Amazon muscles in on Premier League Football market

Amazon has been announced as the latest rights holder of the English Premier League, as the sports market becomes even more fragmented and expensive for fans to follow.

As part of the deal, Package F, Amazon will now be able to broadcast 20 matches per season from one Bank Holiday, boxing day, and one midweek fixture programme, which will also be in December. Both rounds of games will be available to Prime subscribers, including in the cost, as well as various different highlights packages.

“We welcome Amazon as an exciting new partner and we know Prime Video will provide an excellent service on which fans can consume the Premier League,” said Premier League Executive Chairman Richard Scudamore.

Amazon is slowly edging its way into the sports market, adding the Premier League to American Football content and its partnership with the ATP World Tour and US Open Tennis, as well as dozens of sports docu-series. There have been rumours the business is investigating other major sports in the US, such as basketball and baseball, though the Premier League move should be seen as nothing more than a tentative step for the moment.

“The last two packages were sold at a discounted rate and you can hardly base a media strategy on two days of sport per season so there might be some questions around the packaging of the rights,” said Ed Barton of Ovum. “As it is, Amazon has an opportunity to test how valuable EPL is and how effective it is at monetising those rights without making an outsize financial commitment.

“Advertising, subscription and sponsorship models are all likely to be given a workout. Will the rights lead to an uptick in Prime subscriptions or reduce churn? Does the linear nature of sport translate into higher value advertising? Can they funnel some of that EPL audience into buying stuff on Amazon? Will they pad Twitch’s audience with the mostly male viewers who want to watch the football?”

Net sales revenue ($Billion) of Amazon from 2004 to 2017 (Statista)

Net sales revenue ($Billion) of Amazon from 2004 to 2017 (Statista)

While it is only a brief foray into the world of sports, it will either offer fuel for ambition or a quick lesson in fail fast exploration. Premier League Football has consistently been the headline attraction of Sky, but there have been questions surrounding the value of such content in today’s society. As Barton points out, leaning into other revenue streams in the Amazon business model could be a successful venture, as it is questionable whether a standalone sport business model can be successful.

BT is one company which has suffered in the content world, taking the opposite approach to Amazon. The full-steam-ahead approach to establish BT in the world of sports content might have had some early success, a lack of supporting content in other genres might explain why subscription numbers headed south in the last two quarters. There will of course be various explanations for this, but the BT Sport experiment does not look to be a raving success.

That said, CCS Insight’s Paolo Pescatore thinks the repercussions could be positive for BT.

“Overall, this is also great news for BT with its TV platform the only place where users can watch all the Premier League matches from 2019, thanks to its content relationships with Amazon and Sky (for Now TV). And let’s not forget it has secured more games and the cost per game has come down,” said Pescatore. “The Premier League rights is a great addition to the ATP tennis rights it secured last year. Both come into effect next year – rivals, should watch out!”

However, should the experiment prove to be a success Amazon Prime customers should expect a bump up in price, or at least to be offered sport content as a premium feature. Pescatore pointed out the current model, £79 per year or £7.99 a month, is not sustainable for the internet giant should it want to expand its presence in the sports arena.

“We believe that Amazon will introduce a new sports channel bundle for Prime subscribers,” said Pescatore. “Also, it could seek to introduce advertising to support its push into linear TV. Another option could be events based advertising. This way it will benefit from new streams of revenue. Undoubtedly, Amazon is pulling together a strong and growing set of live TV rights to complement its vast content relationship.”

Premier League TV broadcasting rights revenue from 1992 to 2019 (Statista)

Premier League TV broadcasting rights revenue from 1992 to 2019 (Statista)

One question which some might ask is whether this is a sensible strategy from the Premier League. Maximising revenues through different rights holders is obviously a sound business strategy, but crossing over so many distributors in the same geography is questionable.

Initially, when Sky was the sole provider of Premier League football in the UK the value was unquestionable. It secured 100% of the audience, admittedly for a notable expense, but there was obvious ways to monetise the investment through advertising as the numbers were significant. Through the last few years the price per game has increased, though it has dipped slightly this time around, but the number of different ways to watch the sport has increased. The initial outlay has increased, as has the competition to secure subscribers. Sky is now paying more for a smaller audience; the value is starting to come into question.

With Amazon thrown into the mix now as well, consumers are being pulled every direction. It might become too expensive to watch every single game before too long, and it would not be unsurprising to see one of the rivals pack in sports ambitions as it becomes increasingly complicated to generate ROI. The Premier League might be fighting to bleed the assets dry right now, but whether this damages the long-term prospects of the business remain to be seen. If Sky decides to move the focus away from sports and invest elsewhere, clawing back that investment in the future might be difficult.

Moving away from the philosophical pondering, the now is quite clear; the Premier League is winning and rolling in cash, while the consumer is losing.

Packages

Facebook hires Eurosport CEO but sports push could be a huge problem

Facebook has been quietly gathering steam in the content world, but a new hire signals some big ambitions, as well as a headache for rights holders.

According to the Guardian, the social media giant is about to hire Eurosport’s CEO, Peter Hutton as part of a bigger move into the content space. Although Facebook has dabbled in sporting content previously, it was one of the bidders trying to secure the rights for Indian cricket’s IPL, it has not been as active as Amazon or Twitter, both of which have been successfully pushing for some time.

While this appointment is unconfirmed at the moment, it certainly would be a good addition for the Facebook. Hutton was a key figure in securing the rights to broadcast the Olympic Games across Europe, and has previously worked at sports rights group MP & Silva, responsible for selling the rights for such properties as the Fifa World Cup and grand slam tennis. This is a heavyweight in the sports broadcasting world.

In terms of Facebook’s ambitions, it adds a new dimension to the platform, which is at risk of becoming a bit stagnant. The last couple of months have seen CEO Mark Zuckerberg and his cronies play around with various aspects, attempting to increase engagement and continue the staggering growth, but differentiation comes with risk. Arguably, the new ideas to date haven’t inspired Facebook to new heights, and if the rise of Bitcoin has taught us anything, what goes up quickly, can come down quickly as well.

Facebook is in a precarious position at the moment because it is a platform which is driven by user experience. It’s peers at the giants table of the internet are facing less of a threat because of the idea of functionality. Facebook needs to wow users each day to continue to keep them coming back, and while it might not be responsible for fake news trends or spreading hate speech, it is being held accountable because it impacts the experience users have on its platform.

Google and Amazon, who also sit at the top table of the internet, don’t have these issues. Their platforms are function, with user experience reliant on the success of an action, not the interpretation of behaviour. Search for ‘where Australia is’ and you’re happy. Buy a B*Witched CD and you’re happy. The core businesses are based on direct performance of the main product, not reliant on whether users can behave themselves by saying nice things.

When you combine the fact Facebook needs to find new reasons to charge advertisers, make the platform engaging again and generate some positive news, and you have a good driver for a sports content business. But what implications could this move have on the sports content business on the whole.

First and foremost, you have to think about the players who already have skin in the game. The likes of Sky and BT in the UK, for example. If the Premier League decides it wants to make an extra couple of billion and auction off the rights to a streaming partner as well as an official broadcasting partner, it will have to be very careful.

You have to consider the number of subscriptions poor sports fans will have to have if they are to follow a sports team. If BT has X amount of games and Sky Sports has Y, there might also be Z number of games which are on the streaming service exclusively. When we attended IBC last year, one of the problems being faced by the industry is the number of different services which are out there. Content is being spread too thin, arguably meaning there will be little value in any one subscription before too long. Sports is no different in this respect.

“No doubt web brand have the cash (to buy sports rights), but the move poses some interesting dilemmas,” said Paolo Pescatore of CCS Insight.

“Take the forthcoming premier league rights auction. Let’s say BT Sport, Sky Sports and a web brand are successful, that will mean consumers will be forced to sign up to three different providers, three different billing relationships. Ultimately consumers will suffer and will have to pay more. Rights owners need to tread carefully.

“You could also argue the escalating cost of sports rights will drive consumers to watch it live via illegal streams.”

The short term benefit of an extra couple of billion for the Premier League fat cats could very quickly turn into a disaster. Why would any of the content players want to spend ridiculous amounts of cash in buying the Premier League rights if they are not going to get a big enough audience? At some point ambitions to be a sports content player have to take a back seat and you have to question how you are going to get ROI. The guys who are buying the rights now might find other areas to invest.

This is of course assuming Facebook takes the premium product route. Should the Premier League rights owner want to deal with Facebook, there would surely have to be some promise that the social media giant would charge for the product, otherwise it would simply be signing the death warrant of its other customers. The ones who are paying big bucks now and hiding the content behind subscriptions.

This presents its own problem as Facebook does not charge for content currently. The user is used to free videos and is not likely to react well to a premium channel. You could put Amazon or Netflix in the same bracket here, but these are all businesses you already have a billing relationship with; subscription models would not be too much of a shock.

“One of my predictions is that Facebook launches pay-per-view transactions for selected events by 2019,” said Pescatore.

“The company recognises that it cannot rely solely on offering free content on an ad-funded basis. It strives to avoid mistakes made by rivals such as Google, which has failed to make a successful move into paid content. Facebook’s effort to secure more premium material offers scope to charge for selected events, such as sports, on a pay-per-view basis and could extend to event based advertising. The approach will prove attractive to content and media owners.”

A final problem which for the social media mammoth is the idea of production value. To date, Facebook’s approach has centred around user-generated content, where anything dodgy or poor quality is kept at arms-length; sports is a different beast and will test Facebook’s ability to hire the right people.

“Another aspect that needs to be considered is the production cost associated with each event” said Pescatore. “BT Sports and Sky Sports do a great job of providing analysis, insight and commentary pre/post and during the game.”

For sports, the content doesn’t finish with the battle on the pitch/court/track, there is a huge amount to spend on the production in the days before and after the event. Do it right and there will be silent fans, do it wrong and there will be incredibly vocal detractors.

Facebook needs to do something new, otherwise it will take the slow decline to irrelevance over the next few years. Those who don’t believe us simply have to look at how much of a colossus MySpace was. Sports is a good option due to its emotional connection to the audience. That said, the path to success is littered with obstacles, not only for Facebook, but the content rights owners, the current broadcasting players and the consumer.