Beyond the short-term impact of the COVID crisis, the value of football rights in Europe is heading down.
Lower competitive intensity in the broadcasting market is the main reason, and looks unlikely to be reversed.
The leagues must consider long-term initiatives to broaden demand—cash fixes risk worsening their structural problems.
In the UK, carriage on Sky Q will give the new service the opportunity to prove its worth to viewers. Without integration with the UK's biggest pay-TV platform, growing scale is difficult for nascent DTC services.
Elsewhere in Europe, Discovery seeks to bundle too. Unlike the US, where the company has a single model—basic cable—in Europe it operates both free-to-air and pay channels, and it also owns Eurosport.
Ultimate success will come down to whether Discovery's "real life content" is essential and defensible. Generally there is little evidence of people taking services that are not broad, while the barriers to entry for competitors wishing to commission "real life content" are lower than other genres.
It was too good to be true: Ligue 1 TV receipts will not jump 44% as it expected, compounding its COVID-induced financial distress.
Canal+ could step in and is in a strong bargaining position.
With a lack of live sport, the lockdown weighed on incumbent pay-TV platforms’ subscriptions. SVOD providers leveraged their cheap positioning—Netflix and Amazon Prime Video now rank above other subscription services in Europe, and Disney+ had a successful launch.
Incumbents—Sky, Canal+, Movistar+—all pursue a twin-track strategy. They are positioning themselves as gatekeepers thanks to service bundles, while redirecting resources away from sports towards original series.
European productions are increasingly garnering audiences outside of their home markets, regardless of the production language. Netflix is a major conduit for European exports, due to personalisation of the interface and high-quality dubbing.
The pay-TV platform’s revenue has almost stabilised in France, while positioning has shifted to that of an aggregator—thanks to deals with Netflix, Disney+ and BeIN Sports.
Ligue 1's licensing deal with Mediapro for the 2020-24 football rights seems unlikely to be fulfilled, so the league may have no choice but to go back to Canal+ to ‘save French football'.
Canal+ could now put forward a grand bargain—with its renewed commitment towards French football and production industries, the platform could plausibly gain control over Orange’s IPTV service and negotiate a more favourable regulatory environment.
The COVID-19 crisis is compounding the already grim revenue prospects for upcoming football rights sales in continental Europe.
The financially weakest leagues in Italy and France are especially exposed. Serie A is exploring deals with private equity firms, with the pros and cons finely balanced.
There is a window of opportunity for Sky and Canal+—the adults in the room—to build coalitions with selected clubs to nudge leagues towards needed reforms including longer licence terms, reducing the number of clubs and more equal revenue splits.
When we look back at consumer expenditure on pay-TV and alternative entertainment options during past economic downturns across major countries, we find a broad confirmation of the industry’s comparative resilience.
Also found are variations between services sold through annual contracts and cancel-anytime rivals, a negative impact on big-ticket products, and opportunities for substitutional services.
Unique features in the current crisis include the suspension of sport broadcasts and an SVOD-rich offering which widens consumer options. If hardship persists, incumbents like Sky could face tougher times than during the financial crisis.
Despite operating in a challenging market, Sky has continued to increase revenues, with the resilient performance of its direct-to-consumer and content businesses offsetting the disappointing drop in advertising income.
Across FY 2019, EBITDA was up 12.2%; profit growth driven by a significant reduction in “other” costs as large one-off effects disappear and cost-cutting continues.
Extended distribution deals with Netflix and WarnerMedia will protect Sky’s content proposition for the coming future, as would the mooted integration of Disney+.
With pay-TV competition faltering, UEFA is aiming to stimulate demand for 2021-24 TV rights with early auctions, a possible relaunch of FTA broadcasts, and even, unrealistically, by considering an online service of its own
In the recently completed UK auction, facing no major threat from Sky, BT kept the rights at an almost flat price – probably missing a cost saving opportunity
In the upcoming auctions on the Continent, with former buyers such as SFR, Mediaset and Vodafone having cut back on premium sports, the major platforms’ bids will probably be unchallenged
Mindful of the uncertain future effects of ongoing events, most notably the stagnating TV ad market and the costs of establishing an HQ in Leeds, Channel 4 returned a £5 million pre-tax surplus in 2018, which after investment in Box left its cash reserves at £180 million
Increased digital revenue more than made up for the anticipated drop in spot advertising and sponsorship (with group viewing share and SOCI down) while cautiousness necessitated lower content spend (down 5% from the peak in 2016); a concern given rising content costs
Nevertheless, Channel 4 is doing a good job delivering its remit in a tough environment, continuing to broadcast programming no-one else would and leveraging long-standing relationships to nurture television and film of a quality and ingenuity that belies the modest size of the organisation