Sky

Premier League Football Rights – Addendum

Four months after the winners of the main TV packages for the 2019-2022 Premier League domestic football rights were announced, the final two packages have now finally been sold with Amazon and BT picking up the “remnants.”

First a reminder that previously Sky and BT essentially maintained the status quo in this rights period, while managing their costs. Cumulatively they were paying around £600m over three seasons less than they had previously, with the proviso that the final two packages remained unsold.

Why didn’t those two packages get sold first time around? Essentially, the Premier League’s reserve price was not met. That wasn’t surprising since the packages were poorly conceived, offering multiple matches on a single date meaning that one broadcaster couldn’t maximise the number of potential viewers. Yes, digital technology means that viewers can select what they watch – as we see during early rounds of European club competitions – but they offer a limited number of viewing opportunities.

While the packages haven’t been enormously tweaked since those reserves weren’t met, there is one noticeable change in the new format.

BT has bought Package G which is now 15 fixtures from two midweek fixture programmes, and five matches from the “split weekend.” The “split weekend” is a single weekend’s worth of fixtures spread over two consecutive weekends allowing for a short mid-winter break in upcoming seasons. In effect 10 teams will get a ‘bye’ one weekend, and the other teams the following weekend. That allows for the thick end of two weeks’ break for players of any given club. But it also means that viewers get football every weekend during the “break.”

BT’s five fixtures from that split weekend won’t be simultaneous, so they get a decent bite of the cherry with them. The other 15 fixtures are more complicated. Assuming that midweek fixtures are spread over two nights – Wednesday and Thursday – it means BT would be looking at 3-4 games per night during those midweek rounds. The issue here is that a viewer can really only watch one of those games, assuming the Premier League doesn’t start having kick-offs at 6pm as per the Europa League. Furthermore, some of those games will be ‘unattractive’ to mainstream viewers and therefore unlikely to have been TV picks previously.

BT is paying £90 for these 20 games – or £4.5m a game. That’s significantly down on the £9.2m a game it was paying for its other package. But it bolsters BT’s Premier League offering, enabling it to promote 52 rather than 32 fixtures, so it makes some sense.

Amazon is more complicated. I have not seen any reports on how much Amazon has spent, but it would surely be much less than the £90m BT is spending, since it has bought Package F, with games from one Bank Holiday and one midweek rond.

While the Bank Holiday games could be spread out into as many as four time periods – e.g. kick-offs at 12pm, 3pm 5:30pm and 8pm – a further six games from the round would be played simultaneously with other fixtures. And even the most die-hard fan is unlikely to stay glued to their sofas for four consecutive matches.

With the midweek round, it’s again hard to see how a viewer can see more than two fixtures – one on Tuesday and one on Wednesday. The remainder will need to be played simultaneously.

In both cases, some less glamorous games will be included, so the rights fee should be lower – in the £50-60m range I would guess. That leaves the Premier League with perhaps £450m less over three seasons than previously.

As I said previously, when I mused on Amazon buying rights, I could envisage a sales push from Amazon with something like: “Buy a Fire TV stick this Christmas and get free access to Boxing Day football – only with Amazon.”

But this is a marketing challenge for Amazon. They have games on only three dates within the season. So they’re going to have to spend a lot on advertising to reach viewers for such a short period.

The Premier League was desperate to get a digital player like Amazon on board, because since there’s no obvious competitor to Sky or BT right now, they need deep-pocketed global players like Amazon to come in and shake things up (aka spend even more cash!). But if Amazon bid for the bigger packages, they didn’t go high enough, and global operators like them or Facebook really want global rights. Given the value of Premier League football, it’s probably still a better business model for the league to sell rights on a territory by territory basis. Sum of the parts is worth more than an Amazon whole.

That may not remain the case forever, but aside from the prestige in owning the rights, there has to be a business model where it makes sense for Amazon or another digital giant to buy these rights. And I’ve struggled to find one. That said, Facebook did bid for Indian Premier League rights. They didn’t win, but those rights might make more sense since India is probably still a growth market for Facebook. Is there anyone left in the UK who might use Facebook that isn’t using it? (It’s true that post Cambridge Analytica, a bigger issue for Facebook in the future might be retention of some of those users.)

I’m certain that next time around, we’ll get a different set of TV packages that makes more sense to more broadcasters and digital operators. I’ve argued all the way along that these were badly formulated and indeed were a misreading on the Premier League’s behalf.

I will be interested to see who gets mobile goal flash digital rights since those are yet to be allocated and might indeed be of value to a new player.

The Premier League probably looks jealously at the way the NFL can sell the same rights to multiple platforms. For example, Thursday night games next season will air on Fox TV, the NFL’s own NFL Network (which gets cross promotional branding on Fox), and Amazon who have renewed a previous deal. Now Amazon is reported to have spent perhaps $50m for the 2017 rights, so pocket change in the scheme of things, but it’s amazing that the NFL can sell the same games multiple times.

The NFL also repackages other games that it has “already sold.” While Sunday afternoon rights holders like CBS and Fox cover games in multiple territories, adhering to complicated rules about which fixtures have to be covered in which “local” market, nearly all the games are available to subscribers of DirecTV’s Sunday Ticket package. DirecTV obviously pays healthily for these rights – as do its subscribers.

Beyond that, NFL Network also offers Redzone (viewable in the UK on Sky Sports), which is ad-free coverage of all the afternoon’s fixtures, hopping from game to game as teams get closer to scoring. While the NFL owns NFL Network itself, it’s still effectively redirecting some viewers away from networks like CBS and Fox to its own network, where viewers are not exposed to those networks’ ads!

In some ways it’s remarkable that the NFL is able to do this, but American football is an in-demand product, and networks need it on their schedules. I’m sure that the Premier League would love to do something similar.

Bulletproof

Oh dear. Sky One’s big new glossy action drama is pretty awful.

Before I explain why, I will admit that I’m not the target audience for this show. But nevertheless, this show is just all over the place.

Bulletproof is trying to be a 2018-vintage action cop show set in London. Imagine The Sweeney or The Professionals, mixed with the buddy-cop smart dialogue of films like Lethal Weapon or Bad Boys.

You’ve got Ashley Walters and Noel Clarke as the two bodies, their hard nosed boss, their girlfriends and their co-workers. Then you’ve got the baddies in the first episode, some Slavic car thieves (Gone in 60 Seconds?), who are tooled up to the max. Walters and Clarke and co-creators with Nick Love (The Football Factory, The Sweeney (2012)).

From the opening credit sequence, which has big bold graphics, and lots of shots of our heroes in full action mode as if from a 1980s TV show, we know exactly where we are. Or do we?

Very early on, an informer gets murdered in front of them (with some slightly dodgy CGI), and they’re on the tail of the car thieves, starting with a car chase. It’s not entirely clear why heavily armed bad guys would run over an informant right in front of the police, when they could quietly murder her at their own convenience some other time, but let’s not get bogged down with such details right now.

There are, however, instantly massive problems with the script.

The buddy-buddy side of things runs throughout, but having seen a character horrifically murdered in the first few minutes, nobody really seems to care about her much, given everyone gets sidetracked with other japes and tomfoolery. Then someone remembers that they have to catch the criminals because of the senseless murder.

Noel Clarke’s character in particular seems to be the most useless policeman in the Met. He suspects his girlfriend of cheating on him, and rather than paying attention on a stakeout, he broods over who he thinks the culprit is.

Having crashed their car in the chase – well, set off the airbags anyway – they have to get a lift home, and to win over their uniformed colleagues, Clarke’s character says, “Keys, plod,” to the first uniformed official he meets. Yes – I bet that goes down well in the station.

Later, he inadvertently shoots a colleague in the shoulder during another chase. But no worries, he’s soon drinking and joking with Walters at takeaway van somewhere. Only later does he discover that the bullet just missed a major artery. Phew. Especially as they’d disobeyed orders to take on the villains rather than waiting for backup.

Their colleagues actually get captured by the bad guys since they stupidly joined a case conference via a video link while they were staking out the bad guys. I’d have thought that standard procedure when hidden in the bushes is not to distract yourself with Skypeing your colleagues.

And needless to say that Clarke and Walters, when not practising on the gun range, walk around their Met office with their guns in shoulder holsters all the time, because that’s what American cops do. None of this signing them in and out of the armoury for them.

Look, I get what this is trying to be. A big action series with characters who appeal to a younger and more diverse audience. We’re not supposed to take it seriously.

But the tone is just all wrong.

Clarke’s character is miserable throughout, except when he’s on the phone trying to sort out whether to get free-range chicken for their family meal or not. So those scenes jar, even though they feature Clarke Peters no less. The handbrake turns in mood are just wrong. You have to go one way or another. You can have stupid silliness – all the villains having sub machine guns, even though they’re just loading cars onto a container ship – but you have to do that all the way through. The relationship elements just get in the way and feels wrong – particularly as we’re straight into a failing relationship. Don’t overload the episode with backstory – we can learn more about the tricky relationships as we go, not the whole hog in episode one. And especially, only once we know that they’re good at what they do, can we start to emote with them, when their flaws are revealed. In a US series, you know that this would bookend the episode, and not get placed into the middle of the episode.

Mostly importantly, to root for our heroes, we need to see proof early on that these are good cops who are great at their job. Instead, we quickly find out that one of them doesn’t like high speed car chases even though we’re going to get a lot of them in this series. This is a curious characterisation to give one of the leads in an action series anyway. The joke is going to wear thin very quickly.

Why not introduce the characters being really good at their jobs by way of introductions. Sure, it’s a little hackneyed, but it gives you action up front, and shows the viewers that these are good cops who can do the job brilliantly. Coming away from episode one, we more have the feeling that they are utterly useless at what they do, getting their informant killed, their colleagues kidnapped and then shot, ignoring orders and generally endangering the public at large!

The action sequences are fine, although they don’t feel as expensive as they want to feel. Just because you have a drone, it doesn’t make things look automatically glossy. Cars don’t crash during chases – they just end up with a loose boot and deployed airbags.

And although this is firmly set in Laaandaaaan, it seems to have been mostly filmed in Liverpool. Which explains why the locations feel a little off. The Sweeney and The Professionals were firmly shot where they were set. Again, that feels like a bit of cost-saving going on.

First episodes are hard – you have to set up the characters and give us enough of a story to get us hooked, but this missed the goal by a mile.

Big action series aren’t trivial to make. The same channel that showed this also showed A Touch of Cloth. We know the tropes of action series and the police procedural. We’ve seen Hot Fuzz. But most of all, the tone of the world we’re in needs to be consistent, and there simply isn’t the lightness of touch that a series like this needs.

On Sky Q, Netflix and BARB

Note: This is a subject likely to be of even more niche interest than many of my other blogs here. You have been warned!

Yesterday Sky announced that it had reached agreement with Netflix to add Netflix to their Sky Q platform. What this means is that Netflix programmes will appear within the wider Sky Q ecosystem. It means that individual programmes will be promoted without necessarily having to dive into a Netflix “app” as you would on many TV platforms.

On Twitter this raised a few questions: Sky’s on BARB, so might we see ratings for Netflix in due course? Does this mean that Sky will know what their customers are watching on Netflix?

The first thing to say is that this Sky deal isn’t unique. On Amazon’s Fire TV platform, for example, individual Netflix programmes are recommended alongside Amazon’s own shows. You can dive straight into an episode of Stranger Things if you want to (and have obviously previously logged into your Netflix account). And that probably means that Amazon has some idea of what programmes their customers are watching.

I’ve no doubt that the carriage agreement between Netflix and Amazon stipulates that data can’t be shared, since as we all know, Netflix doesn’t publish ratings figures. But Amazon probably has some view on that. Of course, it’s only a partial view since there are a multiplicity of ways to get Netflix on your TV, from built in Smart TV apps, to games consoles, Chromecast, Apple TV and many others. But you know, if you have a big enough sample… I’ll return to samples later.

It’s worth noting that a multiplicity of companies potentially have some kind of awareness of how Netflix is performing. Netflix has a complex Content Delivery Network (CDN) globally to ensure that you get what you want when you want it and where you want it. More importantly, some larger Internet Service Providers (ISPs) are part of Netflix’s Open Connect network. In other words, the ISPs cache Netflix’s programming locally on their own data servers, speeding up delivery time to viewers, but also saving the ISPs money in terms of connectivity with the wider internet. Both the CDNs and ISPs have the potential to understand in great detail what is being consumed (albeit there may be encryption and obfuscation to limit or prevent this).

One thing that Netflix being on Sky doesn’t mean is that there will be BARB data. Recall that Netflix is already on other TV platforms such as Virgin Media. It’s also worth noting that even if all parties wanted to, BARB isn’t really set-up to provide meaningful data at this granularity, and that’s to do with sample sizes.

There are about 26m TV households in the UK, each of which has one or more people. BARB is the UK TV ratings organisation and it recruits a panel of households that provide detailed viewer data which is used to determine overall ratings. There are roughly 5,100 BARB households, with each BARB household representing around 5,000 other households.

That’s a decent sample; it’s large enough to provide robust data on programmes across the larger TV networks. (Things do get a bit more complex with smaller channels, and I’m always wary of anyone telling you how few people watched a show on a minority interest channel, since the sample doesn’t really cater for it). BARB has to work across each TV region, since advertising is sold on a regional basis.

But back to samples, and specifically Sky Q. How many Sky Q households are there in the UK?

In late January, Sky’s results for the six months until 31 December 2017 revealed that there are now 2m Sky Q homes in the UK and Ireland. BARB only measures UK TV viewing, but we’ll use 2m as a working number, alongside 26m TV homes. BARB needs to make sure that it’s panel is reflective of how people actually watch TV – the right number of Freeview, Sky Q, Sky+, Freesat, Virgin Media homes and so on.

Sky’s figures suggest that 7.7% of UK homes, roughly, have Sky Q. If that’s replicated in BARB’s 5,100 panel, then we’re talking about 392 BARB households with Sky Q.

In a paper published in January 2018, BARB says that 7.5m homes have Netflix subscriptions in the UK, or 22% of homes (This is based on a large survey that BARB conducts called the BARB Establishment Survey. It’s used to ensure that BARB knows properly how the UK public is watching TV and video).

As things stand then, assuming that Netflix subscribers are spread evenly across all TV platforms (a massive “if”), then we need to further reduce our sample to find Sky Q homes who currently have Netflix. It seems likely that current subscribers would be able to link their accounts to the Sky Q platform, and of course Sky and Netflix would like to see subscriber growth coming from those homes.

Let’s be generous and assume that instead of 22% of Sky Q homes having Netflix, it’s likelier to be closer to 50%, based on the greater disposable incomes of those households and them likelier to be earlier adopters. That means our sample is down to 196 homes. And that’s a very small sample to start trying to model what those households are watching on the Netflix platform.

This is all moot anyway, since unless Netflix changes tack radically, they don’t need to join ratings bodies like BARB. They’re not an advertising led business (the reason commercial services need BARB), and they know precisely how much their shows were streamed.

These digital providers are rolling big dice. Netflix says that it will spend close to $8bn on programming this year. Amazon is expected to spend $5bn. Facebook and Apple have promised to spend big too.

Recode has an interesting chart that puts 2017 spends in context.

But we probably need to contextualise that a little because Netflix and Amazon are spending globally, while many of the other players on this chart are predominantly US companies with relatively little ex-US programme spending.

I’m not sure where any of this gets us except that these digital streaming platforms are going to be everywhere even more, and we’ll probably never get a clear picture of how popular much of their programming really is.

Premier League TV Rights – 2019-2022

The new Premier League TV rights auction for the UK has just got under way, with bids due in at the end of January, and the results announced in early February. Such are the scale of these rights now, that the announcement tends to be made to accommodate the stock market. If a PLC is spending several billion pounds on something, this is “of note.”

Where do we stand, and where are we likely to go?

At first glance, there really doesn’t feel like an enormous growth left in the UK market. Last time around, the value of UK live rights rose a colossal 70%, from £3bn to £5.1bn!

This increase in cost didn’t come without consequences. Subscribers to both Sky and BT have seen increases in their subscriptions, while Sky in particular (who’s packages increase the most in value), has cut costs elsewhere, reducing some coverage – notably tennis.

But different players have different needs from Premier League football.

Sky

As the bid from 21st Century Fox for complete ownership of Sky continues to navigate regulatory hurdles, Rupert Murdoch himself is selling out to Disney. While the Disney deal itself will need to overcome any US regulatory concerns, the general feeling is that it will get through unscathed (While it shouldn’t involve the US President, Trump is reportedly more concerned about the future of Fox News than anything else, and Murdoch keeps ownership of that). Meanwhile, the prospect of Sky News being a Disney property rather than a 100% Murdoch owned, is probably more palatable to more people. The separation organisationally from the unsavoury practices at Fox News is probably helpful too. There perhaps remains a question of when the various deals go through, so that waving the Sky deal through before the details of the Disney deal have been finalised might be problematic.

But returning to the Premier League, for Sky the rights are an important – not to say critical – part of its overall offering. Sports also remain an important part of Disney’s offering.

ESPN has for many years been a substantial revenue generator, but of late it has began to suffer. So-called “cable cutters” don’t all want ESPN. It had been regularly bundled into all basic cable offerings, taking a substantial share of a household’s monthly cable bill, regardless of whether that household actually wanted to watch sport. As such, it became a cash cow. That’s still the case, but as younger subscribers choose their digital offerings in a piecemeal way – Netflix here, HBO Now there – ESPN was beginning to miss out. It was losing overall subscribers, and has of late announced a series of redundancies to cut costs.

In part to bolster that, Disney has picked up Fox’s regional sports networks as part of the Fox acquisition, qne they provide very solid ratings revenues.

The problem with all sports for broadcasters is that in large part, they are not actually owned by the networks. Every few years, the rights are put out to tender, and the rights owners tend to expect big increases.

That extends from the Premier League to the NFL, the IOC, the ICC, the NBA and so on. Sport has become disproportionately important because for the most part, the value is in live rights, and an audience that advertisers love being unable to skip the built-in advertising.

Sky needs the Premier League, and it has to pull out all the stops to maintain the crown jewels of the packages offered. But at some level there will be a red line beyond which it doesn’t make sense to bid.

BT

BT is in a slightly different position, as it built its TV offering as much as anything to support its broadband proposition. This has developed further when BT trumped Sky to buy Champions’ League and Europa League rights. Unlike previous minority rights holders of Premier League football, BT was clearly a serious player with serious cash available. By offering sport initially free, and later at a discount to its broadband customers, it was able to stem the flow to other broadband providers.

In TV terms, BT does still feels like a smaller player in the wider marketplace.

There may be a slight shift at BT now, as it develops a stronger TV offering built around IP delivery, but the company is really in the business of running wires and cables into your home.

Sky and BT Making Up

Interestingly, Sky and BT have recently reached an agreement to properly wholesale their packages to each others’ customers. While BT Sport has been available to Sky customers since launch, viewers had to deal separately with BT to view the channel on their Sky box. The new agreement will make it easier for Sky customers to add BT Sport to their existing Sky package, buying it directly through Sky. In return, BT will make available Sky’s Now TV offer via its own BT TV platform. That effectively provides a mechanism for BT to offer the full range of Sky Sports channels through its platform.

Commentators have suggested that the pair have reached this agreement in part to mitigate the chances of the pair outbidding one another in the upcoming auction. While I doubt they’d collude (which may be illegal anyway), it’s likely that the status quo would suit both parties just fine. The pair do potentially face some opposition however…

Sidenote: One curious consequence of the Disney takeover of Fox (and in turn Sky), is that BT currently has a deal with ESPN for much of its US sports programming. In essence this leaves Disney with at least a small foot in both camps.

The Packages

Note: This is based on published information. Precise details of first picks is likely to appear in the tender documents which aren’t ordinarily made publicly available.

Under this contract, we will be up from 168 matches to 200 of the 380 total Premier League fixtures being broadcast live on UK TV.

Previously, there were five packages of 28 games, and two packages of 14 games. BT won the rights to 28 Saturday 1730 fixtures, as well as a further 6 midweek matches and 8 Saturday matches. Sky won all the remaining fixtures.

This time around the seven packages are built somewhat differently, with Saturday evening primetime being added into the mix, as well as some intriguing midweek packages.

2019-2022 Packages
Package A: 32 matches on Saturdays at 12:30
Package B: 32 matches on Saturdays at 17:30
Package C: 24 matches on Sundays at 14:00 and eight matches on Saturdays at 19:45
Package D: 32 matches on Sundays at 16:30
Package E: 24 matches on Mondays at 20:00 or Fridays at 19:30/20:00 and eight matches on Sundays at 14:00
Package F: 20 matches from one Bank Holiday and one midweek fixture programme
Package G: 20 matches from two midweek fixture programmes

Packages A and B are the same as before, but increase from 28 to 32 games. Package C had previously been exclusively 2pm fixtures, but now has eight primetime Saturday night games.

Package D tends to be the most valuable package, in the past containing the majority of first picks (in other words, broadcasters can put the biggest matches in this slot, other considerations such as police advice notwithstanding).

Package E now gets some 14:00 Sunday games as well as Monday and Friday night football.

But, beyond an overall increase in fixtures and the Saturday night slot opening up, it’s packages E and F that see the biggest changes. Previously these were a mix of mid-week and Bank Holiday fixtures throughout the season. But under this auction they will account for four individual programmes. For example, when there’s a full midweek fixture list, all games are usually played on a Tuesday and Wednesday. But by offering rights to all these games in a given week, any one viewer can only really watch two of them, since multiple games take place simultaneously. So while there are 40 games in total across the two packages, there are potentially only 8 opportunities for a viewer to watch a game, with the other 32 happening during one of those 8 timeslots

So while it’s technically innovative, you wouldn’t expect this package to go for a vast amount of money compared with the others. It’s fewer games than other packages for starters. But it also seems squarely aimed at getting streaming services involved.

Both Sky and BT would be able to offer this choice – they both did or do similar things with Champions’ League group stages. But a decent number of the games are not fixtures a broadcaster might ordinarily choose to televise – think of those matches towards the end of an average edition of Match of the Day.

But if this is aimed at getting digital players involved, it would seem to require an awful lot of marketing for just 8 opportunities to watch on as few as 7 individual days.

The Premier League can only really show all its fixtures in midweek slots because there’s a blackout during Saturdays at 3pm to support the wider football world. But I wonder whether by 2022, we’ll see every Premier League game played outside the 3pm Saturday window? That would enable all matches to be shown live, and perhaps a 2pm Sunday slot having the majority of fixtures.

Potential New Entrants

A bit like the broadcasters, different digital groups have different reasons to use video. Are they looking to increase dwell time on their services, are they looking to grow their user numbers, or are they looking for something else altogether?

Sport isn’t out the question with streaming services, bringing with it loyal fans. But it also brings issues with having a robust technical backbone, and excludes those who don’t have solid broadband.

Furthermore, only UK rights are being sold. While the UK remains an important market for most of the big players, being able to offer streaming to multiple territories is preferable to global operators. The Premier League, of course, sees greater value in selling international rights in different territories to different operators rather than bundle them all together.

What is certain is that the Premier League is desperate for one or more of these companies to enter the market. If Sky and BT would be prepared to stick with the status quo and only offer modest increases in their bids compared with last time, it would take a third party entering to push bids upwards. The only possible existing TV group who might be persuaded would be Discovery via its Eurosport channel. But it’s just not clear that the rights make sense for that brand. While Discovery has spent big on the Olympics, it doesn’t have much of a UK footprint at all in football beyond various secondary UEFA and FIFA competitions.

Facebook

Facebook notably did bid for Indian Premier League cricket rights for a large number of territories, but the deal the IPL eventually did with Star India (also being sold to Disney as part of the Fox deal) included global streaming rights, so they lost out.

You wouldn’t count out Facebook from bidding for Premier League football, but the challenge for them is that these are UK rights. While Premier League football potentially offers increased dwell time on the platform, assuming that the games are broadcast free to viewers, there’s relatively little in it for Facebook in terms of gaining new subscribers.

However Facebook is investing in premium video, and they have money to burn, so a bid isn’t out of the question.

Google/YouTube

YouTube has bought sports rights in the past – cricket immediately springs to mind. Google is constantly evolving its offerings, with a rumoured reversioning of its music offering in both audio and video terms, due to be launched soon.

As with Facebook, Google doesn’t face any problems in being able to afford rights, but it’s not clear what it really gains for them. YouTube is already phenomenally successful, and Google’s reach is nearly complete.

Again, that doesn’t mean that they wouldn’t bid, it’s not entirely clear why they would.

Apple

Apple is also making a play to develop a premium video offering, but it hasn’t as yet entered the sports arena. It’s platform is much less developed in the UK, and if made available exclusively via Apple apps or devices, any bid would curtail audiences a bit.

It seems much less likely that Apple would bid compared with other digital players.

Amazon

Amazon may be interested. Their model is slightly different, and they’ve not yet achieved the prestige in the video marketplace that others have. They’re certainly jealous that Netflix has developed stronger video brands than they have. The recent acquisition of The Lord of the Rings rights shows their ambition in this area – spending $250m on the rights alone to make a series, before they spend a single cent on production.

Notably they have now bought a range of tennis rights, outbidding Sky for the men’s ATP tour rights, as well as buying US Open rights. However we should be careful here. The entire ATP rights package cost Amazon less than Sky pays for a single Premier League fixture.

Tennis feels like a toe in the water for Amazon. They also stream Thursday night NFL games – something Twitter did previously, but outside the US you may not have noticed (games happen after 1am local time in the UK, and 2am in central Europe). It should also be remembered that Thursday night NFL is the least valuable package, and Amazon shares the rights with CBS and NBC in broadcast.

Amazon certainly has the technology to offer streaming, both via its Amazon Prime Video platform, as well as Twitch, potentially allowing it to reach a younger audience.

As such, it feels the likeliest bidder of all the digital platforms, even if the strange nature of packages F and G don’t really seem to make sense for anybody.

Twitter

Twitter has played with live streaming, offering everything from an alternative election night programme with Buzzfeed, to eSports and, as mentioned above, some NFL games last season.

Of all the digital players, it feels like Twitter perhaps has the most to gain in terms of getting new sign-ups from something like this. However it’s not trivial to get Twitter video onto your TV set.

As a company, Twitter is a scale lower than other digital businesses (see also Snapchat, who I’ve not even considered here), and so cost may be an issue.

Netflix

This feels to be the least likely digital bidder. Their business has not been built on sport, and as mentioned above, the real problem with sport is its lack of repeat-ability. If you’re paying £10m+ for a property, then they want to sweat that asset over a number of years. The value of a live match is a one-time thing, and really doesn’t seem to fit their model.

Outcome

We’ll find out the answers to all these questions in a couple of months’ time. Would the Premier League leave Sky and/or BT without games or a severely reduced offering? If the money was right, then yes. How would pubs show games “broadcast” on Twitter? Someone’s phone hooked up to a TV set?

Just because these businesses have the cash, it doesn’t mean that it makes sense for them to bid for rights. There has to be a reason. It might be adding value to a wider package such as Amazon Prime; it might be growing the number of users, or increasing a site’s dwell time. But many of these services are doing quite nicely already.

I can’t see BT and Sky increasing their bids at anything near the level they’ve previously managed. The value just isn’t there. Sky has managed to diversify its offering with originals and exclusive deals with providers like HBO. Renewing that HBO deal feels almost as important as doing another Premier League deal.

In the end, it’s probably best not to second guess these things too much. All will become clearer in February when consumers will discover just how many subscriptions they need to get the full range of Premier League football on television.

Facebook, Amazon and the Premier League

It’s nearly time for the money-go-round… sorry, merry-go-round, that is the Premier League rights auction for seasons 2019/20-2021/22. We’ve just started the second season of the current deal where Sky and BT between them have spent £5.1bn for the current round of rights. Recall that last time around, this represented a colossal 71% increase in revenues.

That money, allied with ever-increasing overseas TV rights, fuels the UK game. But there were questions about how much further rights could increase next time around. Sky and BT represent the only “broadcasters” who are likely to bid next time around, and assuming that each is broadly happy with its lot, you wouldn’t expect rights to increase substantially.

Indeed, it seems as though the current set of rights have caused some real pain to the broadcasters. Sky has broadly speaking cut back its sports coverage, losing men’s tennis, and reducing rugby union coverage. Anecdotally, it seems that more coverage is coming from Sky’s studios rather than sending production teams to events.

One way or another, Sky has tried to avoid massive increases to consumers, although prices are going up.

So if Sky and BT are fairly maxed out, how do Premier League clubs get some big increases next time around?

Today The Guardian reports that Manchester United vice-chairman Ed Woodward says that Amazon and Facebook will get into the game.

As far as everyone is concerned, these companies bring untold wealth. They could be game-changers – pardon the pun.

Well of course Woodward would say that. And I’m sure that Amazon, Facebook, Google and Apple will run the numbers. But at over £10m a match under the current contract, they’d need a compelling case. With the possible exception of The Crown, that blows all top TV dramas out of the water in terms of costs.

A lot has been made of Amazon taking on ATP Men’s Tennis in the UK from next year. They’re paying around £10m – the same price as a single Premier League match – for a year’s worth of tennis. Sky is said to have wanted to pay less than last time around, so it was to all intents and purposes giving up on the sport. They’d already dropped their US Open coverage.

For Amazon, tennis is a bit of a trial. Perhaps it’ll get them new Prime memberships, or make current members happier. But it’s not a massive cost. It’s not a multi-billion, multi-year commitment.

That’s not to say that one of GAFA won’t buy rights, but that’s a much bigger step. And what does that really get you?

All of this is before considering whether every football-loving household in the UK has enough internet bandwidth to support a live HD (or 4K) stream.

I could be wrong. But I’m not convinced just yet.

Free to Air Cricket

Today brings some interesting news, with the ECB actually allowing some free-to-air cricket on TV screens in the future. The BBC has done a deal to see the return of cricket to its channels for the first time since 1999.

You will recall that in 1998, Channel 4 secured the rights to most international cricket, notably including Test cricket. One Test was aired on Sky, who until that point had made do with smaller competitions and notably overseas tours.

In many respects Channel 4 really improved TV coverage, and despite some awkward business of trying to show both cricket and Channel 4 Racing on the same afternoons (with Film 4 often being used as an overspill channel), they were very successful.

In its final season Channel 4 saw a peak audience of over 7m watch England win the 2005 Ashes. Thousands turned out for an open-top bus parade that ended in Trafalgar Square.

Cricket was on top.

And then, for the most part, it disappeared from our screens. Sky had outbid Channel 4 for exclusive coverage of all domestic cricket. The ECB had taken Sky’s cash ahead of any interest in keeping the game alive.

The ECB continued to work exclusively with Sky renewing deals right through until 2019.

The only free-to-air cricket that appeared on our screens were Channel 5’s highlights packages and some IPL cricket on ITV4 (Which has since also moved to Sky). There’d be an occasional tourist game against Scotland on the red button but that was it.

Earlier this year, the BBC did show highlights of the ICC Trophy, and we have also seen some in-game digital clips appear on the BBC website. But for live cricket, you “only” had the unparalleled Test Match Special.

In the meantime participation in cricket had fallen, and most counties were now propped up financially by the ECB.

T20 had come along, and while the riches of the Indian Premier League might seem impossible to replicate in Britain, the success of Australia’s Big Bash seemed distinctly replicable.

That tournament runs for 35 nights in a row on free-to-air Channel Ten, garnering significant audiences for its city-based franchise structure. (It should be noted that Channel Ten is suffering severe financial pressures currently, and either rival Channel Nine will win the rights next time around, or some of the games may go subscription only).

So the ECB has now conjoured up a city-based franchise format, meaning that some big counties will miss out and need to be paid off. That also means that the new format will be in addition to the existing T20 Blast series which will continue to be competed at county level.

And then of course there are the existing four day County Championship games as well as one day competitions, all of which need to be squeezed into the cricket season.

Add into the mix central contracts, extended period of Big Bash, IPL, one-day internationals, T20 internationals and Tests, all of this means that big names are rarely seen in their “home” counties.

Still, that’s the mess of contemporary cricket.

Which all brings us to today’s news that the BBC has done a deal for cricket with the ECB. It doesn’t start until 2020, because Sky still has exclusivity until 2019. But the BBC will be showing:

  • Two England men’s home T20s (of a total of 4-6?)
  • One England women’s home T20
  • 10 matches from the domestic men’s T20 city-based franchise series, including the final (out of a total of 36 matches, all of which will be on Sky)
  • Up to 8 matchs from the women’s T20 city-based franchise series including the final
  • Highlights of home Tests, One Day Internationals and T20 Internationals
  • Highlights of women’s internationals
  • Digital clips of men and women’s internationals, plus County Championship, One-Day Cup and T20 matches
  • Test Match Special wins radio rights to all competitions through until 2024

So the live coverage will exclusively be T20 formats, with other competitions receiving highlights treatment.

Sky has regained rights to everything else, including exclusive live coverage of home Tests. BT Sport, which is thought to have bid, has not come away with any rights. Notably, it has bought rights to Australian cricket meaning that it will be the exclusive rights holder to the Ashes Tour this winter (assuming the massive pay dispute there is sorted out).

In total, the deal is said to be worth £1.1bn over five years – quite a jump from previous deals, with Sky’s last deal £260m over four years, and then extended a further two. That said, there wasn’t significant growth over the last two deals. This all suggests Sky sees a great opportunity in the new T20 competition.

Still, this all goes to show that getting eyeballs in front of your sport is essential if you want to see any significant growth in it. And perhaps other sports will learn from this.

The ECB has learnt the hard way.

Sky Sports Revamp

Sky Sports is reportedly getting a bit of a makeover, losing the numbered channels currently known as Sky Sports 1-5, and instead gaining sports-specific channels.

Currently the channels are roughly being used as follows:

Sky Sports 1 – Football
Sky Sports 2 – Cricket, Rugby, Football
Sky Sports 3 – Football, Tennis
Sky Sports 4 – Golf
Sky Sports 5 – Football
Sky Sports News
Sky Sports F1 – F1
Sky Sports Mix – (Available on cheaper non-sports Sky tiers) Simulcast of one of the above, Dutch/Spanish Football or smaller sports like Netball, Drone Flying etc.

It sounds like this list is going to be rationalised into:

Sky Sports Football 1/Premier League
Sky Sports Football 2/Football League/Spanish etc.
Sky Sports Cricket
Sky Sports Golf
Sky Sports Arena (Including Rugby and Tennis)
Sky Sports F1
Sky Sports News
Sky Sports Mix (Assuming this continues)

In some respects, this simplifies things a little. It seems that what Sky wants to be able to do is offer a cheaper entry to its sports packages. Recall that BT Sport retail its sports offerings from as little as £5 a month for a streaming package, and £7.50 for those with Sky (and a BT Broadband internet connection).

Currently the cheapest way of getting Sky Sports on TV is £49.50 a month (based on taking the cheapest Sky Original Bundle before adding the full Sky Sports pack to it, with Sky only offering packages with their new Sky Q box). According to The Guardian, this will allow Sky to charge £18 for its cheapest partial sports offering.

But I do foresee a few problems with this plan.

First of all, it seems likely that the cheapest offering will not be football, rights costs for which have shot up. I would anticipate that either cricket or golf will be the cheapest offerings.

Then there’s the issue of sustaining full channels of some of these sports around the clock year long. Sky Sports F1 is something of a joke outside the season, and is largely filled with filler outside of race weekends. Quite why it didn’t become a broader motor-sport channel has never been obvious to me.

You also have the issue of major sports that don’t fit in. What about Rugby League or NFL, both of which have significant followings and carriage deals with Sky.

But more to the point, as someone who takes the full Sky Sports package, I would love to pay less and drop sports I’m not interested in. Namely Sky Sports Golf and the misery that is Sky Sports F1 (Seriously, why would I pay to hear Martin Brundle?).

At time of writing, it’s not clear when these new packages will go live, and I’ve not seen the price breakdowns across the different packages.

There’s also the not insignificant matter of third parties who currently get Sky Sports 1 and 2 on a wholesale basis. Although formal “must-offer” conditions have previously been removed, Ofcom has said that it would take a keen interest in any move that removed Premier League football from other platforms.

It would seem like that Sky would continue to retail football. But nearly all Sky’s major sport appears on those Sky Sports 1 and 2 currently – so even if golf usually finds its home on Sky Sports 4, it gets a bump up during, say, The Masters or the Ryder Cup. Lions rugby is on Sky Sports 1 right now, and next week England’s Test series against South Africa will start on Sky Sports 2.

While the Premier League channel might be one, what would the second be? At the moment, if I subscribe to, say, Sky Sports on BT TV, I can watch Premier League football, Test cricket and Lions rugby. What happens in the future? The easy answer would be for Sky to allow its channels to be retailed more fully on other platforms. (I did also wonder if the recent news about Sky and Virgin sharing Sky’s targeted advertising technology might mean that Sky Atlantic was made available to Virgin Media homes?). But we shall have to wait and see.

With the Fox takeover of Sky still in the balance following yesterday’s news that it’s being referred to the competition authorities, it will be interesting to see how Sky plays this.

BT/UEFA Rights Deal

08 March 2009

Last week, BT Chief Executive Gavin Patterson was reported as saying that “rampant inflation in sports rights” had to end.

Today we learn that BT is going to pay £394m a season for UEFA Champions’ League and Europa League rights from the 2018/19 season, up from £299m a season under the previous agreement.

By my calculation, that’s a 31.8% increase over three years.

What was that about “rampant inflation” again?

BT’s new deal also includes all rights to highlights, meaning that there won’t be any TV highlights on ITV. Instead, BT will share free highlights in social media.

Hmm.

And of course UEFA is going to an 1800/2000 GMT/BST structure on Champions’ League match days, meaning lots of UK residents will still be at work or commuting while matches are taking place, as already happens with the Europa League. Oh good.

Prior to this deal being announced there had been lots of rumours in the press that UEFA advertisers were unhappy with the loss of free-to-air coverage.

One estimate suggests that being a tier one partner of the Champions’ League costs $70m. There are eight main sponsors of the Champions’ League (Heineken, Mastercard, Gazprom, Sony, Nissan, PepsiCo, Adidas and Unicredit), and if we assume that they all pay the same, that’s $560m a year in sponsorship revenue (Approx £460m).

UEFA’s calculation is that £100m more for UK rights is worth it, set against £460m of pan-European sponsorship revenues, and any reduced reach for those advertisers within the UK market for their premier competition.

This feels like a very short-term deal.

There is a quote in BT’s press release that says:

BT will enhance its social media coverage to reach new audiences, by making clips, weekly highlights, UEFA’s magazine show, and both finals available for free on social media. BT streamed both finals last year on YouTube for the first time, taking the number of people who watched BT’s live coverage of the finals to more than twelve million. The company will also seek to bring the best of the action to its large mobile customer base.

That suggests that only the final will be made available free. Everything else will be behind a BT paywall. No BT Showcase any more. There’s the possibility of BT sub-licencing some matches to another channel, but absolutely no guarantee they will.

I’ve examined the 12m number before, and it is to be regarded very carefully indeed. First of all 12m is not 12m different people – it’s the sum of the Champions’ League audience and Europa League audience. Football fans being who they are, that’s a lot of the same people who watched both matches.

And as I mentioned in the previous article, BT is using “reach” rather than the more usual “average audience” to get as big a number as they can. Last week 3.45m watched a one-sided FA Cup replay between Man City and Huddersfield. 3.45m means that at an average of 3.45m watched the entire broadcast from 1930-2200. Audiences aren’t constant, and once Man City were well ahead, audiences drifted away to other programmes. Other people turn on late and perhaps watch the last half an hour. Overall, at any given point in the entire match 3.45m were watching. But BT is using a reach number – the number of different people who watched any of the game. This is necessarily bigger. And it’s not a number that would normally be bandied around by a broadcaster when talking about viewership of their shows.

Finally, without a great deal more information we can’t be sure what the 3m YouTube component of the audience really means. First of all, the Champions’ League final had 1.8m views, meaning the Europa League must have had about 1.2m. YouTube registers a view when someone watches as little 30 seconds. So this almost certainly doesn’t mean 1.8m or 1.2m watched the entire match. And again, many of the same fans will have watched both matches.

Digging into BT’s YouTube channel doesn’t seem to surface the complete live videos any longer. There are just highlights packages. There are a couple of short videos with several hundred thousand views each, and it’s not clear if these were once the live streams (I suspect they may have been), or just incredibly popular promo videos, but either way, we need to be careful what we’re counting. Interestingly, the CL promo has around 470,000 views while the Europa League promo has over 600,000 views. If they were the live streams, then that doesn’t total 3m.

To be fair to BT for one moment, a single YouTube view does not equal a single viewer. Many will have been streaming to smart TVs with sizeable numbers potentially watching. But online video views can be a murky business, and the methodology is completely different to the BARB measurement for TV, meaning combined audiences figures should be treated with tremendous caution.

I suppose in the end, I find it incredibly disappointing that either a single match isn’t made available to ITV, C4 or C5, and that highlights are removed from TV altogether. Saying that you’ll make highlights available in social media is a nice addition, but shouldn’t replace a broadcast channel. Many older viewers in particular will struggle to see footage now. It’s the elderly and poorest in society who don’t have access to the internet for streaming and the devices necessary to enable them.

UEFA clearly doesn’t care about those viewers. BT will pay more for complete exclusivity, which they now have. And if you either can’t afford BT, or don’t have the means or ability to watch their social streams, then tough luck. No European football for you.

If this were any other sport – I’m looking at you, cricket – you’d question the ramifications for the future of the sport by striking this kind of lockout deal. But this is football, and the major competitions are always likely to be important.

The only tiny bit of hope is that Karen Bradley, Culture Secretary, recently talked of “future proofing” listed events like the World Cup. Would free-to-air Champions’ League highlights ever be included in that list?

Incidentally, if you were in Belgium, Germany or Italy, you’d be able to see, at minimum, the finals of the Champions’ League or Europa League of a home club reached the final, because of rules regarding listed events in those countries.

A 32% increase in fees? This time next year, the next Premier League TV deal will be being announced. I bet over in Gloucester Place, the Premier League is rubbing its hands in anticipation of next year, unless BT and Sky reach some kind of appeasement in respect of their relative positions in the TV football marketplace.

More “rampant inflation” to come?

[Later] An interesting piece in The Guardian about BT’s need to win these rights following a fairly miserable year for them. Although I would make a couple of points:

  • Only in football could a 32% increase in rights fees be considered to have cooled a little. BT drove the last round of increased fees by making a knockout bid. This time, they’ve still paid a substantial premium at a time when Sky “…did not look to submit a knockout Champions League bid.”
  • The Guardian piece notes that Sky is paying £11m a game under its current deal compared with £1.1m a game for BT’s UEFA deal. But that’s not really a fair comparison because Sky’s Premier League games are not all played simultaneously. In the group stages there are sixteen matches per round, spread over two nights. Even with two timeslots a night, that means at least three out of four matches will be behind a red button. And you can only watch one match at a time. Even watching the “goals” show, it means that a Tuesday evening is costing £8.8m for BT in rights fees. Sky only schedules a couple of simultaneous games on the final day of the season if there’s something to be played for. Yes, there’s “Super Sunday”, but you can watch both games.

Discovery and Sky Do a Deal

[A follow-up/continuation of the piece I wrote the other day about the fallout between Sky and Discovery in the UK and Germany.]

On Sunday morning there was an epic final at the Australian Open. Somehow the top 8 men’s players in the world conspired not to make the final, and we got a “throwback” final of Rafa Nadal (9) v Roger Federer (17). The last time these two played in a final together was 6 years ago in Roland Garros.

The match duly ran into a tense and exciting fifth set, with Federer coming out the winner after some amazing points played at the highest level. The match was broadcast on Eurosport (a channel owned by Discovery), and no sooner had the final point been scored, than the Eurosport commentator was reminding viewers, via a prepared script, that in the next few days Sky viewers would no longer be able to watch this channel and others in the Discovery portfolio, and that viewers should either phone Sky or contact them on social media.

As it happens, viewers can now breathe a sigh of relief. Late on Tuesday, a deal between the two companies was agreed, and the channels did not go off air at midnight last night.

Quite who “won” isn’t too clear with reports that both sides claiming victories of sorts.

Set against this was the background of Fox trying to take full ownership of Sky at the moment – something that Ray Snoddy notes in his piece about the affair.

The dispute broke into the open last week, with Discovery setting up a specific site (which some Sky broadband customers reported to have had trouble accessing), and Sky hitting back with pages on its own site suggesting alternative programming that Sky provides.

Over the weekend and for the last few days, there was also a blitz of press advertising from Discovery and Sky, presenting their cases with various levels of implied aggression.

In the UK, we’ve not really experienced a lot like this. Perhaps the biggest channel carriage fallout was between Sky and Virgin Media, which saw some Sky channels, including Sky One, removed from the platform.

Of course, Sky continues to limit access to its Sky Atlantic channel, meaning that its not viewable on Virgin Media, BT TV or TalkTalk TV.

The availability of Sky Sports channels was also messy for a while. Ofcom used to force Sky to provide Sky Sports 1 and 2 on a “wholesale must-offer” basis. That meant that any provider could offer Sky’s channels at a fixed rate (a rate that might be lower than Sky was selling the channels itself). That stipulation was removed in 2015, but it’s notable that on BT TV, only Sky Sports 1 and 2 are available. Whereas Sky Sports 1-5, Sky Sports News HQ and Sky Sports F1 are all on TalkTalk TV. While football, cricket and rugby tend to be on SS1 or SS2, other events might easily float over to other channels – particularly at busy times over the weekend. More recently Sky has launched Sky Sports Mix, which is Sky exclusive although it rarely shows fixtures that aren’t on other Sky Sports channels.

But returning to the now resolved Discovery/Sky dispute, were there really any other options for either side?

When you enter the world of multi-channel paid-for TV, you enter the world of bundles. You don’t agree to take Sky or Virgin Media, and then carefully list the channels you’d be interested in subscribing to. Instead you’re presented with various bundles with different channel line-ups. Premium movies or sports channels are then offered on-top of this.

For example Sky currently retails the Sky Variety bundle for £32 a month (prices and bundles vary the whole time, but we’ll go with this value). They say that includes 373 channel (11 being HD channels), of which 250+ are free-to-air. In other words, you’d get those 250 channels anyway with a basic satellite decoder regardless of having a Sky subscription.

So there are somewhere around 100+ premium channels some of which you’re probably interested in, and they are all getting a proportion of that £32 a month. Sky obviously keeps a cut itself for running the service and its own channels. Beyond that are channel providers that do deals with Sky for some of their offerings. UKTV, for example, will offer channels like Alibi and Gold (neither of which are on Freeview) for a set price a month; ITV has ITV Encore; Viacom has a range of channels including the MTV family and so on.

One channel provider might offer both free-to-air channels and pay channels. UKTV offers Dave free, but Alibi on a paid basis. Discovery itself offers free-to-air Quest, mostly repeats of shows that have previously aired on their main channels. You probably do get bigger ratings for making a channel free, but you have to fight for advertising revenue to make it pay. It’s a fine balance. Subscription revenue is more certain, and if you do a good deal with the likes of Sky or Virgin Media, then the channel ticks over financially on its own.

When you go free-to-air, each channel you make free has to survive on its own accord. While you might try to force advertisers to not be able to buy Dave on its own, but also have to advertise on, say, Drama and Really, it’s a slightly tougher sell. The advertiser might only be after the young male audience that Dave provides.

But when you go down the paid-for route, it certainly makes sense to bundle your channels up. Discovery bundles the various Discovery channels (+1, DMAX, Shed, Turbo, History, Science), along with TLC (and its sister channels), Eurosport 1 and 2, and Animal Planet. Some of these get decent ratings, and have real investment in them (Discovery, TLC, Eurosport); others tick by largely on repeats (Shed, Turbo).

The platform operator has to decide the right mix of channels for the right price. How much of that £32 a month should go to Discovery for its bundle of channels? The operator will consider the importance of the channel (Is a must-offer channel that might mean its subscribers cancel and go elsewhere?), its ratings, investment in the channel (Are they making desirable new programmes and promoting them, helping make the platform better?), and the overall value to consumers. They also have to think about their bottom line.

The channel provider will naturally think their offering is more valuable than the platform does, but they usually hammer out a deal between themselves. Remember, there’s only £32 in total to go around, and that has to pay for some other overall costs as well.

And that’s what this battle has been about. It hasn’t been reported what Sky is paying for Discovery’s channel offering, but I’d guess that it could be anything from 50p to £2 a month per subscriber. To put this in context, in the US, the channel group with the highest monthly subscription fees is ESPN with a reported $7.21 a month of cable bills going to this channel. Unlike the UK, where premium sport is only paid for by those who choose to buy it, ESPN gets less per subscriber, but vastly more subscribers pay it by virtue of the channel being a “must-carry” on nearly all cable households.

During the hurly burly of the Sky/Discovery disagreement, there were a few suggestions made by Sky about how Discovery might monetise its channels:

  • Send channels free-to-air and rely solely on advertising revenues
  • Retail the channels itself via the Sky platform
  • Transform the business into an OTT offering

None of those works easily.

Free-to-air Ad Funded

All these channels already take advertising. Indeed, Sky’s own advertising division, Sky Media, sells Discovery’s advertising. Remarkably, while channel carriage discussions were breaking down last autumn, Sky Media, the advertising side of the businesses actually renewed a long term agreement with Discovery Networks.

But it’s likely that advertising only accounts for perhaps 50% of the channels’ revenues. While going free-to-air would mean that channels would be available in more households, Freesat homes and perhaps expansion onto Freeview, it’s not at all clear that the additional advertising revenues this availability would bring, would make up for the subscription shortfall. In turn that might see less investment in Discovery’s channels, with some of the smaller channels almost certainly needing to be closed down.

It should be said, however, that UKTV has grown its business very successfully by taking channels free-to-air. Dave, Really, Drama, Yesterday and Home have driven their business by being or going free-to-air.

Retail the channels itself

Think of this as the BT Sport solution. Market the channels directly to consumers, taking the revenues without Sky acting as an intermediary.

BT went down this route because they wanted a direct relationship with their customers. But they were in a uniquely strong position in the first place. Their original play was aimed at retaining BT customers who might have moved their phonelines and broadband to Sky or other providers, and so they were starting from a massive customer base. Then they offered an initially free BT Sport service. Stay with us or move to us, and get the channel free. They already had a large billing facility to manage the service. Customers could relatively easily add BT Sport to their channel mix, either on BT’s own platform, or via Sky. And they can market the channel easily – bombarding BT customers with email and direct mail explaining the offer.

The other thing BT had was killer programming. And I don’t mean Shark Week. They had Premier League football, and some decent games at that. Retailing the channel themselves has worked well for them.

But few others try this. There are a handful of specialist sports channels that manage this – Premier Sports and BoxNation spring to mind. But again, they are able to target a specific interest group directly. You want to watch lots of boxing? Subscribe to BoxNation (Although notably even BoxNation has now done a deal with BT).

For Discovery, this is much harder. They’d need to develop a whole new subscription team, and market the channels heavily. While Eurosport could probably reach cycling and tennis fans relatively successfully, the more general interest nature of Discovery is a much harder sell.

In short, this would be an expensive gamble, persuading viewers that they should phone-up Discovery and spend an additional £2.99 a month or whatever to subscribe to their channels.

The OTT Offering

The other route is to sell directly as a streaming service. Offer the linear channels, but also boxsets of programmes, making them available through various digital platforms. In essence Discovery already does this with the Eurosport Player.

If you don’t have a premium TV subscription, then you can pay monthly or annually for access via the Eurosport website or app. Remember, something like 40% of UK television households are Freeview only. So there’s definitely a market to be tapped if the price is right.

Again, that works for sport better than a general entertainment channel.

Summary

Only those in the room will know what really happened, but I would argue that Discovery was between a rock and a hard place. It would have been colossally disruptive to lose its main channel distributor in Sky.

On the other hand, Sky is definitely looking to reduce costs, since it simply can’t place the full 83% increase in Premier League rights fees it’s now paying solely on Sky Sports subscribers. Other parts of the business have to take part of that cost. And this is before we consider the upcoming next round of UEFA Champions’ League rights which if Sky tries to win back, will place an added cost burden on Sky.

Being seen as a “bully” probably also isn’t a good place to be right now for Sky as it seeks regulatory approval for its takeover.

That all said, it’s not clear that bundles are here to stay forever. There seems to be a movement – especially in the US, for “skinny bundles” – a lower subscription featuring a handful of core channels, and then buying “a la carte” services on top. There are “cable-cutters” and “cable-nevers” – those who cancel cable subscriptions, and those who never took one in the first place (especially millennials). They just want to buy HBO for Game of Thrones or whatever.

It’s all certainly a concern for ESPN who can no longer bank on all 100m+ US cable households each paying $7.21 a month for their channels. And if you’re not interested in sport why should you?

Yet buying each channel/subscription separately quickly mounts up. A US subscriber in an OTT world might buy Direct TV Now for a basic selection of streaming channels starting at $35 a month. They might also pay for Netflix, Amazon and Hulu. They add HBO Go for a few more dollars. And then beyond that there are things like CBS All Access if you want the upcoming new Good Wife and Star Trek spin-offs/series. You might expect similar offerings from NBC or ABC in the future. There’s also the forthcoming BBC/ITV BritBox. And only this week we hear that Walter Presents will also be available to US subscribers.

$2.99 here; $5.99 there. That’s a lot of TV that all adds up very quickly.

One way or another, resolution of the Sky/Discovery dispute means that Sky viewers are able to continue to watch Idris Elba: No Limits on Discovery. Which is as well, because Elba is also the marketing face of Sky, and it would have been kind of awkward when he’s plugging the new Sky Q box, that his series wasn’t available to Sky viewers.

Personally, I’m left having splashed out £20 for Eurosport Player before I learnt of the dispute’s resolution. As it turns out, this wasn’t really necessary. That said, that app gives me a number of additional streams that mean I can often watch sports action live, when TV will only be showing highlights later on. So perhaps it’s a fair investment.

Sky/Discovery Carriage Dispute

Channel carriage disputes are relatively rare in the UK, but we’re in for a sizeable one right now, with Discovery publicly stepping forward and saying that from the end of this month, Sky subscribers may no longer get access to a Discovery channels. It seems that the two companies have been unable to reach agreement on how much Sky pays Discovery from the subscription fees it collects from viewers.

Sky says that it has overpaid for Discovery’s channels for years.

Discovery says that it is now paid less than it was ten years ago. They claim Sky is playing hardball because of its Premier League rights inflation.

The whole dispute has become very public, very quickly. I noticed that during the BBC’s reporting of a Venus/Serena final in the Australian Open at the weekend, there was already a crawl along the Eurosport footage they’d lifted.

Discovery has set up a Keep Discovery website, and their social media outlets are alerting followers to the dispute. This is straight out of the US-playbook, where such tactics are common and often go public. Sometimes they’re quickly resolved; but other times they go on for years (In Los Angeles there is ongoing dispute between Time Warner Cable who own SportsNet LA with exclusive LA Dodgers coverage, and the major cable companies who actually reach customers in the area. As a result, most locals have been unable to watch local basseball coverage for at least three seasons now.)

Meanwhile, Sky has also added a section to its customer service website.

While I’m not sure how long discussions have been going on, this must have been a while. I know this because sometime around October last year, I completed a Sky customer research survey in which many of the questions seemed to be about how much I valued Discovery’s channels, and whether I’d continue as a customer if I lost access to their channels.

A few thoughts on this:

  • I’m sure Sky is trying to save cash after its record breaking Premier League rights bid. While they’ve not passed full costs onto consumers, they’ve clearly cut back in places, reducing coverage of some sports, and cutting overheads where possible. They do continue to invest in original programming however.
  • According to BARB, in December 2016 the Discovery Group had a 1.69% share of viewing. But this includes Quest, a free-to-air channel which is potentially unaffected by this dispute.
  • Discovery is clearly investing in Europe. It took full ownership of Eurosport in 2015, and has also bought a large swathe of exclusive European Olympic rights beginning in 2018 in some territories.
  • Sky announced a 9% fall in operating profits today as a direct result of their increased Premier League costs.
  • This is not just a UK affair. The disagreement extends to Sky Deutchland as well.
  • Eurosport calls itself the “Home of Cycling” and it does indeed carry vastly more cycling coverage than any other channel. This ironically means that the Team Sky cycling team (fully owned by Sky) will be largely invisible to Sky TV viewers post the 31st January if the dispute is not resolved. At least until the Tour de France which is also carried on ITV4.
  • My favourite FAQ on the Sky site is: “I regularly watched Eurosport. What can I watch on Sky instead?” To which the answer seems to be Premier League football, rugby union, cricket and rugby league. None of which is much use if I actually wanted to watch cycling, downhill skiing, tennis or snooker. Sky Sports and Eurosport UK have almost no sporting crossovers!
  • When live sports are affected, it’s not uncommon for viewers to look for “alternatives.” These aren’t always legal. If your favourite sport goes off-air, and you’re not willing to change TV provider, that mate who’s mentioned how easy it is to set up a Kodi box and pull in illegal feeds, might open your eyes to how easy piracy is. And that doesn’t help any sports TV channels. Why pay if you can get them free?*

In the meantime, do I pay £19.99 for a year’s subscription to Eurosport Player? It’s on sale until 31st January when the price reverts to £59.99? It works with Chromecast. Paying would be hedging my bets. And if the channels do disappear, then a conversation with Sky’s retention team might see me recouping that cost.

* I’m not advocating this, but it must surely be a temptation.