It's likely no surprise that TV rights make up the lion's share of football clubs income. Broadcast revenues are the main source of total income in almost all of Europe’s top leagues according to the KPMG Club Finance and Operations Tool: 58.9% in the English Premier League, 57.5% in the Italian Serie A, 53.2% in the Spanish La Liga, 47.7% in the French Ligue 1 and 39.4% in the Bundesliga (the only league in which broadcast revenues are topped up by revenues from commercials). For the past decades, a few rights holders have dominated the European market, broadcasting the games of domestic league championships via satellite or cable to fans’ living rooms.
The emergence of 'over the top' (OTT) service providers, such as Amazon Prime in the UK or DAZN in Germany and Italy, into football rights bidding is likely to bring about a shift in the football rights broadcasting landscape. What changes should be expected? Will there be sole winner in the battle for market dominance between traditional broadcasters and OTT services, or can there be cooperation among them? And, fundamentally, what exactly does OTT mean?
To help you grapple with those questions, KPMG's Football Benchmark team has delved into how OTT services are making inroads into the football industry's broadcasting markets, considering the consequences for the players involved.
OTT (Over-The-Top) describes a transmission form in which content is delivered directly to the end user via the internet—over the top of the traditional media distributors' given infrastructure. Commonly, the term refers to video content that is streamed to the client on-demand, however, the expression is also used to describe audio, messaging, and internet voice calling solutions, prominent examples being Netflix, Spotify, WhatsApp and Skype. The business model of OTT services is rather simple: typically, customers pay a subscription fee and are eligible to consume content on-demand on any OTT capable device they use such as mobile devices, smart TVs, personal computers or digital media players provided by third parties. In other words, the direct-to-consumer model allows users to stream chosen content whenever and wherever they want, using hardware that is connected to the internet.
While traditional ways of consuming motion pictures are bound to one device such as the TV, OTT content is compatible with multiple devices, allowing users to watch from a broad range of gadgets. This enables fans to watch from any imaginable location, given they have Internet access. Moreover, additional content, such as betting on games, can be integrated into the stream. Another major advantage of the technology is that although the user has a large number of alternatives to choose from, streaming services are offered for considerably lower prices compared to traditional products such as cable TV packages, where the content is provided according to a fixed schedule and the consumer has to adapt.
To better understand the role of OTT services today, it may be useful to review the evolution of the OTT content provider par excellence: Netflix. Originally founded as a distributor of DVDs via post in 1997, Netflix ended up creating the video streaming industry in 2007, due to simple cost saving reasons: streaming was in the long run less expensive than mailing physical media to customers. For a subscription fee, Netflix users are eligible to choose from a large catalogue of movies and TV series. Thus, Netflix enjoys a direct relationship to subscribers and also a large pool of data on viewing patterns, allowing them to understand and serve their customers’ needs.
How is this related to the football industry? Parallels are clearly identifiable, especially taking into account why nowadays media consumers are increasingly using OTT services. In contrast to the traditional consumption of broadcast media in which channels and shows are predetermined, it is the subscriber’s choice to select preferred content from the OTT platform's expansive library. Thus, football lovers gain the power over the programme, having access to football live-streams, video-on-demand matches, replays, and live statistics from a single application anywhere, anytime.
Take the example of OTT service provider “MyCujoo”. When Portuguese football club Boavista F.C. was relegated to lower tiers, matches were no longer broadcast live by traditional media, making it impossible for fans to follow their favourite team's games. In 2014, the Presa brothers, lifelong fans of Boavista, decided to fill the gap – now, any club or league can broadcast games to a worldwide audience via MyCujoo’s online platform, who not only stream live matches across six continents but are expanding into other major sports. Currently, in this unprecedented football-free time due to the COVID-19 pandemic, football fans that have a subscription can enjoy live football from Tajikistan and Belarus, where football is still being played.
Moreover, OTT technology not only makes for an alternative and flexible distribution of content, but also for the creation of exclusive content. Such content is usually unique to the very provider, offering exclusively produced originals. In part, this is also valid for the football industry, especially for bigger clubs: Liverpool FC, for example, cooperate with the AT&T subsidiary Turner Sports to offer matches, highlights, analysis and the UEFA Champions League campaigns to supporters in the United States. Content is taken from Liverpool’s in-house OTT service LFCTV and streamed on Turner’s platform B/R Live. As well as Manchester City, Borussia Dortmund has also partnered with Amazon and created a 4-episode documentary giving fans a behind-the-scenes look back at the 2018/19 season – exclusively accessible on Amazon Prime Video. Manchester City and Dortmund have reportedly earned EUR 10 million and EUR 5 million, respectively, via these initiatives.
However, despite the many opportunities, OTT solutions entail two major weaknesses, which are closely linked to each other: first, the reliability of a streaming service, which is more prone to malfunctions compared to cable or satellite TV, and, second, the time delay between the live action and what viewers are seeing on their devices, a noticeable difference that can be rather long. This is especially an issue for live broadcasts: obviously, fans don’t want push notifications telling them that their favourite team have conceded a goal before they have seen the play on their device.
Current situation
According to the Rethink TV Forecast published in September 2019, streaming will see sports media rights revenues hit USD 85 billion by 2024. The football bidding industry for TV rights is expected to increase from USD 12.8 billion to USD 31.9 billion during this period, primarily due to greater viewership of Europe’s top leagues in Asia and North America.
Up to now, OTT providers have not driven up the TV rights bidding process over the last bidding cycles in any of the big 5 European leagues as was anticipated by some. Traditional TV broadcasters still remain the major provider of domestic live football for fans, offering subscribers similar features as OTT platforms do: online television services.
Our chart shows the current domestic broadcasters in the top five football leagues.
.png)
In the Premier League, ultimately Sky Sports (broadcasting 128 of the 200 televised games) and BT Sport (52 / 200) remained the biggest bidders, spending a combined GBP 4.5 billion in the 2019-2022 rights cycle. Amazon shows 20 Premier League games in total for an undisclosed fee including two rounds of games in December, including all 10 games played on Boxing Day. Notably, this resulted in the first time in history that EPL games were not shown on TV.
In the same period, Spain’s LaLiga contracted two major TV partners for broadcasting their matches nationally. Telefonica subsidiary Movistar pays EUR 980 million per year for live rights, having secured nine games of each matchday, offering them as pay-per-view. Via its television network Gol, sports agency Mediapro distributed through cable operators, Internet television, and digital terrestrial television acquired the rights to show the second best game of the week exclusively as well as the highlights of the whole week for non-subscribers for a sum of EUR 1.14 billion per season.
Until the new rights cycle beginning from the 2021/22 season, German Bundesliga has sold its rights for live football to Sky and DAZN for an accumulated amount of EUR 1.2 billion. While DAZN – who have seen a 950% year-on-year-growth since their launch in 2016 – was founded as an OTT provider, Sky have also been offering to stream the matches on its Sky Go application. Amazon, meanwhile, has secured rights for the live-audio transmission.
In Italy’s Serie A, pay-TV broadcaster Sky Italia currently shares live rights with the sports streaming giant DAZN, as part of separate 3-year deals worth around EUR 937 million per year. DAZN agreed a partnership to air Serie A games on their new Sky Italia channel. This agreement with Sky will allow an increasing number of fans in Italy to have access to DAZN’s selection of matches.
French Ligue 1 is currently in their last season of their rights cycle, with contracts for the next one starting in the 2020/2021 season having also already been made. According to Ligue de Football (LFP) announcements, Spanish media group Mediapro was awarded a majority of the rights, while beIN Sports successfully bid for two weekend matches. Both Mediapro and beIN Sports offer streaming services, too. Interestingly, Canal +, the long-time broadcaster of the French Championship, has not been awarded a single lot.
Outlook
OTTs will no doubt play a major role in the future delivery of live football. UEFA, for instance, is planning to show Champions League matches via its own OTT service at the beginning of the next rights cycle in 2021 according to media reports. It has also been announced that it could be an option to restrict the selling of rights to TV networks in low-income regions, focusing on OTT providers instead. UEFA.tv currently offers live women’s, youth and futsal content as well as replays from European Championship matches, Champions league and Europa League matches, highlights from the European domestic leagues and background stories.
German DFL is reportedly planning to launch a “Bundesliga Pass” from the 2020/21 season for territories with insufficient media coverage. The Pass would include access to games of the first and second tier – the rights for highlight matches, however, might yet be offered to broadcasters on a single-match basis.
LaLiga also expects a shift towards OTT in the near future. According to the league’s technology director, Jose Carlos Franco, OTT revenues could account for 50% by 2026, while they are at 8% now. At the beginning of 2019, LaLiga launched its own platform LaLigaSportsTV.
Nevertheless, the growth of OTT's share of the football broadcasting industry does not mean that OTT providers will eliminate traditional distributors any time soon. OTT services are very often still dependent on pay-TV broadcasters as they face challenges in establishing a brand on the market and achieving customers. Partnering with traditional broadcasters can help them to validate and attract new customers. MyCujoo is a unique example of an OTT provider newly entering the market – by providing niche content, they rather complement than compete with traditional broadcasters, increasing viewing options for consumers. Moreover, traditional TV broadcasters often react to such change to the broadcast market by offering live streaming themselves.
.png)
