As Part of $2 Billion Golf Deal, Discovery to Launch Streaming Service
The estimated annual value of the deal in 2019 and 2020 is $50 million, with payments increasing to $100 million annually in 2021 and then ramping up through 2030.
A stand-alone direct-to-consumer service for the PGA Tour, set to be launched by the golf property and Discovery as part of their 12-year, $2 billion partnership outside the U.S., will look to bring golf to the game’s four billion fans worldwide.
The service will launch on Jan. 1, 2019 and be a lynchpin of the deal.
“We have been on a mission to be the leading global IP company in the world," Discovery CEO David Zaslav said during a press conference on Monday. He added that “passionate fan bases” are the key to content domination in the global market. “The No. 1 mission here is a global direct-to-consumer platform that changes the way people consume content.”
Former NBA and DirecTV executive Alex Kaplan, who in his role as executive vp, commercial for Eurosport Digital will oversee the golf property for Discovery, said the partners would unveil the name for the streaming service later in the year.
It will not just offer live events — the PGA has more than 140 tournaments every year, including signature tournaments The Players Championship, the FedExCup Playoffs and the Presidents Cup. “We think it could be where people shop, where people talk to each other, short-form content, instructional videos,” said Zaslav.
JB Perrette, president and CEO of Discovery Networks International, on Monday also said that while Discovery will take a country-by-country approach to its PGA offerings, which could include the launch or rebranding of linear channels, it was likely to lean more towards direct-to-consumer offers in the bigger picture.
He also highlighted that for Discovery, the deal was its latest move towards strengthening its offering of content verticals with passionate fans at a time when other media and entertainment giants look to go for scale. Referencing Walt Disney's deal for large parts of 21st Century Fox and a possible competing bid from Comcast, Perrette said a lot of players were going “for the aggregation plays.” Discovery instead is focusing on verticals around “passionate fans in affinity groups," including food, real crime, sports and the like.
The deal, which will extend through 2030, includes the linear and digital rights (outside the U.S.) to the U.S.-based men’s golf circuit for more than 2,000 hours of content annually. Discovery will air PGA coverage on its pay and free-to-air channels. It will sub-license the PGA rights in certain territories similarly to the way it has done with its rights to the Olympic Games. (CBS Sports and NBC Sports have exclusive U.S. media rights to the PGA Tour; each of those deals run through 2021.)
The Tour is the second massive sports rights deal since Discovery took full control of Eurosport in 2015. The company paid $1.6 billion for European rights to four Olympic Games beginning with 2018 Winter Games in Pyeonchang. More than half of Europe’s population — 58 percent — watched the Winter Olympics from South Korea last February. The global event — which was carried on linear and digital via the Eurosport Player — was watched by 386 million viewers and delivered 4.5 billion video views, according to Discovery.
PGA commissioner Jay Monahan noted that Discovery’s handling of the Olympics was a major factor in the Tour’s decision to partner with the company. “At the end of 2016 and the beginning of 2017 we really started to get into the future of our international business because we had seen more international stars coming forward.”
Half of the top 50 golf players are from outside the U.S., including England's Justin Rose, Northern Ireland's Rory McIlroy and Japan’s Hideki Matsuyama. And the PGA manages developmental tours in China, Latin America and Canada.
Perrette said during a press conference that the PGA partnership ticks all the boxes Discovery is looking for: passionate fans and a growing global community of not only viewers but also participants. He characterized golf "a sport that is absolutely global" and said it also has current and future "heroes," which will alow Discovery to do what it has done with other sports coverage — "taking nobodies and making them somebodies."
Until now, the PGA has negotiated all of its rights deals on its own. But as the game has become increasingly international and the content universe has proliferated, the organization was looking for a partner with global infrastructure already in place. The PGA did not pursue talks with any other companies, said Monihan. “We pursued this path exclusively,” he said.
The estimated annual value of the deal in 2019 and 2020 is $50 million, with payments increasing to $100 million annually in 2021 and then ramping up through 2030. Discovery has earmarked an additional $20 million-$30 million per year in the first three years for marketing and operations costs. (Discovery will produce all of the content). As such, Discovery expects “minimal start-up losses in the early years” of the deal and then “positive cash flows” over the life of the pact, the company said in an investor letter on Monday.
Golf is a $170 billion industry that boasts among the most affluent fan base in all of sports; the PGA’s blue-chip advertisers include Rolex and Schwab. At the same time, live rights have only escalated as deep pocketed digital native services including Amazon and Facebook has muscled into the market.
For the PGA Tour, said Monahan, the “no. 1 area of focus is growing and diversifying our fan base.The world of media is fast changing. This is about every fan having access on every device.”