virgin media

Eleven Sports in the UK Reported to be in Trouble

I wrote something on Twitter about this, but thought I’d elaborate a little here too.

There was something of a shake-up in rights prior to the start of this football season when newcomer Eleven Sports entered the UK market and snapped up rights from Sky (La Liga) and BT Sport (Serie A and UFC) amongst others. 

Eleven Sports had hired Marc Watson, former CEO of their TV operation, and were expanding into the UK. The company, founded by Leeds United owner Andrea Radrizzani already operated in a number of other markets around the world, but was now entering the competitive UK market with its OTT service. That said, it was clear from the outset that Eleven Sports really wanted to agree so-called “wholesale” deals with existing TV operators like Sky and BT. The idea with these is that when, say, Sky sells a viewer a sports package, Eleven Sports would be bundled in alongside Sky Sports, Eurosport and others, and get a guaranteed revenue per month. This would be lower than the £5.99 Eleven Sports was selling itself to consumers directly, but the slightly lower fee would be made up for in volume. 

However a report in the Telegraph, and picked up in The Guardian, suggests that these negotiations have not gone well.

Talks have collapsed with Virgin Media, and both Sky and BT have been playing a game of wait and see. They could afford to do that because, while Eleven Sports had picked up some very good rights including the next two biggest leagues in Europe (from a UK perspective) after the Premier League, these aren’t necessarily essential for a British viewer. And I suspect that neither Sky nor BT saw too many cancellations when they lost those rights.

While Eleven Sports has been in the background trying to do wholesale rights deals with the big TV operators, in the foreground they don’t appear to have been doing a great deal to sign up consumers directly – something that Netflix, for example, spends a lot of money doing. I noted at the beginning of the season that they didn’t even seem to have a TV ad. And since then, I’ve seen little to no direct to consumer marketing (It’s possible that it’s just not been targeted at me, but I’m squarely in the bracket of their potential subscribers).

The cynic in me would think that they’ve been betting the house on getting those wholesale deals through. And the TV operators just don’t need to do them. Sure, they miss out on showing El Classico, but that’s more than made up for my Manchester, Merseyside and North London derbies.

The Telegraph reports that Eleven Sports may have as few as 50,000 subscribers bringing in £300,000 a month. That’s nowhere near enough given their rights costs. But I’m amazed that they even have as many viewers as that. You imagine that these are mostly die-hard Spanish and Italian football fans, alongside those from other smaller leagues they have the rights to (Volume is not the issue with the service). I suspect that their upcoming UFC rights which are due to kick in this January, would have added a few more subscribers. But it’s not clear that these would be enough. In any event, the UFC is said to be talking to BT about a last minute extension of their existing deal in the event that Eleven Sports does close down.

The one deal that Eleven Sports did manage to do was with STV, the Scottish ITV franchise holder. Last month they announced a strategic partnership, that would see the broadcaster sell advertising and sponsorship around Eleven Sport’s programming. In a related deal, the STV Player would also get access to two games from La Liga and Serie A each weekend.

(Sidenote: The STV Player, of course, is targeted at viewers in Scotland, and there seems to be some kind of agreement between ITV and STV to politely point viewers towards the correct player depending on which region they live in. You have to supply a postcode during sign-up, and there are content restrictions on non-Scottish domiciled viewers as a result. It’s unclear if this includes the Eleven Sports games.)

But all of this feels too little, too late. The UK sports market is highly competitive, and the existing players have very deep pockets. It’s instructive that a different OTT service that operates in a similar manner DAZN Sports, has chosen not to launch in the UK for that very reason.

It’s notable that Netflix has chosen to steer clear of sports. Only last month, their CEO Reed Hastings said:

“Sports, like live sports, for on-demand adds almost no value to it. People want to watch sports now. They want to know who won. They don’t want anybody to tell them who won.”

Although he didn’t totally rule it out in the future.

But it doesn’t take much to do the sums. The most recent NFL deal in the US, was a $650m a season deal Fox paid for Thursday night football. They get 11 games for that. But that roughly means that per hour, they’re paying more than double what Netflix pays for an hour of The Crown or HBO pays for an hour of Game of Thrones. And that’s for a single market for a property with essentially zero repeat value.

Not that this has stopped Amazon experimenting. Next season it becomes home to ATP tennis in the UK, and it has bought a limited package of Premier League matches beginning with the 2019/20 season. Although the latter were certainly sold very cheaply as I’ve noted here before.

Amazon does have different strategic goals to Netflix, and it’s possible that Amazon identified a segment that they underperformed in, which tennis might help them reach.

I can only think their football investment is purely a marketing initiative that will see them give games away to viewers who use their hardware and/or their apps. There are too few fixtures for them to try to sell subscriptions, but you can get people to use an app/device that they otherwise might not use.

Back to Eleven Sports. You feel that despite the people involved, they entered the market naively, and didn’t have the killer sports package that they really needed. They didn’t get any Premier League football or even any UEFA packages, and that put them on the back foot from the start.

They may manage to turn it around. Reports suggest they improved their app, adding functionality like Chromecast to it. But the low subscriber numbers just kill them.

Virgin Media and UKTV (And ITV) – Continuation

On my commute to work this morning, I saw a digital outdoor sign advertising a programme on Yesterday. I can’t recall the programme, but I can tell you that at the bottom, a large blue strap had added “Not available on Virgin Media.”

Things are ramping up in Virgin Media and UKTV’s dispute. The Guardian reports that Virgin Media is now sending out letters to interested other broadcasters to bid for UKTV’s slots on their EPG.

That feels like quite a hardball move from Virgin Media, since once those channel slots are gone, they’re unlikely to return. It’s obviously supposed to drive UKTV back to the negotiating table.

However in the meantime, The Guardian is also reporting that ITV and Virgin Media are also in dispute, with ITV reportedly suggesting it might pull all its channels from the platform by this weekend. Loss of ITV would be massive, with the channel responsible for lots of the biggest programmes on television. Even the loss of ITV2 on its own, at a time when Love Island continues to ride high in the ratings, is enough to make most platforms reconsider.

You suspect that ITV is pushing home a strategic advantage at a time when Virgin Media is already weakened from a consumer perspective with the loss of UKTV’s channels. If ITV’s channels were to drop off the platform, then there’d be a massive hole in what Virgin Media is offering viewers.

Certainly, most of those channels would remain available to viewers on Freeview, but the loss of on demand and recording functionality, along with the annoyance of having to flick around to jump between DTT and Virgin Media, is a disincentive.

This seems to be the result of an ongoing dispute between Virgin Media and ITV going back months. Last year, the Telegraph reported that ITV wanted between £45m and £80m in retransmission fees following a change in the law.

In April last year, the 2017 Digital Economy Act came into law, and it allowed for retransmission fees from cable operators – but notably, not satellite. Fees paid to broadcasters for otherwise free-to-air channels are the norm in the US, but hadn’t been the case in the UK. Indeed, broadcasters tended to have to pay platforms to ensure their services were covered.

This had become something of a bone of contention among commercial broadcasters, and ITV has been moving ahead most strongly.

As well as fees, prominence in the EPG and how catch-up offerings are presented are likely to form part of the negotiations. (As an aside, I note that Sky has recently been giving significant promotion to BBC programming, something it has not previously done on a regular basis).

The fees issue with UKTV and retransmission fees issue with ITV suggests that Virgin Media, under owners Liberty Global, is playing a really tough game at the moment, beating down channel suppliers as much as possible.

Losing ITV as well as UKTV could be a massive challenge for Virgin Media. I would imagine that groups like Sky and BT TV will be moving up their summer advertising campaigns (usually built around the upcoming football season) as a result.

[UPDATE] – It’s really worth listening to Virgin Media and UKTV slug it out on-air in this week’s episode of The Media Show. Both sides make their case, with Virgin Media very happy to carry the free-to-air channels for no money. UKTV want to sell them the entire package of channels – free and paid for. From their perspective, Virgin Media charges viewers to receive the channels, so they should get some subscriber money.

There was no mention of plans to sell off UKTV’s slot numbers. Nor was there any mention of ITV’s dispute, although that only really re-emerged following the programme’s recording.

Virgin Media and UKTV

We seem to be in the middle of a real old-school rights agreement brouhaha at the moment. Virgin Media has just removed all UKTV’s channels from its platform after what we must assume was a lengthy period where the two parties failed to meet terms.

UKTV is 50% owned by the BBC, and 50% owned by Discovery (following Discovery’s recent completion of its acquisition of Scripps). And UKTV is pretty successful. It has trodden the line of being both a pay-TV and free-to-air operator very carefully. It has a total of eight channels: W, Dave, Alibi, Gold, Eden, Drama, Really, Good Food, Yesterday and Home. Of those, five are also available on free-to-air platforms like Freeview and Freesat. The remaining channels, including Gold, Alibi and W are only available on pay platforms.

When the entity that would become UKTV was first set-up, it was heavily reliant on licencing repeats of notably BBC programming. But in recent years, it has made a lot of headway commissioning its own exclusive programming, and acquiring exclusive programming, or contributing to production budgets of international programming. That mix has seen it deliver strong ratings and revenues.

According to BARB, over the first few months of this year, it has average between 5.0% and 5.5% of viewing, placing it sixth behind the BBC, ITV, C4, Sky and 5 groups of channels. The biggest channels are Drama and Dave, which each get about 1% of viewing. To put that in perspective, it usually makes them bigger than any of Sky’s own channels including Sky 1 or Sky Living.

So why is there is a fight with Virgin Media? Well it’s cash. Who knows what Virgin Media pays for UKTV’s channel bundle, but it’ll be a handful of pounds a month per subscriber. From press reports, Virgin Media is seeking a steep discount on what it has been paying and UKTV isn’t happy.

Virgin Media’s key argument is that UKTV isn’t able to offer on demand rights to much of their programming.

This is true. The BBC does place limits on what programming can go onto the UKTV Play platform. That’s because the BBC is also selling those rights to streamers like Netflix and Amazon Prime Video. However, that doesn’t mean that UKTV play only carries their original programming or their acquisitions. You will find BBC programming on the platform. At time of writing, they have episodes of Sherlock, Silent Witness and Waking the Dead available to stream. However, there do seem to be limitations on what can appear in box sets. And obviously, UKTV’s own programming can stay available for much longer.

(Incidentally, this isn’t a situation unique to the UKTV/BBC agreement. Sky/Now TV sees HBO programming come and go in various windows. Game of Thrones will be there for a while; then it will drop off, perhaps coming back later in the year.)

However Virgin Media complaining is unlikely to change the BBC’s position. BBC Studios who maintains the stake in UKTV and also monetises programming on other platforms, is unlikely to budge just because Virgin Media would like it to.

In the short term, viewers lose out. Virgin Media is hoping that while it’ll lose some subscribers, they save money in the longer term. Their so-called replacements are, of course, nothing of the sort. And Sky will no doubt enjoy signing up a few new subscribers.

But this is a dangerous game. Channels like Dave and Drama are popular, and viewers will get upset. While those two are available on Freeview, others like Alibi and Gold aren’t. Some die-hard crime TV fans may indeed up and switch platforms. UKTV is an oddly powerful platform to have a falling out with. Perhaps they were pushing their luck with increased fees to support their continued investment in new programming. We may never know.

I suspect in due course, sense will prevail and a new agreement will be met. Recall that when Discovery and Sky had a big falling out about 18 months ago, it was resolved only at the 11th hour.