of future bidding decisions; however, recent evidence suggests that their appetite for further expansion into the broadcasting market is far from full.

Traditional sports broadcasters will need to adapt their broadcasting models to cater for the rise in OTT broadcasting. Potential options for incumbents to manage this recent shift include:

1. creating competitive platforms that can challenge the business models of online-streaming providers;
2. seeking to partner with online-streaming providers (i.e. through joint ventures) and thereby gain access to technologies and online platforms to expand the reach of their content; and/or
3. given the large sums currently provided for broadcasting rights by traditional broadcasters, do nothing and bet against the trend becoming a permanent one.

The jury is still out on whether the online-streaming model can completely replace the traditional sports broadcasting model, or whether we can expect to see a combination of the two approaches for the foreseeable future. Pre-COVID-19, it seemed clear that online-streaming of sports is here to stay, and the likes of Amazon and DAZN are just getting started. The pandemic has muddied the waters.

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