STREAMING

Live Sports - The Next Victory for Streaming Giants ?

Matt Bradshaw

(MBA2022)

Matt Bradshaw is currently studying for his MBA at London Business School while pro-actively exploring careers in Tech, Media and Sport. He will be interning at Amazon over the 2021 summer. Prior to beginning his MBA, Matt worked for 6 years at Affiliated Managers Group (AMG), a multi-boutique Asset Management firm where he was a Strategy Director within the distribution team. Matt previously worked at HSBC in the Financial Institutions M&A team after graduating in Economics from the University of Bath.

What’s stopping tech giants such as Netflix, Amazon, Apple or Google from adding live sports to the ever-increasing list of industries that they dominate? If they did, what would that mean for powerful incumbent firms?

Firstly, let’s consider the existing competitors and the customer. In the UK, for example, it may be difficult to overtake incumbent leaders, SkySports and BT, who have staked their claim on attracting customers that desire access to all available sports in one place. Inevitably, more entrants – for instance, Amazon’s recent English Premier League (EPL) coverage – means a further split of coverage across channels and platforms, just as when BT entered the market in 2013. While this is traditionally bad news for hardcore fans who prefer to watch everything in one place and may not be willing or able to pay for three or more different subscriptions, it could be positive for those happy to pick and choose which sports they pay for. 

With multiple platforms, the important question is whether consumers wish to have everything in one place. Sky’s traditional selling point is likely to be threatened as consumers gain flexibility in other viewing and may expect that same flexibility in their sports viewership – just because a customer pays for the EPL it doesn’t mean they also wish to pay for the NFL and cricket.

The question then becomes: Why aren’t these powerful tech giants taking advantage of the potential rising demand for flexibility by entering the market? To answer this, we need to first consider what is needed to actually compete, the critical component for new entrants being television rights. These are very expensive – the most recent EPL UK broadcasting auction totalled £4.5bn – and often becomes a loss leader. However, beyond simply obtaining the rights to broadcast the sporting event, production value and (perhaps most importantly) ratings are key. Product owners such as the EPL or the NFL understand that they earn too much money from revenue outside of broadcasting – from merchandising, ticketing, and partnerships – that they cannot just sell to the highest bidder if it may risk actual viewership.

Overall, I would argue that the aforementioned tech giants have the balance sheet, technical, and organisational capabilities to overcome these hurdles; the more important consideration is do these companies actually want to enter the market and what would be their core motivations for doing so? Amazon has been the most active in acquiring rights and naturally has the cash to add more, but to-date this has been a slow step-by-step process. When considering the seasonality of the content they have acquired, such as pre-Christmas premier league and pre-black Friday Rugby Union, it could be that their true objective is in fact simply to drive sales to their core consumer business. The question also remains as to whether firms like Netflix see enough value in sports rights, which lose almost all value once the event is over (beyond ancillary highlights packages) as compared to regular streaming content that produces lifetime subscription value.

It is too early to know what this will all mean for the future of UK live sports broadcasting, but it seems likely that in the short term the market will become increasingly fragmented as newer entrants chip away with more sports packages. We are, however, probably a few years from Sky and BT having to worry about their market share as enough of their customer base still relies on the simplicity of having everything all in one place.

London Business School Tech & Media Club