Is Streaming the Future for International Sports Rights?

Premier League Liverpool
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After Amazon deals for top-flight soccer in the U.K. and Germany, will 2020 see a digital revolution in the lucrative business of live sports?

One thing his holiday season will do is unite the otherwise combative English fans of the Liverpool and Everton soccer clubs, alongside those supporting Manchester United or Man City, Chelsea or Arsenal. All of them will be getting their fix of "football" on Amazon Prime.

This week, Amazon will stream 10 live matches of English Premier League soccer, the second tranche of the 20-match package the online giant secured as part of a three-season deal with the league. Amazon streamed its first 10 matches over a three-day period earlier this month but the real test will come Dec. 26 — Boxing Day in Britain — when the country is home on holiday and Amazon will bombard fans with nine matches, six of them streaming simultaneously. A final match, Wolves versus Manchester City, takes place Dec. 27.

The English soccer rights deal, which reportedly cost Amazon around 90 million pounds ($118 million), was the streamer's first big move into sports rights in Europe.

The technology giant followed up with another deal, announced Dec. 10, for select rights to the Champions League club soccer tournament for the German market. Like the English Premier League deal, the Champions League agreement will run three seasons, starting in 2021-2022.

Shortly after Amazon confirmed the Champions League deal, Sky, the European pay TV giant owned by Comcast that has been the German home for the Champions League for the past 20 years, announced it had pulled out of negotiations for the next licensing period. DAZN (pronounced "da zone"), a London-based online sports streaming platform that is part of tycoon Len Blavatnik’s Access Industries, scooped up the remaining rights for Germany, though German public broadcaster ZDF will also carry the Champions League final match each season.

These digital deals follow live sports agreements including Amazon's three-year, $130 million deal, signed last year, to show Thursday night NFL games on its Prime video service, and YouTube's recent partnership with Major League Baseball to live-stream 13 games during the second half of the regular season to YouTubeTV subscribers in the U.S., Canada and Puerto Rico.

From the perspective of the international sports business, this looks a lot like a revolution. Live sports, one of the final bastions of free and pay TV, appears under threat from the online upstarts. In addition to Amazon and DAZN, Facebook, Twitter and Google subsidiary YouTube have all dabbled in live sports and now regularly compete in rights auctions in key territories. As forecast by a report published back in January by Indian media giant Tata Communications, 2019 looks like a "tipping point for the sports industry."

But a closer look at the deals, and the money spent, on sports by digital powerhouses suggests the digital disruption may not be a huge financial boon for the leagues. Amazon's 90-million-pound layout for the EPL matches was what local telecom giant BT Sport paid for a similar package of 20 games. Sky, in contrast, ponied up 4.5 billion pounds ($5.9 billion) in 2018 to show most Premier League matches over three seasons. Overall, the 2018 auction resulted in a 10 percent drop in revenue compared with the previous licensing period, according to London-based research group Enders Analysis. That is hardly the sign of a booming new business.

Another much-hyped online deal with the English Premier League — a 200 million pound ($261 million) agreement with Facebook giving the social media platform rights to all 380 matches for the Southeast Asian market — has reportedly fallen through, forcing the league to scramble to find a new buyer.

Facebook has a certain history here. In 2017, the company offered a reported $600 million for the online streaming rights to IPL, India's top-flight professional cricket league, only to be outbid by pay TV group Star India, now a Disney subsidiary, which ponied up a jaw-dropping $2.55 billion for IPL TV and digital rights over a four-year period. In September, Facebook did a much smaller deal, inking a four-year agreement with the International Cricket Council for post-match recap footage and, within India, some in-game highlights, for ICC tournaments, including the ICC Men’s Cricket World Cup.

Similarly, in the U.S., Facebook has scaled back its commitment to streaming Major League Baseball, carrying just six nonexclusive MLB games on its Facebook Watch service this year, compared with 25 exclusive games on Facebook last year.

Instead of sparking a digital revolution in live sports, online disrupters appear more circumspect, reluctant to spend millions or billions on rights that, in the words of a recent Enders Analysis report, “are country-specific, have little or no shelf life, and have limited appeal outside of a dedicated fan base.”

Enders Analysis notes that the annual cost of the Premier League under its current contract — just over $2.2 billion — would pay for 17 seasons, 170-plus episodes, of Netflix's costly period drama The Crown and dwarf the $1 billion Amazon is laying our for six seasons of its ambitious The Lord of the Rings adaptation. Unlike in-house drama, live sports has zero rerun value and very little cross-border appeal. Top-end cricket won't win Facebook any new users in France. MLB matches aren't going to drive up German subscriptions for Amazon.

Seen in this light, Amazon's English and Champions League soccer deals look less like a strategic shift and more like a clever bit of spot marketing. The Premier League deal, in particular, generated loads of free publicity for Amazon's Prime service in the lead-up to the Christmas period. As a loss leader to generate traffic and Prime subscribers, the relatively small investment might have paid off. Without giving specific figures, Amazon said the Premier League deal contributed to a “record number” of new subscribers signing up to Prime Video in the U.K. in the first week the matches were streamed.

It is notable that Amazon's major sports investments outside the U.S. have come in Germany and the U.K., its two largest international markets, with corresponding marketing budgets. Facebook's focus on cricket makes sense as a part of Mark Zuckerberg’s focus on the subcontinent as a major emerging market for his platform, less so as a broader strategy to move into live sports.

In fact, the future of sports streaming may lie in cooperation, not competition, with traditional TV companies. Sky Sports in the U.K. this year started allowing YouTube to show Premier League highlights on its platform. DAZN might carry premium soccer in Germany and Italy, but it also cooperates with pay TV platforms in the same markets. In Italy, some 79 percent of DAZN subscribers also subscribe to Sky, making a head-to-head battle between the two unlikely. Facebook's ICC deal will complement Star India's programming — the group paid $944 million last year for worldwide live-stream and TV rights for all of the Indian cricket teams’ matches. Even in the U.S., the digital giants are looking to team up for sports content. This summer, Amazon joined a $3.5 billion bid led by TV station giant Sinclair Broadcast Group and the New York Yankees to buy back Disney's 80 percent stake in the Yankees Entertainment and Sports (YES) Network.The deal will see the Yankees control 26 percent of YES, Sinclair will own 20 percent and Amazon just 15 percent, with the rest split between financial backers.

As 2019 comes to a close, it looks less like a tipping point than the start of a long, slow evolution in how live sports are bought and watched worldwide.