Assessing the significance of Amazon’s entry into the Premier League broadcasting market

Posted on 3 August 2018

Assessing the significance of Amazon’s entry into the Premier League broadcasting market

The Premier League recently announced that one of the final two domestic broadcasting packages for the live streaming of Premier League football had been sold to Amazon Prime for an undisclosed amount. For three years from season 2019/20, all ten matches of the traditional Boxing Day fixture programme and a further ten mid-week matches from another Bank Holiday game week will be available in the UK only to Amazon Prime subscribers. The other streaming package was taken by BT.

Simon Leaf, Managing Associate at Mishcon de Reya LLP, discusses the significance of Amazon’s entry into the Premier League broadcasting market and the impact that it is likely to have on rights holders, other technology and streaming platform providers, and traditional broadcasters.

The final two packages were sold several months after the initial auction had been concluded, as the Premier League failed to receive a bid that met its reserve price earlier in the year. On the face of it, this suggests that we are a long way off from seeing a revolution in how sports rights are consumed. However, digging a little deeper suggests this could well be evidence of a major change in approach to the sale of broadcasting rights.

A change in strategy for rights holders

In recent years, rights holders have been increasingly looking at alternative, non-linear, routes to market when selling their valuable broadcasting rights. This is evidenced by the Premier League’s decision to create these two smaller streaming packages compared to the other standard packages of live rights it has historically sold. The change in direction was made in the hope that it would lead to a bidding war between the global technology platforms, commonly now referred to as the ‘FAANGs’ (standing for Facebook, Apple, Amazon, Netflix and Google), who were all rumoured at some stage to be considering entering the market for the broadcasting of live Premier League football.

Other prominent sports rights holders have deliberately looked at innovative ways to engage younger fans that are more likely to consume sports in non- traditional ways, borne out by a recent decline in viewing figures of live Premier League matches experienced by the traditional broadcasters. For the Premier League season 2016/17, for example, viewing figures for matches on both Sky and BT fell; culminating ultimately in Sky agreeing to pay around 16% less per match from 2022 than it does under the current deal. This includes partnering exclusively with non-linear platforms in recent months. In what was reported to be boxing’s first ever US $1 billion deal, Matchroom Boxing, for example, announced in May 2018 that it was partnering with the DAZN streaming service in the US. As part of the deal, 16 boxing events a year will be held in the US and will be exclusively available to view in the US on the DAZN platform.

Every Premier League game is available in the US via NBC’s online portal, and all FIFA World Cup 2018 matches in Australia (including 39 of them on an exclusive basis) were originally due to be streamed by Optus, a major Australian broadband supplier. However, Optus experienced significant technical issues in making the stream available to the Australian public, and ultimately agreed to ensure that all of its matches would also be shown on Australia’s public service broadcaster too. This was clearly an embarrassing turn of events that further illustrates the risks of the new approach of relying solely on non-linear means.

One of the main ways that rights holders have sought to mitigate this risk is by focussing their efforts on bringing the FAANGs on board in the expectation that they have the necessary resources to ensure that a perfect ultra HD stream is available for their users. Such efforts will no doubt be enhanced with the launch of 5G services in the future. From a legal perspective, rights holders will need to be careful when drafting broadcasting agreements involving streaming services. Not only will they need to ensure that they have not already granted these rights to existing media partners, they also need to consider how to protect international broadcasting revenues if the relevant partner is only being granted rights in certain territories - especially given the potential piracy risks. Savvy rights holders will also seek a share of increases in subscriber and sponsorship revenues that can be directly attributed to the relevant event, which makes comprehensive pricing and auditing provisions a must.

Can Amazon make it work?

On almost every commercial measure - including number of viewers, cumulative attendances and sponsorship/ broadcasting deals - the Premier League is the most successful league in Europe, and arguably the world. Through its own popular online platform (including its Fantasy Football offering, as well as the individual websites run by each of the clubs), the Premier League and its clubs have amassed a wealth of data about its fanbase.

The FAANGs also operate on a global basis and exploitation of data is a core component of all of their strategies. Recently, they have started to become more acquisitive in terms of the purchase of sports distribution rights. Examples include Facebook’s partnership with Fox Sports to stream UEFA Champions League football and Major League Baseball games in the US, and Amazon’s purchase of the UK rights to screen the US Open tennis and the ATP World Tour. Google, through its YouTube platform, has also completed deals to screen sporting events, particularly eSports - an example being the multi-year broadcasting deal it signed with Faceit to stream the Esports Championship Series pro gaming league. It is therefore not surprising that Facebook, Google and Twitter had reportedly been considering making a bid in the latest rights auction.

Perhaps it was the attraction of the potential access to millions of fans during the Boxing Day fixtures, traditionally one of the busiest times for retailers, which persuaded Amazon to dip its toe into the water. While the amount paid has not yet been revealed, fans of each Premier League team will be forced to interact with Amazon if they want to view these games, and it therefore gives the company a great opportunity to cross-sell its other services, including content available through Amazon Prime and its more traditional e-commerce platform. This will provide Amazon with the opportunity to better understand its subscribers’ tastes, and then further tailor the offering to suit them. Given that the next auction is unlikely to commence until at least a season into the new partnership, it also gives Amazon (and its rivals) the opportunity to assess whether to make a more comprehensive bid for the next set of rights from 2022.

Nevertheless, both rights holders and the technology companies will need to ensure that any processing of personal data - which would include sharing access to each other’s database for marketing purposes - complies with the new General Data Protection Regulation (Regulation (EU) 2016/679), as well as the Privacy and Electronic Communications Regulations 2003.

The impact on traditional broadcasters

The Premier League’s deal with Amazon is also significant because it now means that, for the first time in the League’s history, there will be three domestic broadcasters screening live games. The success that Sky has had in consistently growing its subscriber base since the early 1990s has often been attributed to its exploitation of Premier League rights. On a number of occasions it has seen off rival broadcasters, such as ESPN, Setanta and NTL, which sought to grow their operations through the acquisition of the rights to broadcast live Premier League games. However, arguably the fiercest competition it has faced has come in the last five years from BT, with both companies competing to offer customers the full suite of TV, mobile, telecom and broadband services. Nevertheless, it remains to be seen whether ordinary fans will be willing to pay a third provider, and how pubs and clubs that rely on Premier League football to ensure footfall will be impacted by the move.

Above all, Amazon’s entry is a sign of the competitive challenges that both Sky and BT face across their wider businesses from the growth of each of the FAANGs. Looking at this from a narrow rights perspective, some of the other events that companies like Amazon, Facebook and YouTube have already won are examples of this. At a broader level, traditional pay TV broadcasters are increasingly needing to reassess their business models in order to retain their relevance, when not only is so much of their customers’ data that they seek to understand and exploit increasingly held by the FAANGs, but also globally, there is evidence of a growing trend of subscribers who are ‘cord-cutting.’ In other words, consumers are dropping pay TV packages in favour of cheaper streaming alternatives, such as Amazon Prime and Netflix.

Other broadcasters, like the BBC and Disney-owned ESPN, have sought to compete with the likes of Netflix and Amazon Prime by coming up with their own alternative delivery methods. ESPN launched ESPN+, a sports streaming service designed to complement the traditional ESPN channel, in the US in April 2018. For under $5 per month (so, significantly cheaper than ESPN’s main service that so much of its profits are dependent on), ESPN+ promises to show more than 10,000 live sporting events to its subscribers, including a live Major League Baseball game every day during the season. Away from sport, Disney has also removed its films from Netflix, and has announced plans to develop its own internet-only streaming service. It remains to be seen what impact Disney’s acquisition of 21st Century Fox-owned Sky Sports will have on the market if the deal eventually goes through.

The BBC, on the other hand, has been trialling the use of alternative delivery methods during this year’s FIFA World Cup. All 33 of the games that the BBC has the rights to show are not only available through its iPlayer service, but also in virtual reality through a specially built app. Over three million people streamed England’s first group match against Tunisia using the iPlayer in the UK, a new record. Again, there are plenty of legal considerations for broadcasters to consider when developing new technologies. In particular, they will need to ensure that they have the appropriate rights under their existing agreements to broadcast through the new medium. Ownership of the IP associated with the new platform, as well as any additional content generated by users of the service, should also be considered from an early stage.

The future

While the BBC’s latest viewing figures from the England versus Tunisia match certainly adds to the evidence that there appears to be something of a revolution in the consumption of live sports content, over six times as many people still watched the game through traditional methods.

In a climate where on-demand availability is increasingly the expectation in all forms of life, viewing live sport is one of the few remaining activities where the bulk of the value remains in the live action itself. After all, it is increasingly hard not to find out how your team, or the athlete that you are supporting, has done in an ever-connected world. It is also one of the few activities which brings people together, so that arguably the experience is enhanced by feeling of being part of a community while watching the relevant event.

Of course, social media companies would argue that this is exactly the advantage that they have over the traditional broadcasters, and it explains why the major clubs and leagues have invested so heavily in building content and communities specifically for the likes of Facebook, Snapchat, Instagram and Twitter.

The main headline from the Premier League’s latest auction was undoubtedly the drop in domestic revenue generated from the sale of UK broadcasting rights. However, the next auction could see a return to growth. Especially if Amazon is successful in exploiting the rights that it has acquired, other potential non- linear broadcasters may enter the ring to compete for the rights. In response, the Premier League may look to increase the number of potential broadcasters vying for the rights or possibly re-examine its global model of rights distribution so that a company can compete to obtain global (rather than just UK) streaming rights.

This article was originally published by World Sport's Advocate, on Thursday 12 July.

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