An inside look into the global market for premium sports OTT services

Soccer fans
For more than two decades, pay-TV operators have experienced a long period of sustained growth. What was the key driver? The answer is simple: Sports.

By Ivan Verbesselt, SVP Marketing, NAGRA

For more than two decades, pay-TV operators have experienced a long period of sustained growth. Global pay-TV revenues grew at 6 percent per annum from 2008 to 2017; even the more mature markets, Europe and North America, grew at 4 percent annually over this period. What was the key driver of this growth? The answer is simple – Sports.

Looking back, in 1996, Sky’s Rupert Murdoch described sport as a “battering-ram” for his pay-TV operations. “Sport,” he said, “absolutely overpowers film and everything else in the entertainment genre.”  Recent research shows that he is not far off the mark.

According to the recent Pay-TV Innovation Forum report, "The Global Market for Premium Sports OTT Services", sports have been leveraged by pay-TV to attract premium audiences at scale and, as a result, the value of major sports broadcast rights have appreciated significantly. The NFL rights – the most expensive in the world – cost almost $3bn per year in 2018, up 58 percent since 2008, while the value of English Premier League rights have risen 216 percent from £570m per year in 2008 to £1.8bn per year in 2018.

However, we have only skimmed the surface for how to fully leverage sports for the success of the pay-TV market. In the recent Sports Video Group article, “The Future for Media Companies Must Be Flexible, Says NAGRA Report”, NAGRA’s Simon Trudelle shared his insights on the evolution of the industry and the need to adapt to today’s consumer viewing habits.  

“There will be growth in OTT in the years to come. This is the direction that the industry and the consumers are taking,” Trudelle says. “More consumption on mobile devices for sure and also a consumption of content that needs to happen over a period of time. It’s not just sitting down on a Saturday to watch the event, but it’s being able to stay up to speed with everything happening with the sports you love throughout time. It’s the storytelling around it; it’s the overall experience over the season.”

The article continues, “When all the pieces are put together correctly, operators will be able to reach more fans than ever, and fans will find a deeper level of engagement with their favorite teams than they ever could in the pre-OTT days.”

To address this market evolution, providers can look to the better understand the key market implications outlined in NAGRA and MTM’s latest Pay-TV Innovation Forum report, "The Global Market for Premium Sports OTT Services".

The report provides valuable insight into the changing landscape of sports OTT services and their impact on traditional pay-TV service providers. It analyses the key characteristics, strengths and weaknesses of the different categories of industry participants and assesses the implications of the rise of sports OTT for pay-TV providers.  It also outlines the seven key implications for pay-TV providers going forward, which are:

  1. Live sports are the last bastion of live TV, making it mission critical for pay-TV companies to retain tier-one sports rights in their bundles.
  2. Pay-TV companies appear well positioned to retain the tier-one sports rights.
  3. Platform providers, such as Amazon and the major sports broadcasters, are likely to be the two most significant threats to pay-TV providers’ retention of tier-one sports rights and customers.
  4. Pay-TV providers will continue to rationalize their investment in tier-two sports rights and tier-two entertainment channels.
  5. Sports OTT providers will continue to experiment with different pricing and packaging models, seeking the right balance between being attractive to consumers and being profitable.
  6. Pay-TV providers will need to evolve their service offerings in response to agile challenger brands who are offering innovative viewing experiences for sports fans.
  7. Pay-TV providers must continue to take steps to limit the impact of sports streaming piracy by leveraging new anti-piracy technology and industry collaboration, particularly as 5G begins to roll out.

It is clear that the proliferation of sports OTT services calls into question the future role of sports in pay-TV. Can the traditional pay-TV providers retain the tier-one sports rights they cherish at viable prices? Will the proliferation of sports OTT services reduce demand for pay-TV? Will pay-TV providers be able to adapt their offers to keep up with agile and innovative challenger brands?

Answers to these questions, and more, are now available in the Pay-TV Innovation Forum research mentioned above. You can download your free copy of the full Pay-TV Innovation Forum special Sports OTT report here.