Rattling the sport broadcast chains

Neal Romanek
September 27th 2017 at 2:35PM : By Neal Romanek

As sports broadcasting moves behind paywalls, the whole value chain is changing. But how good for the industry. Olivier Suard, VP marketing at Nevion, gives his take

Broadcasting is constantly being shaped and redefined by change. This change is driven by a number of factors, from advances in technology and the emergence of new competitors, to the shifting demands and expectations of viewers. These factors mean that traditional broadcasters need to adapt and, more specifically, they need to remain relevant in a fast-shifting landscape.

Ultimately what this means is broadcasters need to adapt not just their offerings, but their operations, and by extension, their value chain as well. That certainly stands to reason, given the industry in which they operate. But just how are they going about this?

Sport shake up

Taking a look at sports broadcasts there has been some headway in evolving those offerings to meet audience expectations. In the past few weeks there have been a number of stories in the media that reinforce this view. The first was the report that nearly half of young people watch illegal streams of live sports. The second was that top tier cricket is returning to the BBC for the first time since 1999. The third announcement was that Formula 1 is considering developing its own OTT platform to deliver the sport over the Internet.

These apparently unrelated announcements have in fact one thing in common: they are disruptions to the established value-chain of sports broadcasting.

That value chain, which has been in place for some decades now, involves content owners selling the rights for the coverage of the sport to the highest-bidding broadcasters, who in turn charge viewers (via subscription or pay-per-view) for the pleasure of viewing the sport.

This has been a lucrative business arrangement for both content owners and broadcasters.

However, many viewers don’t want to pay to watch sports - or don’t want to pay very much. As a result, battling piracy has become one concern for broadcasters, but not nearly as much as declining audiences.

The industry might argue that it doesn't matter, as long as the remaining viewers can be made to pay ever more

One of the reasons for the decline is the volume of content now competing for viewers’ attention — whether it’s other sports, video on demand, short-form user-generated videos (e.g. YouTube), gaming, or social media.

But evidence also points to the decline in sports viewing being primarily due to its move away from free-to-air broadcasting.

When the British Golf Open moved from the free-to-air BBC to subscription-based Sky Sports channel earlier this year in the UK, the viewing figures dropped by 75%. This is a pattern repeated across many sports, as they move to paying channels. Even the hugely popular English Premier League viewing figures are down.

The industry might argue that it doesn't matter, as long as the remaining viewers can be made to pay ever more. But declining interest in watching sports, especially amongst the young, can also damage the interest in actually taking part in the sports. Take cricket, for example: in 2014 alone, the sport saw a drop from 908,000 to 844,000 of people playing cricket at grass roots level. The announcement of the return of cricket to a free-to-air channel in the U.K. should very much be seen in that context: a sport fighting to maintain its mass appeal.

F1 running out of fuel

F1 is another sport that is losing viewers. According to reports, F1 lost 25 million viewers when it switched to pay-per-view. So far, the governing body doesn't appear to have any plans to change its strategy per se, though it is interesting that it is looking into providing its on OTT service to reach viewers directly, especially those younger viewers who are watching less and less traditional TV.

With the long-term popularity (and with it the potential value) of their sport at stake, content providers will need to consider whether their strategy should remain as it is now, to maximise revenue, or whether they should shift to maximising coverage instead.

In turn, broadcasters, especially those that rely heavily on a subscription-based or pay-per-view model, will need to take note of the shifting strategy of sports content providers. Having the deepest pockets may no longer guarantee acquiring the broadcasting rights of popular sports. Revenue models based on free-to-air broadcasting may need to be expanded, potentially affecting the broadcasters' bottom line.

But most worrying of all for broadcasters would be the prospect of content owners bypassing broadcasters altogether and developing their own distribution strategy based on the Internet, targeting the growing number of cord cutters — the move away from traditional TV subscriptions. Such moves would lead to a “disintermediation”, a term which will no doubt be used a lot in broadcasting in the coming months and years.

Sport is just one part of the broadcast content ecosystem that has the potential to cause a revolution in the traditional value chain. While it is all anecdotal at this stage, could this be the beginning of a serious movement? Given the pace of change in the industry overall, the finish line may be even closer that you think.