Technology and changing consumer habits are making it necessary to think about a new model for broadcasting rights in sport, with the need to “create a premium product that justifies having to pay for it,” according to Martijn Bakx, media rights manager at Mediapro and a professor at Johan Cruyff Institute
Technology is like a train with an infinite number of carriages that sooner or later you have to get on if you don’t want to be stranded at the station. And now we are in the high-speed era. Every evolution brings about a change in habits, but it is only when you pause for a moment that you have time to reflect on whether your business model is adapted to the reality or whether you need to reinvent yourself to give your customers not only what they like, but also what they need. Sport has entered fully into this debate and broadcasting rights are a key point as its main source of income.
Sport is still perceived as the goose that lays the golden egg in terms of TV product, and in that large market football rules the roost. Leagues and promoters of sporting events have long benefited from having a star product to offer to broadcasters; clubs have relied on the power of the union to sell unified content with the centralization of rights, and the owners of those television rights have believed they could attract the final consumer at any price. This system has been presumed to be outdated for some time now, and the pandemic has only accelerated it. “We now have much more information about the actual usage of the content with the data that digital consumption provides us. I think there will be a correction in the price. We have reached the pain level of what the consumer is willing to pay for sport,” says Martijn Bakx, media rights manager at Mediapro and a professor of our Master in Football Business in partnership with FC Barcelona.
Martijn Bakx media rights manager at Mediapro and a professor at Johan Cruyff Institute.
Consumer choice is no longer limited to how to watch content, but also what content to keep. According to a survey published by Deloitte on digital media consumption trends in the United States, in January 2020 only 20% of streaming video subscribers reported having cancelled a service in the last year; in October 2020, 46% of users confessed to having unsubscribed from at least one service in the last six months.
“I think there will be a correction in the price. We have reached the pain level of what the consumer is willing to pay for sport.”
The biggest concern for the sports industry remains the behavior of young consumers. “Generation Z has grown up in a digital world, a world where content is not always something you have to pay for. So, after having access to free content, it’s strange for them that you have to pay. For us, the goal is to create a premium product that justifies having to pay for it,” says Martijn.
Taking advantage of his visit to Johan Cruyff Institute to teach his module of the Master in Football Business in partnership with FC Barcelona, we review with Martijn the current state of the broadcasting rights industry and the growth of new entertainment content services.
How has the broadcasting rights landscape in sport evolved over the last few years?
The broadcasting world is continuously changing. It has changed since I started in the industry in 2000 and has continuously changed throughout the years. The differences between then and now are the speed of change, because of consumer behavior and also because of technology, obviously. And it is really technology that in the last years has changed so much and it has opened up an enormous amount of possibilities for broadcasters, but also for brands, for clubs, for leagues, to connect with the fans in a more direct way.
I wake up every day and there’s a new broadcaster. So, it’s such a rapid change these days. And for rights holders and for broadcasters, it is an extremely important task to be aware of that change and to be where new consumers are, where young people are, to find them.
“In the last years, technology has changed so much and it has opened up an enormous amount of possibilities for broadcasters, but also for brands, for clubs, for leagues, to connect with the fans in a more direct way.”
There used to be a time when it was very easy to be a broadcaster because everybody was switching on the television and watching a TV screen and it was the same TV screen everywhere. There were three, four, 10, 20 channels, but that was the only way to consume content. That has changed, obviously. So, for us, for rights holders, for broadcasters and also for brands in general, it is an enormously important task to know where the audience is.
Media rights are, by far, one of the main sources of income for clubs and sports organizations and it has been proven that the centralization of media rights is most profitable for the big leagues. Who has the control over the content?
I think media rights are extremely important for clubs, and are extremely important for leagues. We know the percentages and sometimes it’s too important, I would say. It is a task of clubs and leagues to be profitable, taking into account the fragile nature of media rights. The control of the content, ever since the centralization of the rights lies with the organizers of competitions, in this case the league. So, it’s the league who, by centralizing the rights of all the clubs, is also able to provide a unified product that is marketable globally.
Two years ago, I had the opportunity to interview a colleague of yours, Pierre Maes. He said then: “Getting young people to pay to watch sport on television is a big challenge”. Is it still the case?
Absolutely. It’s the biggest challenge that we have these days. One thing is that we connect with a certain audience, called the baby boomers, the Generation X, even the millennials. But we see that new people are getting into the market of consuming content—Generation Z, especially, and the generation Alpha if you want to go further—which is a group of people that have grown up in a digital world, have grown up in a world where content is not always something you have to pay for. So, by having the accessibility to free content, these people find strange that you have to pay. For us, the task is to create a premium product that still justifies payment for it.
“Our task is to create a premium product that still justifies payment for it.”
And apart from that, we see that the younger generation is losing a little bit of contact with sport, is losing a little bit of interest in sport. And that’s a big challenge because you don’t want to lose a generation. You don’t want to lose what is described in the world as the connective tissue between different generations. Because my father loved to watch football and that’s why I started to watch football as well. So, if these people get older and new generations grow up in an environment where sport is not as loved, then not as seen as before, we really create a problem. It doesn’t mean that a generation is already lost just for the fact that right now they are not willing to pay for content or not interested in sport, that can still change, but we need to make a product that allows people to get back their interest in sport.
Considering that are now used to have premium content on sport, does it mean that it will be difficult to have sport on public televisions from no on?
Well, I think that has been a movement away from public TV to commercial television first, and then to pay television to whatever provider of content behind the pay wall. We should not forget that free television, free access to television, also is very powerful because it connects with the masses, everybody has access to it and it allows or creates a platform for brands to find a lot of exposure as well. So, the value of free access to content is still there. It’s even maybe even more than enough; look at new players like Facebook or Amazon. These are broadcasters who charge very little or nothing for the sports content they buy. But they have such a powerful weapon, which is commercial, and is the fact that advertisers know exactly the amount of people that connect with that brand, connect to the games, that free access television is really coming back in many ways, as well.
“Free access to content is still there; it’s maybe even more than enough; look at new players like Facebook or Amazon. These are broadcasters who charge very little or nothing for the sports content they buy.”
Will we have to continue paying for Premium Sport content? And if so, will prices continue to rise or have they reached a ceiling?
I think premium content will always exist and people will always pay for premium sports content. It is true that over the last years, especially with the arrival of telcos and the arrival of a lot of competition with regard to the broadcast landscape, prices have gone up. And I think we have already seen that there is a certain correction taking place with regard to the value of sports rights right now. If you look at the latest tender processes in the UK and what will probably happen very soon here in Spain and Italy as well, and in Germany it’s happening as well, you see a sort of the ceiling, we have reached like a maximum of what broadcasters are willing to pay. The reason for that, I think, is that there is much more information about the actual usage of the content with the data that digital consuming provides you. There was a time when sports rights were used as a trigger for a telephone company to create a package with which it would attract clients not just to its sports content, but also to have an update for their broadband connection and for mobile phone access. The business structure is much more different now with a clear vision of what the audience is for each of the broadcasters. I think there will be a correction in the price. We have reached the pain level of what the consumer is willing to pay for sport.
“Premium content will always exist and people will always pay for it, but I think it will be a correction in the price; we have reached the pain level of what the consumer is willing to pay for sports.”
According to your sources, what do sport fans want to watch on TV?
Going back to premium content, it’s obvious that people will always watch football. It’s the number one here in Europe. In India, people will pay for cricket. In certain markets, people will pay for rugby. In other markets, people will pay for American football or people will pay for whatever content is popular within each of the territory.
Now, apart from that, there is a task to grow your audience, to connect with an audience and to build an audience for sport. And that’s a relationship that televisions or broadcaster should have with sport, to create an individual visual product that allows the fan base to grow. So, televisions and broadcasters in general are extremely interested in whatever is a guaranteed success. And then they will look at up and coming sports and sports that have the potential to become dominant in a territory. Women’s sports are a good example, which were not popular in the past. Women’s football has become extremely popular and you see that there is a growing popularity of that sport. So, televisions will tap into that and become broadcasters and help women’s football to grow. So, it’s a combination, a clear content that is a guaranteed success that broadcasters will use to get a subscription business, to get an audience, to guarantee a certain audience. And then there is a group of sports that have the potential to grow a certain niche of followers.
Are Direct-to-Consumer platforms an increasingly important element in rights-holders’ media strategies?
Definitely, they are a new player in the first place. The fact that you can just use an internet connection to connect with your audience allows a lot of people, a lot of new initiatives to become relevant players in the market. Now, the strength of an OTT proposition is not just the fact that you can easily connect with an audience, but it’s also that you get to know your audience because the digital consuming of the content creates a digital footprint of who you are. OTT players have a lot of information based on how people consume sport and what these people are, what they do and how they consume. So, an OTT proposition is extremely important, is extremely interesting, not just for the fact that it has a certain audience, but the knowledge that an OTT gets about the audience.
“The strength of an OTT proposition is not just the fact that you can easily connect with an audience, but it’s also that you get to know your audience because the digital consuming of the content creates a digital footprint of who you are.”
What are the parameters by which a television producer decides which sport to invest in?
You look at a potential, at what the television product can end up being, and based on a lot of research on how the sport is performing in different territories or how it has grown over the last years, you invest in something or not.
Mediapro’s model and its product for LaLiga
Building new revenue streams requires making significant changes to the strategy, operating model and culture of Entertainment & Media companies. What is Mediapro doing in this sense?
I think the biggest challenge is that you can broadcast the content and then you can find ways, digital possibilities or whatever way, to connect with the audience more than just by playing out the games on the screen. So, there used to be a time where that meant that you had to have an hour-long preview show and a lot of talk about it in the studio-based programming and things like that. Now, I think what we are looking at is creating an experience for the viewer that’s more than just watching the games. The viewer becomes an interactive part of that, whether that is through social media, trying to find the reaction from the viewer on the broadcaster that they are consuming. The idea which we are looking at in our group, which is called MediaPro Next is, basically, a fintech of looking at how we can get as much as possible out of sports rights that we invest in. Much more than just broadcasting the actual match.
“We are developing MediaPro Next, a fintech to look at how we can get as much as possible out of sports rights that we invest in; much more than just broadcasting the actual match.”
The Mediapro Group is a promiment player on the global stage in sports rights management and the international commercialization of competitions such as LaLiga and the UEFA Champions League, among others. What were LaLiga’s requirements in terms of tv production when the pandemic was declared?
Well, the pandemic, of course, created an enormous challenge for us as producers. We produce all the matches of many of the first and the second division and when the pandemic hit, we had to play along with some new rules. The amount of people being able to travel and go to the stadiums and producing the matches was limited. So, working with those limitations, we tried to convert those limitations of those new rules into an opportunity. We started thinking about how we would be able to guarantee an audiovisual product that was similar to what we had before. We worked very closely with LaLiga on looking at different alternatives. And very soon we found and we realized that producing a game in an empty stadium does not create the same product as producing it with a full stadium. So, we looked at different ways to make the viewer as comfortable as possible with this new product.
It started with creating an artificial soundtrack during the matches. We had been working with EA Sports in the past on providing them access to real sounds of the crowds in all the stadiums of LaLiga and we used those soundtracks now to adapt to any sort of situation during a match. We even went a step further and that was really bold and innovative and groundbreaking in creating a visual field that the stadium was full, so we filled out the stadiums with a virtual stand as well.
“The pandemic created an enormous challenge for us as producers; in the end, we used the limitations and we created a new product, an opportunity out of it.”
In the end, the result of that became that people almost forgot that they were watching a game that did not have any sound in the stadium. And we’re at a point right now where all of our broadcasters, all of our 80 plus broadcasters in the world have been enormously positive about the result. And everybody is embracing the idea. And everybody wants to have the fit with virtual sound and with virtual stands.
We gave them the opportunity to choose in the beginning, but nobody wanted to have the matches without those extra elements. Apart from different more technical innovations and technical changes that we brought to the game because of the fact, for example, that cameramen cannot stand next to the sidelines because of safety, they have to be at a distance from the players and only a few cameramen can be at the sideline. Normally, in a normal game, we have many more. So, we have more cameras in the stands where there is no public now and that creates angles that are interesting and that provide a new way of consumer confidence. In the end, all those things together, we used the limitations and we created a new product, created an opportunity out of it.
Aplicartions of virtual stands for LaLiga matches * Image: LaLiga.
With the coronavirus pandemic we have seen different companies reaching agreements to alleviate losses in television rights and, somehow, compensate the viewers. We have the recent example with Movistar and Dazn to share MotoGP and F-1 broadcasting rights. Is this a trend that will continue in the future?
We have a relationship with all the broadcasters in which we mitigate as much as the potential losses that they might have from the coronavirus. The example of Dazn and Movistar in Spain is a trend that has happened in other territories as well. It’s clear that having an enormously dispersed audiovisual offer between traditional, conventional broadcasters and OTT players puts the fan, the consumer, in a difficult position where he or she has to choose because, of course, you cannot pay for everything out there. And I think OTT platforms have realized that as well. Enormously heavy investment in buying rights for those OTT players, and then just the actual streaming of content of OTT content direct to consumers has proven to be a challenge. So, what Dazn has done, very smartly in my opinion here, is create the linear channel again and, basically, turn back the clock a little bit and become a linear provider for Movistar.
Everybody became a player of their own and you see that in order to be relative and also financially sustainable, you need to have a guaranteed demand of viewers and the guaranteed demand of viewers you still get these days in traditional broadcasters such as Telefonica.
Is the pandemic making audiences even more demanding?
The behavior of audiovisual content in general has changed through the pandemic. Everybody wants to get the news about the pandemic, but also consume content, entertainment content, throughout the pandemic. You see different people in the same house and everybody wanting to consume one way or another. People started consuming on tablets, on computer screens, on mobile phones… So, I think the overall behavior of consuming content is changing and Covid is accelerating this change.
“To celebrate the Olympic Games without fans would mean renouncing too much of its true identity.”
It is not yet clear whether the Olympics in Tokyo will be held this year. The organizing committee is still working on the idea of celebrating the Games in July, but the Japanese government is reticent about the safety not only of athletes but also of the population. What is your opinion on that as a media rights manager? Is it worthwhile broadcasting the Olympics with no fans at all in the grandstands?
I think in the Olympics, it’s a four-year event and a lot of other things come into play, political pressure. But in the end, the Olympics is such a big event that playing without fans would be detrimental to the event and it would really change the DNA of the event. In that respect, I think that the Olympics, which has always been more than just a sports event, is an extremely social event, it has a political impact, it has a social impact on the city. To have that without the public, I think we’re taking away too much of what the true identity of the Olympic Games is.
