The media market is undergoing many changes: its structure is altering, it is subject to regulatory intervention, and content is attracting increasingly international audiences. These significant changes are here to stay. They include the multiplying number of TV channels, the development of strong alternatives for content distribution (e.g. DTT, IPTV, cable, satellite and mobile broadband), as well as the rapid growth of over-the-top TV (web TV) and non-linear TV. We believe this trend will accelerate, affecting all players in the pay-TV and triple-play markets. For sports organisations looking for alternative ways to maximise the value of their premium audiovisual rights, these changes will be both beneficial and challenging.
On the one hand, such developments favour premium sports content providers, who could benefit from international audiences in the same way as movie studios have done for many years (and thereby attract associated revenues). According to the Motion Picture Association of America (MPAA), international box office revenues for Hollywood movies accounted for nearly 66% of total revenues in 2008. However, movies typically attract greater international interest than sports, which often appeal only to a specific local market. The revenue generated for premium sports rights owners from international markets although growing is still limited, typically up to 15% of total revenue. However, the English football Premier League realises more than 30% of its revenue from international markets, showing other sports organisations that it is possible to close the gap with the studios in capturing international revenues.
On the other hand, sports organisations may also face new barriers to growth. Market developments have favoured fresh regulatory interventions to support both consumers and effective competition, e.g. by limiting distribution exclusivities downstream. Ofcom in the UK and the MDA in Singapore have decided to impose remedies from 2010, and similar developments we can be expected elsewhere in the near future. In France, for example, the authorities, despite having not (yet) taken action, have decided to monitor closely Orange’s downstream exclusivities and increase the relevant authorities’ powers accordingly.
In this complex environment, premium sports right holders are taking specific initiatives to take advantage of new opportunities and minimise risks. The UEFA Champions League is focusing on enhancing the audiovisual elements of its products (e.g. by increasing the number of matches or spreading matches over a greater number of match days), as well as setting high production standards or producing content, as are the English Premier League and the French football league. The English Premier League has also recently announced its TV channel plans focusing on international markets, and the French league is bidding for one of the pay-DTT licences. These leagues could learn further from established initiatives in the USA, Europe and beyond. For example, in the USA the National Basketball Association, National Hockey League, National Football League and, more recently, Major League Baseball have launched their own TV channels. In Europe, the Dutch football league also has its own TV channel and recently launched its own over-the-top (web TV) services.
These developments, particularly in France and England, indicate that this direct-to-consumer trend will accelerate in 2010, with more sports rights owners being likely to complement indirect, third-party TV channels with their own channels. However, such a move is not without risks. The Internet favours a complex network of collaborative and competitive relationships. Managing these relationships is critical to ensuring audiovisual revenues continue to grow, avoiding the cannibalisation of current revenue streams, and developing stronger negotiating positions in a turbulent market. We are already seeing a new debate developing in both the USA and Europe over premium sports owners having the opportunity to combine both direct and indirect access to consumers.
Analysys Mason is highly experienced in supporting premium rights holders, such as football leagues and clubs, operators and content aggregators, with new audiovisual opportunities. Our experience has helped our clients navigate market and technological developments and take into account associated regulatory and competition law issues.
For more information, please contact Lluís Borrell, Partner, at lluis.borrell@analysysmason.com