2021 SPORTS D2C Forecast

REPORT Contents

OVERVIEW...... 03

1. MEDIA STRATEGIES...... 08

2. BUSINESS MODELS...... 12

3. FAN ENGAGEMENT...... 16

4. MONETIZATION...... 22

5. STABILITY...... 24

6. CONTENT...... 28

7. PRICING...... 32

FINAL ANALYSIS...... 36

2 MediaKind 2021 Sports D2C Forecast

Overview

The MediaKind 2021 Sports D2C Forecast is the most significant analysis ever undertaken of the direct-to- consumer (D2C) OTT platforms owned and operated directly by sports rights-holders. Sports Although a handful of rights-holders, such Global sports media rights revenue hit $51bn as MLB and FIBA, have been operating in 2019 and is projected to reach $56.1bn by D2C services for over a decade, D2C is 2022, according to the Sport Business Global an emerging market, reminiscent of Media Report 2019. Traditional broadcast deals D2C pay-TV in the early 1990s. A sector marked still drive the vast majority of that income. So by experimentation and exploration, trial and the question facing sport is what role D2C Forecast error, innovation, creativity, and risk-taking – should play in this new world? Will they evolve with big rewards for those that get it right. their business in the same direction that the A global snapshot rest of the media industry is going? What new of the most Media companies like Disney are now businesses can they create? How will they positioning themselves as streaming operators harness the growth potential? The MediaKind exciting and rapidly first and foremost; internet-based delivery 2021 Sports D2C Forecast provides a unique evolving sports is no longer the future of media content insight into industry thinking and practice to media industry distribution - it is very much the present. This answer these questions. developments process is happening faster than anyone could have imagined even two years ago, no doubt accelerated by the COVID-19 pandemic.

3 2020 The results are in...

The seven main conclusions based on the findings of the MediaKind 2021 Sports D2C Forecast are:

D2C: an increasingly important element in Subscription model dominates. The majority 1. rights-holders’ media strategies. Most rights- 2. of rights-holders who operate a D2C OTT service holders now consider it essential to have a direct make it available as a premium subscription relationship with their base, beyond an official service. Annual subscription passes represent website, even though it will be a decade or more a critical way to guarantee a return on investment before a D2C service becomes the primary means on D2C platforms. Exceptions include governing of distribution. But many of those that do not bodies using the platform primarily for currently have a platform operational are in the developmental purposes. Subscription is likely advanced stages of research and development to be the dominant business model for years into a possible launch. More sports rights markets to come. will go dark, forcing more sports rights-holders to turn to D2C to claw back lost revenue. However, 3. The UX bar is rising for fan engagement. There given the importance of linear media rights is an even split between rights-holders who use revenue in professional sports economics, their D2C platform as a content hub, focusing on it is likely to be a decade or more before the quality video, ease of navigation, and an attractive reaching inflection point at which a D2C service user interface, and those who are exploring a is used as the primary distribution platform by whole range of fan engagement tools to exploit the majority of rights-holders. the full capabilities of an OTT medium.

4 MediaKind 2021 Sports D2C Forecast

Opportunity for secondary monetization is Live content is king. All the rights-holders 4. still mostly untapped. At present, very few 6. analyzed in this report provide live content. rights-holders are embedding secondary Each makes different strategic decisions about monetization verticals – like betting, ticketing, which of its events will be made available live and merchandising – within their D2C services, and the degree of exclusivity offered vis-à-vis whether pay or free. Betting applications are broadcast coverage. While most of the rights- set for rapid growth, but the dilemma for rights holders interviewed still define their D2C platform holders is whether to put these features on their as complementary to broadcast coverage (at least main website or behind a paywall where the for now), all see it as an essential part of their engaged hardcore fans will reside. distribution strategy for live sport.

Stability at scale is crucial. Despite tremendous Maximizing recurring revenues. Among those 5. technological advances, there is still concern 7. rights-holders that offer premium services, among many rights-holders about how a there is a wide variety of pricing structures and streaming service would stand up when faced entry points. There is a clear need to generate with a high volume of concurrent live streams. guaranteed revenues in a subscription culture For most rights-holders, the reality is that where immediate cancellation is made easy—as audiences are currently far smaller. But most of such, heavily discounted annual passes tie fans those analyzed said the stability and scalability into the relationship long-term. of a platform were still fundamental. Low latency will be critical to the take-up of betting services.

5 The research

Based on a combination of interviews with senior decision-makers at rights-holders and desk-based research, the MediaKind 2021 Sports D2C Forecast covers 40 sports rights-holders from across the world. Those analyzed include the four major US sports leagues, regional confederations, national associations, leagues, and clubs. It encompasses the wealthiest rights-holders in sport as well as niche sports and challenger events.

The rights-holders and properties covered are:

ATP Tour NASCAR America’s Cup National Association (NBA) American Hockey League (AHL) NCAA Big Ten Conference National Football League (NFL) Champions Hockey League (CHL) (NHL) England and Wales Cricket Board (ECB) PAC-12 Conference English Football League (EFL) PGA Tour Pro14 European Federation (EHF) Professional Squash Association (PSA) European Rugby Champions Cup SailGP European Confederation (CEV) UEFA Formula One US Golf Association (USGA) Gaelic Athletic Association (GAA) USTA International Basketball Federation (FIBA) Ultimate Fighting Championship (UFC) Italian Basketball League (LNP) Women’s National Basketball International Swimming League (ISL) Association (WNBA) International Volleyball Federation (FIVB) Women’s Tennis Association (WTA) Liverpool FC World Endurance Championship (WEC) MXGP World Rally Championship (WRC) Major League (MLB) World Wrestling Entertainment (WWE) Manchester United FC

6 MediaKind 2021 Sports D2C Forecast

Sports rights-holders It encompasses the wealthiest 40from across the world rights-holders in sport as well as niche sports and challenger events.

7 MEDIA STRATEGIES

D2C is an increasingly important element in rights-holders’ 1 media strategies

Multiple objectives D2C OTT will be The rights-holders surveyed for this report cited complementary for multiple strategic objectives for operating a D2C as far ahead as I can OTT service. Over and above these specific think. But we have objectives, there was a common refrain among to do it, to future- decision-makers at sports bodies: rights-holders proof, to cover dark have to consider having a direct-to-consumer markets and as an content proposition.

outlet for all the For nearly all rights-holders contacted, their additional content D2C platform is not their primary distribution platform for content. The exceptions to this are niche sports or challenger events, which do not have exposure on traditional broadcast platforms

The other main exception to the rule is when a D2C service is employed in a market where no acceptable broadcast deal has been secured. In such markets, the D2C platform becomes the de facto primary means of distribution.

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As one rights-holder put it: “OTT has two Prioritizing going direct functions for the foreseeable future: to plug dark markets and to offer a back-up solution When it comes to assessing how D2C in markets where the broadcast market does strategies will evolve in response to the not produce a satisfactory offer.” changes driven by the growth of streaming, it is necessary to distinguish between the D2C platforms complement broadcast technology and the business models around coverage, providing a range of functions it. There is little doubt that an accelerated that are not mutually exclusive, including: switch to streaming is underway and that this is probably happening more rapidly in the US • Capturing data on fans, an asset which than in any other market. The proportion of has eluded rights-holders who have no its content that any rights-holder makes direct touchpoint under traditional rights available via streaming will continue to distribution strategies expand dramatically. • Providing additional revenues But this does not necessarily herald a shift • Providing an outlet in ‘dark’ markets, to D2C from third-party distribution. Rights- Our D2C where no broadcast exposure has been holders will look to increase both revenue and platform services reach. And because all sports bodies need to secured, which therefore serves as a the super fan; it’s plan in advance, they will privilege business ‘stalking horse’ in rights negotiations a premium product. with broadcasters models that deliver guaranteed revenues for anything in the medium term. Until rights- It’s the only place • Promoting grassroots events, such as holders come up with business models that where you can youth events, which struggle to secure provide certainty of income for the medium see every match. broadcast exposure term, they will be reluctant to prioritize D2C But it remains over broadcast models that deliver it. • As a vehicle for sharing large volumes complementary of additional content that would not One thing seems inevitable: D2C platforms to broadcast otherwise be seen will soon be prevalent in sport. This report coverage focuses on 40 rights-holders that have at • Super-serving hardcore fans with a richer least one direct-to-consumer content outlet. experience and more extensive coverage There are still many that don’t. Some of the sporting world’s most prominent and lucrative • Expanding reach by drawing in fans from properties – from FIFA and the Premier League a different, usually younger, demographic in soccer to World Athletics – currently do not • Building a data set of user behavior have a D2C platform as an active part of their to serve customers with a better and rich content distribution portfolio. Low-value more personalized experience and content carried on official websites does not help drive other revenue streams, fall under the definition of D2C in this report. such as sponsorship. However, all these bodies have been researching the viability of D2C and are at an advanced development stage. ’s Bundesliga has the complete technical infrastructure in place and could launch a D2C service at any time. ’s is not far behind this.

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How rights-holders distribute D2C services

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15 The number of 2 2 2 2 rights-holders analyzed which have a standalone mobile app for D2C Access its D2C service With few exceptions, rights-holders want Stand alone mobile apps the broadest possible distribution for their platform, which means they are One of the more surprising takeaways of device agnostic. the research, perhaps, given the ubiquity of mobile devices and the increasing The desire to reach all fans on all screens consumption of mobile content, is that less has led to the near-ubiquitous distribution than a third of the rights-holders covered of streamed sports content across all currently make their D2C service available as available streaming platforms and devices. a standalone mobile app. However, this also Those rights-holders who have created may reflect the fact that consumption of live standalone D2C apps have done so for sport still takes place overwhelmingly on the multiple platform including (but not limited largest screen available. to): iOS, Android, Roku, AppleTV, Android TV, Amazon Fire TV, Chromecast, Sony Just 33% offer a standalone D2C app for Playstation, Microsoft Xbox, smart TVs. mobile devices with the same branding and content available on PCs. However, there is an apparent dilemma about the distribution strategy: to go with Integrated access standalone apps and web platforms or integrate within rights-holders’ existing For 40% of the rights-holders analyzed, the main app and web platforms: D2C service is reachable via the main rights- holder mobile app, meaning that there is a Stand alone OTT web platform way of accessing a mobile-friendly service in 75% of instances. In total, of the 40, 58% have a standalone D2C web domain. The remainder have their Of the 15 with a pure mobile app, only five D2C service as a sub-domain of their main (13% of the total) don’t have a standalone D2C website, usually reachable via a tab on the web domain; instead, integrating it within the main menu or navigation bar. main rights-holder website.

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Conclusion 1.

Streaming is a significant factor There are already signs that a hybrid in the future of sports media model may develop, in which a distribution. Most rights-holders rights-holder branded D2C service have already been tapping into that is carried as part of an aggregated technology for the best part of a service by a third party, such as decade by distributing clips and a major media company with other short-form content on third- substantial resources. Such a model party social media platforms such would remove many of the technical as YouTube, Facebook, and Twitter. and consumer-facing demands from The next five years will provide the rights-holder, but it would come a better picture of the role D2C at the cost of the forgone access services will play within that future. to valuable user data of their own audience of fans. Rights-holders analyzed said no sports body could afford to be in US-based rights-holders, such a position where all the valuable as the big four US professional data about its supporter base is in leagues, seem to be further the hands of a third party were advanced than their European omitted and to which it may have counterparts in exploring the little or no access. potential of D2C services.

However, for the premium sports and many of the sports properties analyzed, the traditional broadcast market continues to deliver substantial revenues – often their biggest revenue stream – and guaranteed for years in advance.

Developing D2C platforms also requires a cultural re-set: it takes sports bodies out of their comfort zones and into new areas, such as marketing to consumers and operating payment systems, where they have no expertise.

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BUSINESS MODELS Subscription model dominates 2 MediaKind 2021 Sports D2C Forecast

Overview of business models utilized by rights-holders

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Four models, six ways to pay It is often said that there are only two business Of that 70%, there are seven different ways to models for media content – paid and free. pay for the content. Some rights-holders offer % The burgeoning D2C market suggests a more a wide range of these options, others just one complex picture, with four underlying models or two. The options are: and multiple variations emerging. 70 • Annual subscription Across the 40 rights-holders analyzed, of rights-holders four distinct D2C business models can • Monthly subscription analyzed have a be identified: subscription • Day/weekend subscription D2C service • Free to access • Pay-per-view for single events • Freemium, with limited content as part of, • Archive only subscription or an alternative to, a premium service • Subscription to a particular team • Free companion services – those provided (monthly or annual) as a free adjunct to someone subscribing to other payment services. Because some rights-holders offer multiple entry points, the following breakdown is not • Subscription made up of mutually exclusive subsets. In Among the services analyzed, some form of addition, there are additional layers to the subscription – including those with freemium subscription: for example, the NBA offers a offerings – is by far the most popular model, more expensive version of its monthly and accounting for 70%. annual passes so that advertising commercials are turned off.

13 Number of subscriptionNumber of subscription types offered types o ered to fans by byrights rights-holders holder

4 4

6

16

Subscription Types 2 PPV is offered by 18% of the rights-holders, but never as the only option but as one of

0 2 4 6 8 10 12 14 16 several paid options. Similarly, the daily or weekend passes 8% of rights-holders offer Rights-holders are always presented as an alternative to either an annual or monthly pass. Variations on subscription 5% of the rights-holders make it possible An annual package is the most popular type to access archive content only, with a of subscription. 60% of the 40 rights-holders specific subscription. analyzed make this option available although % only 5% have an annual subscription as a Outside of these type of subscriptions, single entry point. the NBA has been incredibly innovative in 60 exploring new price points, introducing 58% of the rights-holders analyzed offer a quarter-by-quarter pricing in December 2018. of rights-holders monthly subscription, making it the second most popular package type. 48% of the 15% of the rights-holders allow fans to buy a offer an annual rights-holders offer a monthly subscription in subscription that focuses on a particular team, subscription combination with an annual subscription. Only five of which are from the US, including the package 5% make a monthly pass the only entry point. NBA, MLB, and NHL.

A monthly subscription is the second most Most popular subscription type utilized by rights-holders popular subscription package type aileeen

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% The free model 25 25% of the rights-holders analyzed offer a branding of a main sponsor or sponsors free service, which is the leading service, (e.g. video clips ‘presented by...’) to ensure of rights-holders not a light version of a premium service. maximum exposure for their official partners offer a free service All these products carry live sport. Usually, which they may be able to leverage for more which is the leading the only requirement is a sign-up requiring sponsorship revenue. customer data. service, not a There are also two services in the US that light version of a It might be anticipated that such free services are not available as a standalone free option premium service. are supported by third-party advertising, such but are made available at no extra cost to as pre-roll video, banners, or branded portals subscribers to specific pay-TV platforms or and hence advertising-funded. This is not channel bundles. Both are college sports the case for any rights-holder offering a properties: the NCAA’s March Madness Live free service. service and the PAC-12 Conference’s app PAC-12 Plus. Instead several of those which carry no third-party advertising include the embedded

Conclusion 2.

Subscription services will continue There will always be exceptions to be the norm among D2C services to this norm. In general, these for years to come. Rights-holders will continue to be non-profit need revenues, and the pressure to organizations such as governing increase media-rights income has bodies using D2C to secure reach never been more significant due to ahead of revenue and showcase the financial crisis faced by sport minor and youth events that would following the COVID-19 pandemic. not otherwise be televised.

Increasingly creative subscription Advertising on free services is offers are likely to be employed to currently undeveloped as a revenue capture as much of the addressable stream, but this will change as they market as possible. The NBA is begin to draw a critical mass of utilizing over ten different packaging viewers. At that point, rights-holders’ strategies in the US for its League official sponsors will also look for Pass service. And where the NBA sponsorship opportunities on goes today, other sports bodies D2C services. follow tomorrow.

15 data Tracking alerts Fantasy Live stats/ Languageoptions Live radio Live team Cut-ins to round-up In-game, on Split screen/ Key moment Personalized multi-game broadcasts VOD highlights data/content AR/VR features comms audio and graphics Di erent/choice players/drivers Exclusive emojis of camera angles Compare stats two other live games demand highlights (overlays, graphics)

FAN ENGAGEMENT

The UX bar is rising for fan 3 engagement

16 MediaKind 2021 Sports D2C Forecast

data Tracking alerts Fantasy Live stats/ Languageoptions Live radio Live team Cut-ins to round-up In-game, on Split screen/ Key moment Personalized multi-game broadcasts VOD highlights data/content AR/VR features comms audio and graphics Di erent/choice players/drivers Exclusive emojis of camera angles Compare stats two other live games demand highlights (overlays, graphics)

Interactive experience 4 Compared to traditional linear broadcasts, Across the D2C services of the 40 one of the big advantages offered by rights-holders analyzed, 16 different fan The average streaming technology is the ability to create engagement features are utilized alongside, number of fan more of a two-way experience between or enhancing, the live feed of the sports engagement the viewer and the content: a ‘sit forward’ property. The average number of features (active) rather than ‘sit back’ (passive) viewing used is four per rights-holder. Not all features used is four experience. Rights-holders are increasingly properties use these features. In some cases, per rights-holder looking for ways to exploit the rich their events do not lend themselves to them. possibilities thrown up by internet delivery. Many rights-holders use their D2C services purely as an additional content platform, believing that an interactive or immersive VOD experience beyond the content will not provide a significant return on investment The most popular The most popular feature used by feature used by 88% rights-holders is video-on-demand (VOD) of rights-holders – creating a hub of highlights, replays, and/or archives. This was utilized by 88% of the rights-holders analyzed.

Personalization was the next most popular feature, used by 50% of the rights-holders, allowing the user to select their favorite team or athlete, with relevant content being served up to the viewer ahead of all other content.

The third most popular feature is data, whether telemetry, athlete statistics, or real-time leaderboards. 35% of the rights-holders analyzed use this as a tool that is exclusive to their D2C service.

17 Utilization of non content-led fan engagement features

Include di erent language commentary O er live Overlayed VR apps radio commentary telestration graphics

% 48 Content vs engagement features

Almost half of Almost half of the rights-holders analyzed approach demonstrates a creative blend the rights-holders (48%) use their D2C service purely as a where both the broadcaster and the analyzed use content platform, utilizing either one or two rights-holder can provide value to fans. their D2C service content-led enhancements. For example: Other engagement features used purely as a • 8% of the rights-holders stream include audio, graphics, and Virtual content platform live events with no features Reality (VR) applications.

• An additional 10% of the Audio features include different language rights-holders supplement the live commentary (used by 25% of the rights- feed with VOD content holders) or live team communications used in the three largest motorsport properties • A further 23% layer personalization analyzed: F1, NASCAR, and the World Rally on top of the live and VOD Championship. 10% of the rights-holders offer live radio commentary. • 5% of the rights-holders allow split-screen functionality for multiple simultaneous Overlaid telestration graphics include tracing games in addition to VOD the pitch during an MLB game, charting competitors during a SailGP race, or tracing Overall, 28% of the rights-holders use in-game the shots taken in a March Madness highlights of the live games which are being basketball contest. shown on the D2C service. The England and Wales Cricket Board is different however: it Both the NBA and the NCAA’s March offers in-game highlights of games that are Madness basketball coverage offer being shown live by a broadcast partner but supplementary VR apps as part of their not on the D2C platform. This unique D2C subscription proposition.

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Conclusion 3.

As it stands, the market appears to on its own merits, it may struggle be split down the middle between to justify additional costs beyond Include di erent rights-holders who use their D2C creating an attractive user interface. service purely as a supplementary language Second, fan attention and loyalty content hub, with little in the way of commentary could be divided between the sports fan engagement features, and those O er live Overlayed VR apps body’s official website and its D2C rights-holders who are exploring radio commentary telestration service. The official website will the full interactive possibilities of graphics always be free and aimed at the the OTT medium. broadest audience. A D2C service The latter includes many subscription behind a paywall will always have a services. Even though the far more limited audience. On which subscription secures the revenue, of the two should a rights-holder rights-holders still want to keep their concentrate investment in fans on their platform for as long fan engagement tools? as possible and lower churn rate. MLB, the most experienced D2C D2C services will need to have more creator of them all, embeds MLB.TV creative and immersive elements (its D2C service) into its main website, to ensure they are the stickiest. The MLB.com, and does not have a fight for people’s attention will only standalone app or web domain. become more intense.

But rights-holders have to strike a delicate balance on two fronts.

First, enhancements to content come at a cost that has to be covered so the D2C service can secure the incremental revenue the rights- holder seeks. If a rights-holder believes its content is strong enough

19 March Madness Live: A Market- Leading Immersive D2C Experience

Fan engagement tools on the NCAA’s March Madness Live D2C service

March Madness is the name given to the Division 1 The Path to Championship feature provides data Men’s Basketball Tournament, run every spring by streams that allow viewers to see the best-case the NCAA and featuring colleges from across the US. scenario for their bracket. This includes evaluating all Predicting the outcome of games in the tournament, possible bracket outcomes after each game and using through the creation of ‘brackets’ of predictions, has the results to highlight the games that will have the become an obsession among US sports fans. biggest impact on their Bracket Challenge groups.

The March Madness Live D2C service, operated by The Bracket Integrations feature allows fans to stay Turner Sports and CBS Sports along with the NCAA, continuously informed about the outcomes of their employs many engagement tools to tap into this and bracket predictions, whether browsing live game other fan behaviors, creating one of the most richly action on the Watch Page, viewing a live game in enhanced D2C experiences available. Every year the GameCenter, or through push notifications. March Madness Live adds new features to further Fast Break, a live, whip-around feature, also offers capture fan attention. quick turnaround highlights, real-time analysis, social The NCAA March Madness Bracket Challenge is a reaction, and commentary for all 67 games. Fast Break predictive gaming feature that viewers can play with is available when multiple games are being played friends or family while chatting in or around live video during the first two rounds of March Madness. in private groups. The feature allows viewers to get Other features include close game alerts for big personalized bracket alerts and compare their brackets moments, live game scoring, real-time editorial with those of celebrities. content, and live radio broadcasts for all games.

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Some device-specific features have been created for VOD features offer a comprehensive choice of Apple Watch, personalized alerts and quick access to highlights of past games and memorable moments live scores and schedules are available. For iOS devices, (which can be personalized to a specific team) there is an exclusive March Madness sticker pack. and provide options for in-depth analysis, behind- the-scenes features, and interviews. The catch-up A multi-game viewing option, allowing fans to watch video feature allows viewers to tune into a live game two live games simultaneously during certain stages already underway and view catch-up highlights of the of the tournament, was extended for the 2020 season game before that point and explore stats and news (which was canceled due to the pandemic) to cover related to the live action. Feeds provide live blogs from Amazon Fire TV and Android TV devices, as well as recognized news sources and the teams. Player and Apple TV. team statistics are available for every game.

From 2018, a VR application allowed viewers with The strategic and commercial reasoning for the VR headsets to watch live coverage of selected NCAA and assorted broadcast partners to invest in games from a virtual courtside seat. Fans can watch this market-leading service is two-fold: NCAA benefits their favorite team by selecting the camera they because it ensures fans of the property keep returning, want to watch from or via fully produced VR which will sustain future rights fees. In contrast, the coverage incorporating multiple courtside broadcasters will maintain ratings and can, therefore, cameras and sounds from inside the arena. sustain ad revenue.

21 MONETIZATION

Opportunity for secondary monetization is still largely 4 untapped Monetization options

The key takeaway of this report is that standalone sports D2C services today rarely utilize additional monetization features. This applies regardless of whether the service is delivered in a mobile app or via a desktop web version.

Once sports rights-holders have settled upon the business model for their D2C OTT service, they need to consider whether they can build additional revenue streams into the service All major US sports and, if so, which services they should be. bodies developing Additional revenues can be driven by betting services features like:

• Ticketing following the legalization of sports betting in the • Merchandising US in 2018 • Betting

• Fantasy/gaming

• Advertising

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Among the 40 services analyzed in this report, only three of the above five monetization tools are used:

• 8% of the rights-holders use advertising Conclusion 4.

• 5% of the D2C services provide merchandise sales Like considerations about inclusion of fan engagement features, rights-holders • Just one D2C service offers face the same dilemma when it comes ticketing options to secondary monetization streams.

The last two monetization tools are not Most rights-holders will look to use available to all rights-holders. Some leagues, their digital platforms to drive revenues for example, do not have the rights to sell through areas such as merchandising, merchandise or ticketing. The clubs which ticketing, and betting applications. But participate in the leagues do this instead. which digital outlet is likely to drive more

For many of the rights-holders who do hold significant revenues in these verticals? rights to merchandising and ticketing, today, Its main website? A standalone D2C it is more common for them to commercialize service? Or a hybrid of the two? these features on their official websites. Due to the US Supreme Court Decision Betting set to explode (Murphy v. National Collegiate Athletic Association), the stage is set for a None of the 40 rights-holders currently has remarkable growth of betting services an integrated betting service within its D2C in the US. There is little doubt that the service. This is likely to change dramatically in coming years will see an explosion in the the coming years. Following the legalization revenues from sports betting. But it is far of sports betting in the US in 2018, all major from clear whether the US major leagues sports bodies in the country are currently developing services that will enable fans will look to build these around live data to place bets around the live content they on free sites or live streaming on are streaming on their internet platforms. subscription sites. There will always be a ceiling on this option; however, as many sports governing bodies still Fantasy and gaming applications are refuse to embrace betting services for reasons among the fastest-growing segments of integrity and because of social concerns of the media industry and will increasingly about gambling. be integrated into sports content

This limited use of secondary monetization platforms. The March Madness Live features maybe because many of the services service provides an attractive template are still in their infancy. Rights-holders are for how something like predictor prioritizing, delivering the best possible games can become integral to a content experience and user interface. D2C service, and arguably its

Rights-holders offering premium subscription main attraction. services also need to be careful not to overload their services with revenue drivers and run the risk of appearing overly aggressive in their commercialization of the platform. However, all three of the rights-holders which carry third-party advertising are subscription services.

23 STABILITY

Stability at 5 scale is crucial

Reliability at scale

Delivering a reliable platform at scale To some extent, this reflects the fact that for remains a significant priority for rights-holders most of those covered by the report, their rolling out D2C services, and it remains a D2C service is still not their primary content challenge despite recent improvements in distribution platform. Volumes of concurrent global connectivity. live streams for most rights-holders remain in Stability is still the thousands or tens of thousands. Only a absolutely the As the head of media at one major European small handful of the bigger sports bodies with sports body put it: “Stability is still absolutely number one factor long-established D2C services, like MLB, are the number one factor in delivering a experiencing much higher volumes. in delivering a successful OTT service. If your stream is successful OTT not getting to the fan, all the other things However, with the accelerated move service. If your you can build around it are irrelevant.” underway from traditional linear broadcast stream is not technologies to streaming services, and the Only a small handful of the 40 sports getting to the fan, increase in the number of sports rights-holders bodies covered in this report say they have all the other things offering live events online, these volumes experienced high-profile glitches in the will increase exponentially in the coming you can build streaming technology’s performance in their years. When looking for streaming providers, around it are D2C OTT service. However, many admit to rights-holders are looking for providers that irrelevant experiencing ‘teething problems’ in the early can guarantee stability and scalability – the months of the service. capacity to deliver multiple streams and to ‘spin up or spin down’ the service related to consumption patterns without impacting the viewer experience.

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Table stakes

To attract and retain subscribers and to One of the reasons that some of the keep viewers on screen for the longest time world’s largest sporting bodies have been Our events go possible, D2C OTT platforms must be able slow to launch D2C OTT services stems out live to about to satisfy the requirements of an increasingly from streaming performance concerns. demanding audience. High-profile glitches during major events 200 countries. do not only cause dissatisfaction among They reach The ‘table stakes’ for sports fans is that the fans: they can damage the brand image huge audiences. images they are watching must be at least as of the sports body itself. Reliability at scale good as those they are used to seeing from is absolutely vital on their linear broadcast channels, which are And as betting services are increasingly increasingly likely to be in ultra-high definition. integrated into D2C services, the need to simultaneously improve quality while reducing Further, the proliferation of devices on which latency will become business-critical to streamed content can be watched requires protecting that revenue stream. platform operators to support multiple video formats across a complex array of device As one executive explained: “Reliability of platforms, increasing the cost to build and the stream is critical. For betting operators maintain a streaming service. dealing with their customers, they can’t afford to get that wrong.”

Conclusion 5.

With a handful of exceptions, most sports on D2C and the service has toppled, with D2C services are still dealing with a low subsequent negative brand implications number of simultaneous live streams, that any rights-holder wants to avoid. but this is set to change. D2C services will become more central to fans’ media Finding a streaming partner that can consumption as more rights-holders guarantee stability at scale is likely to carve out content from traditional linear become even more critical in the broadcast agreements or use them to light decision-making process when rights- up dark markets. More fans will consume holders appoint a streaming provider. live video streams simultaneously, and rights-holders need to be prepared.

Given the low volume of concurrent streams, most rights-holders have not suffered major technical glitches. However, there have been occasions when mega-events have been screened

25 Seconds count...

Streaming challenges

OTT delivery has some specific challenges around live sport because of how content is delivered over the internet. These include:

Buffering, reduction in picture Delays in the start-up time 1. quality and outages during 4. for video content. surges in internet traffic Latency – delays of six to 30 5. seconds between the event in Variations in quality in different real-time and the viewer seeing 2. parts of the world the stream, leading to ‘spoiler’ events such as alerts, messages, or neighbors celebrating. Being able to process a large Latency also creates inequality 3. volume of last-minute sign-ups in the betting market. to paid services online

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27 6CONTENT Live content is king

28 MediaKind 2021 Sports D2C Forecast

Live is universal

CONTENT All 40 D2C OTT services analyzed in this service. In other words, none of these 6 report carry live events. The range of events rights-holders have switched to a pure covered and the degree of exclusivity that D2C content strategy. D2C platforms enjoy are impacted by various factors. There is one exception of sorts. On GAA GO, the D2C service of Ireland’s Gaelic Athletic To understand the decision-making process, Association, where key events are not shown it is necessary to make two distinctions. live by the GAA’s linear TV partners, the D2C The first distinction is between primary and service allows fans in Ireland to buy these secondary content. Primary content is the matches on a pay-per-view basis. 1 most important competition or competitions Number of run by the rights-holder. Secondary content Of the nine US domestic rights-holders covers events such as youth games and in the survey, eight show non-exclusive live domestic rights- minor leagues. coverage of primary events on their D2C holders who show services alongside their linear TV partners’ exclusive live The second useful distinction is between live coverage. Outside of the GAA, the coverage of their two types of sports rights-holder: European domestic rights-holders surveyed primary events on do not provide live coverage of their 1. A domestic rights-holder: owns a events, even for non-exclusive coverage. their D2C service. sports property that is endemic to a Their linear TV partners have full exclusivity particular geographic market and where to the primary live content. the majority of its fanbase resides If any of the 16 domestic rights-holders in 2. A global rights-holder: owns a sports the survey has a secondary property, any property with no “home” market and a games that are not shown live by their linear multi-territory footprint. TV partner are shown on their D2C service. This includes the English Cricket Board’s 16 of the 40 rights-holders analyzed were county T20 tournament, the Italian Basketball “domestic” rights-holders. In their domestic League’s second division, and Big Ten “home” markets, no rights-holder shows its Conference games outside American primary events live exclusively on its D2C football and basketball.

29 Varying content strategies

While most domestic rights-holders’ fanbases Of the 40 rights-holders analyzed, half had reside in their home market, they are also no domestic market. Of these, the 15 rights- becoming popular in international markets. holders which charge a subscription for their In general, they make their D2C service D2C services only make the service available available where there is not a linear TV partner in markets where the rights-holder has been in that market. They still prioritize selling media unable to secure a broadcast rights deal, rights to broadcasters. But there are some what would otherwise be a ‘dark’ market. notable exceptions. Three of the rights-holders – tennis’s ATP, For example, the NFL’s international media World Rally and WWE – make their D2C strategy is to make NFL Game Pass available service available regardless of whether there in all markets, regardless of the existence of is a broadcast rights deal for live coverage of broadcast rights partnerships. The league their events. Formula 1 makes its F1 TV D2C carves digital rights out of all media-rights service available irrespective of its broadcast agreements. The English Football League’s partnerships. However, F1 TV Pro (which iFollow service allows fans to buy live shows live race coverage) is only made matches not shown by its broadcast available where no live rights deal has partners in international markets. been agreed.

Conclusion 6.

Rights-holders are getting more But resisting the broadcaster dollar is sophisticated when negotiating one thing. There is another dilemma: with linear broadcasters. Few savvy rights-holders might also seek the rights-holders will now sell content broadcast partner’s marketing clout to to a broadcast partner for it to be support D2C service sales and maximize warehoused and never seen by fans. access to the paying customer. That It will become the norm that many will dilutes off the direct touchpoint with seek to carve out specific categories of the fan. rights to populate D2C services. While live content is king, for many Bold rights-holders will decide to turn rights-holders, exploiting archive down some – but not all – revenue to content is a simple feature to provide obtain that elusive direct touchpoint using an easy search mechanism. But with fans. At the very least, there will be increasingly D2C services will drive more a growth of parallel exploitation of live value by using archives to create original coverage by both the rights-holder on programming. Original programming D2C and the linear broadcast partner. is exclusive and fresh and, if not a subscription driver, can be a useful retention tool.

30 MediaKind 2021 Sports D2C Forecast

31 1 10 111 1100 10110 PRICING Maximizing recurring 10 revenues 00 7

Getting the price right

One of the critical challenges facing any Of the 28 rights-holders analyzed that have $96 rights-holder launching a premium D2C a subscription D2C service, the average service is getting the price point, or price cost for an annual fan pass (among those points, right. A considerable amount of who offer one) is $96. The average cost of the average cost research can go into these decisions, a monthly pass is $15. The average discount of an annual D2C especially as every one of the world’s 200+ to incentivize subscribers to take an annual subscription pass markets has some unique characteristics. pass vs. the 12-month monthly pass - which a subscriber can cancel in the large majority of cases - is 43%. The most commonly used of total rights-holders number of subscription packages made analyzed which operate available by rights-holders is two. a subscription-based D2C service Of the rights-holders analyzed, there are two distinct groups:

• US domestic rights-holders with a D2C service serving the US market

• Rights-holders that market a D2C service across either an international or global footprint

32 MediaKind 2021 Sports D2C Forecast

Global subscription price analysis

1 10 111 1100 10110 % 43

Key: 10 the average discount offered The number of rights-holders 00 which offer a D2C annual/ by rights-holders monthly subscription pass to incentivize fans at the pricepoint stated as a proportion of the rights- to take an annual holders which offer an annual/ pass rather than monthly pass. Data for rights- holders with D2C serving a monthly pass global or international (ex on 12-month domestic market) footprint. rolling basis

Global market of total rights-holders analyzed which operate The 19 rights-holders in this category most The biggest discounter was Manchester a subscription-based commonly market two subscription packages: United. Its MUTV D2C service is $41 for D2C service annual and monthly. The average price point an annual pass, a 69% discount on the for an annual pass is $96 and for a monthly 12-month monthly pass equivalent. UFC pass $13. Where an annual pass and a monthly offers the smallest discount. pass is offered, the average discount offered between an annual pass and a 12-month monthly equivalent is 39%.

The English Football League’s iFollow service – which allows fans of particular clubs to watch that club’s matches – is the most expensive D2C service in this cohort. An annual pass to follow one club is $200 per season. A monthly pass is $29 per month. FIBA’s Live Basketball TV pass for the Basketball Champions League is the cheapest annual pass ($36).

33 US subscription price analysis

010 10010

00 1100 200 10

Key: The number of rights-holders which offer a D2C annual/monthly subscription pass at the pricepoint stated as a proportion of the 1020 rights-holders which offer an annual/monthly pass. Data for US domestic rights-holders with D2C serving US market.

US domestic rights-holders

The nine US domestic rights-holders analyzed pass of the nine US domestic rights-holders require deeper analysis. They offer a D2C is $97. The average price of the monthly package domestically (in their home market, pass is $18. which is analyzed here) and internationally (in other markets outside the US) which highlights However, the NBA also has the greatest their significant point of difference: US major number of price points for subscribers. rights-holders have managed to carve out a Excluding special discounted promotions D2C proposition in their home market. Their for post-season or mid-season packages, 11 European counterparts have not. it has at least 11 standard pricing offerings. By contrast, the NFL has one – a full-season, Minimum number The NBA is, by some distance, the most all-team NFL Game Pass. Excluding the NBA, of in-season expensive. The subscription price for its the average number offered is two. subscription NBA League Pass D2C service in terms of Across the nine US domestic rights-holders, packages offered an all-team annual and monthly subscription the average discount used to incentivize by the NBA pass is $199.99 and $28.99, respectively. Both options have premium versions to subscribers to take an annual pass is 50% on exclude commercials, at $249.99 and $39.99 the equivalent 12-month monthly pass cost. respectively. The average price of the annual

Conclusion 7.

There are no hard and fast rules Rights-holders will do their market about pricing a D2C platform. And research on the willingness of fans to third-party benchmarks are of little pay, but in the early years of a new D2C value: one rights-holder’s pricing service, there will be an element of trial levels and packages will not make and error to understand fan behavior. sense for another. However, tying in subscribers for a year at a time will remain a critical objective in pricing.

34 MediaKind 2021 Sports D2C Forecast

010 10010

00 1100 200 10

1020

35 Final Analysis

The rights-holders who collaborated all rights-holders, even those currently with this research project stated that without their own platform, are exploring having a direct relationship with their the commercial opportunities which fans will be critical to their business D2C OTT throws up. The sector looks medium to long term. This goes certain to be the biggest growth area in beyond the creation of an official sports media in the coming decade. New website. It means offering fans live launches are announced every week, and content and in a medium that opens new models and strategic relationships up a two-way relationship to provide are being studied to ensure a return on a richer experience for the viewer investment for sport. and essential fan data and potential revenue for the sports body. However, it is likely to be a decade or more before D2C becomes the Consequently, the number of D2C primary distribution method for premium OTT services in sport looks set to grow rights-holders. Further, this research exponentially in 2021 and beyond. suggests, the pivot could be a two-speed process, with the US leading the way The proportion of the hundreds of and following. clubs, leagues, federations, confederations, and private promoters Most of the rights-holders interviewed currently operating a D2C OTT service define their D2C platform as with rich content remains small. But complementary to broadcast coverage,

36 MediaKind 2021 Sports D2C Forecast

but all see it as an essential part of their monetization verticals – like betting, live sports distribution strategy. All the ticketing, and merchandising – on their rights-holders in this report provide live D2C service, reaching the engaged content, although not always exclusively. hardcore fans behind a paywall, or to the wider audiences on their main The type of content and degree of website. For the moment, this research exclusivity is determined by each sports shows, very few rights-holders are + body’s specific strategic objectives, embedding these features within their which are increasingly market-specific. D2C services. 10 D2C OTT platforms fulfill a range of these objectives. The two-way nature of internet Years delivery allows for a far richer and more They provide coverage in territories immersive experience for fans than is where there is no broadcast coverage. possible with linear broadcast coverage. It is likely to be As such, they become a valuable At the same time, it allows rights-holders a decade or alternative tool. They super-serve the to gather valuable insights into the more before hardcore fan who wants more than behavior of their fans. One interesting D2C becomes what’s on offer from linear broadcasters 50:50 split that emerged was between the primary and is prepared to pay for it. They provide rights-holders who embed a range of distribution method an outlet for archives and other content fan engagement tools in their service for premium that would not otherwise be seen. and those who use their D2C platform rights-holders They become a platform for governing purely as a content hub. The latter group bodies to promote youth and women’s focuses on high-quality video, ease of events, which otherwise would struggle navigation, and building an attractive Further, this research suggests, the pivot for visibility. user interface. could be a two-speed process, with the US Overall, they help sports bodies in For all the advances in internet the search for the Holy Grail: the leading the way and technology, increased broadband Europe following perfect blend of reach, engagement, penetration, and the strengthening of and revenue. the backbone infrastructure which supports OTT delivery, there is still The revenue possibilities are already concern among many rights-holders evident. Most rights-holders in this study about how a streaming service would make their D2C platform available as a stand up when faced with a high volume premium subscription service, and this of concurrent live streams. Nearly all is likely to be the dominant business those decision-makers interviewed in this model for D2C for years to come. study said the stability and scalability of Rights-holders with subscription a D2C platform were still fundamental. products offer a wide variety of pricing structures and entry points, but the heavy discounting of annual passes points to a clear need to generate guaranteed revenues in an environment where cancellations are made easy.

One dilemma for rights-holders looking to monetize their D2C platform is whether to integrate secondary

37 Methodology

The 40 rights-holders in this study The specific breakdown for each of represent the and EMEA these subsets of data was as follows: (Europe, Middle East, and Africa), representing about three-quarters of the Business model global value of the sports media market The following categories were identified: and where the vast bulk of D2C services subscription; free; free, ad-funded; and are concentrated. This selection provides free ‘companion’ service for subscribers perspectives from a wide range of different to other services. Subscription models sports and includes properties ranging from were then broken down further to include: major leagues to niche sports (in media annual subscriptions (one team/all teams); revenue terms). monthly subscriptions (one team/all teams); The research combines interviews with weekly subscriptions; daily or weekend senior executives from some of the rights- subscriptions; single event pay-per-view; holders analyzed with desk-based research and standalone archive subscriptions. conducted between May and October 2020. Access distribution Any interviews were provided on a How consumers can access the D2C confidential basis, so there is no attribution services was broken down into the following of any information to specific sources. categories: standalone mobile apps, available The quotes included are drawn from as a service within the official mobile app, these interviews and are not attributed standalone websites, and sub-domains of to specific individuals. the main website. The information collated on each D2C Pricing service covered the following: business model, access/distribution, pricing, content, Services were subdivided into those primarily fan engagement tools used, and other serving a US audience and those targeting monetization streams employed. Where a global audience. Prices for US-facing information is provided, which is specific services are those quoted in US Dollars. For to a rights-holder, such as details of pricing many of the global-facing services, prices or fan engagement tools, this information is can vary by market. In this report, the prices in the public domain. If the D2C service taken are those published in the UK on the is a subscription service, information is taken rights-holder’s website. from rights-holders’ promotional material and official channels (such as the Apple All prices are quoted in dollars. Conversions App Store, where a D2Cservice is available). from prices quoted in pounds sterling or were made on November 16, 2020. The rates used were: $1 = £0.74; $1 = €0.83.

MediaKind commissioned its advisors The Sports Playmaker to conduct the analysis for the MediaKind 2021 Sports D2C Forecast. The Sports Playmaker is an agency providing sales, marketing, consulting and investment services to companies delivering change to the sports industry through technology. 38 www.thesportsplaymaker.com MediaKind 2021 Sports D2C Forecast

Content The focus of this research was live content carried by all 40 rights-holders. This was divided into four categories: live, exclusive primary events; live, non- exclusive primary events; live exclusive secondary events; live events available only outside the main domestic market (where applicable). Primary events are those identified as being the most important competition or competitions offered by rights-holders.

Fan engagement tools The following categories were identified: VOD highlights round-ups; in-game, on-demand highlights; personalized data or content; split-screen/multi-game capability; different camera angle (to main feed) or choice of camera angle; live stats/data; fantasy/gaming applications; tracking technology; language options; comparison of stats of two competing players/drivers/athletes; AR/VR features, such as overlays and graphics; exclusive emojis and graphics; key moment alerts; cut-ins to other live games; live radio coverage; live audio from team communications; original programming.

Features were included only where they were found on the D2C service. Features were included where they were present on any version of the D2C service, whether mobile app only, website only, or premium version only. Features were included even if they were identified on a limited number of devices. Where they existed as part of an official website but were not specific to the D2C stream, they were omitted.

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