TV vs OTT: New sports content business models

At the heart of this coveted selection of content, sport has enjoyed a spectacular increase in the amount that broadcasters are willing to pay to carry it. If this is especially true of major league sports and events, secondary ones are also capitalising on the boon, thanks to new generalist and sport channels providing new outlets.

In recent months we have also seen top Internet players display a growing interest in acquiring the rights to live streaming sporting events both nationally and internationally, either by acquiring the rights directly or by forging partnerships with rights owners. Whether to increase their user base or to a secure the loyalty of existing users, YouTube, Yahoo!, Twitter, Facebook and Amazon all plan on establishing themselves as key partners in distributing and monetising sport.

This newfound competition only exacerbates the one that already exists between heavyweight telcos, some of whose content policies focus purely on sport (Cf. Proximus) and some which include sport amongst a wider array of content (Cf. Altice/SFR). The amounts spent by these companies have often enabled them to increase their IPTV customer numbers and/or their ARPU, but have also contributed to an unprecedented spike in the price of sports rights, which makes it harder and harder to break even, especially in a universe populated by a growing number of rivals.

As the price of sport content drives up programming costs, traditional TV channels are being forced to adapt:

• Veteran general-interest channels are choosing to cut back on their acquisitions and concentrate on a few flagship events, and to use these major events to showcase their technological savvy and their ability to innovate.
• New TV channels are not looking to compete head on, but opting instead for the rights to events that are exploited very little or not at all elsewhere, which enables them to build a reputation at a price that is in line with their budget.
• The equation is becoming increasingly challenging for the major specialist channels, which are forced to up their bids for the major sporting events that are essential to their brand image, but are also the victims of growing competition and of cord-cutting. Their subscriber numbers are shrinking while programme acquisition costs are rising exponentially. If online distribution (Cf. Sky) and the search for partners to distribute a complete sport package (Cf. Canal+/beIN Sports) are some possible solutions in the current climate, one of the main challenges is to negotiate lower rights acquisition prices.

If OTT will probably take hold over time as a credible solution for broadcasting sporting events live, there continues to be a plethora of technical issues surrounding the distribution of video streams with higher than average quality. For now, OTT distribution can only compete economically with broadcasting (in MPEG-4) when streaming to several thousand users. So it is still an interesting option for supplying bonus content, but not as a replacement solution, especially when it comes to major sporting events.

What is being built today is essentially a bridge between broadcasting and OTT in terms of:

• countries covered;
• available content;
• the ability to show a wider variety of sports;
• enhancing the viewing experience.