Using Content Exclusivity to Maximise Revenue in the New Media Landscape of Sports

By Sam Leadsom and Ross Collett, LCA and Roco Communications

‘The money is in the old media, but the future is in the new media’.

In a recent podcast, George Pyne, CEO of Bruin Capital, captures the views expressed by many sports executives over the last five years. Still, the question remains: Can New Media generate revenue comparable to Old Media, on which the sports industry depends?

For all its benefits, New Media has yet to make a significant revenue contribution to the sports industry, and, in many cases, because of how it is being deployed, it undermines rights holders’ broadcast and sponsorship incomes.

We suggest a new approach to content distribution that sees sports organisations return to content exclusivity across all platforms to maximise revenue in all verticals, highlighting the partnership between Apple and Major League Soccer as an example of how this approach has delivered significant revenue growth for a Tier 2 sport in the world’s largest sports market.

Speaking with a broad spectrum of industry experts over the past few months, several reoccurring themes have stood out:

1. Media rights through linear, Pay T.V., or OTT platforms (B2B) are still sports organisations’ most lucrative revenue generators. Live Content remains King!

2. Sports must build or maintain meaningful revenue streams through digital content distribution.

3. Sponsorship revenue in Tier 2 and 3 sports is flatlining or declining as rights holders must demonstrate a USP and value for money.

4. Culture and Community are increasingly important in the sponsorship evaluation process as metrics move beyond pure ‘eyeballs’ to partnerships that offer a more symbiotic relationship between sport and fan.

Exclusivity and Competition skyrocketed Sports Rights Revenue.

Following Rupert Murdoch’s resignation as Executive Chairman of NewsCorp now is an opportune time to reflect on his commercial approach when he launched his Pay T.V. channels across the globe 35 years ago.

His strategy was that exclusive ownership of sports media rights was crucial to generating subscription revenue. Sam Chisholm, BSKYB CEO, famously said that when SKY bought the exclusive rights to the Premier League in the U.K. in 1992, it was; ‘like Christmas every day’ as people signed up for the service.

No surprise, then, that a critical strategic investment for his Fox network in the U.S. was to buy the exclusive rights to the NFL’s NFC TV package in a four-year, $1.6 billion deal. A slice of the country’s most popular and influential sports league helped put the network on the map.

Fox Sports and SKY, part of Comcast, are now both billion-dollar media conglomerates. They are considered among the top players in every sports media rights discussion, and Murdoch’s strategy became the global standard for sports media rights. Fans were aware that to watch their nation’s favourite sports, they had to subscribe to a platform that held exclusivity, and the platforms competed fiercely to acquire these rights and gain more market share.

In return, Rights Holders and National Governing Bodies (NGBs) assiduously protected their investment by preventing rival organisations from entering the stadium, controlling the amount of usage on news channels, and fighting piracy and other illegal uses of the footage and distribution. By doing so, they retained the value of their rights, and when those rights came up for renewal, they would have enough interest to run an auction. As a result, revenue growth was extraordinary.

The onset of digital content distribution initially created more competition. NGBs saw an additional revenue opportunity, and some separated the digital rights from the broadcast rights by selling them to new partners or retaining them for use themselves. Content Partnerships replaced Exclusivity.

At first, digital and OTT platform owners believed the demand for sports content was limitless, leading to a significant revenue increase. However, this assumption was false as subscription fatigue set in, and many early digital platforms couldn’t afford their rights outlay and either sold them back to the main broadcasters or closed their business. By recognising the threat, Broadcasters adopted streaming technology. They offered Content Everywhere options with the expansion of broadband, allowing them to add digital services to their linear ones and include home phone and other entertainment packages as part of a subscription bundle. This new marketplace interested the telcos, and between 2010 and 2019, with a broader market to compete in, rights fees again skyrocketed.

Digital distribution, in turn, led to the rise of social media, revolutionising how people consume content. Initially, this was seen as the new marketplace for sports, opening the possibility of D2C replacing B2B. In the last five years, there has been a notable shift in the audience’s preferences from traditional media channels to digital, streaming, and social media, but the revenue has yet to follow.

Social media is an effective tool to connect with others and, through short, shareable content, provide the potential to reach a vast global audience with minimal cost. It has been a great addition to Tier 1 sports’ offering alongside their large media rights income. Beneath this level, though, many NGBs have hoped that making their content freely available will attract as many viewers as possible and reap financial rewards. However, this strategy has not been as successful as expected. Instead, it has disrupted traditional storytelling, devalued long-form content, allowed viewers to be far more selective, created a confusing narrative with many stakeholders competing on the same platforms, and reduced content exclusivity, ultimately declining the NGBs’ primary revenue sources, such as media rights and sponsorship.

Free access to content on social media has reduced MRPs income potential, and Telcos and cable companies are divesting their interest in sports, leading to significant revenue loss. Given that media rights remain the most crucial revenue source for NGBs, they would do well to adopt a new approach to digital content distribution.

21st Century Multi-Platform Content Exclusivity

Rights holders and NGBs selling all content rights, including broadcast, digital, and social media, to their media rights partners (MRPs), allow everyone involved (NGBs, teams, leagues, athletes, and sponsors) to work together in promoting the content delivered by the MRPs. It ensures that a single provider offers live, long, and short-form content. It achieves maximum engagement by driving the audience to that platform using social media channels. This approach would help fans find the content they want more quickly.

According to Nielsen’s June 2023 Streaming Content Consumer Survey, with so many platforms to choose from, audience members now spend an average of 10-and-a-half minutes searching for something to watch, up from almost seven-and-a-half minutes in early 2019. In addition, 20% of audiences say they don’t know what to watch before they start looking and can’t find something to watch, leading them to decide to do something else. Alongside subscription fatigue, this fatigue from searching for content is becoming increasingly problematic; exclusive content distribution reduces that.

In return for the exclusive rights, the MRPs should be allowed and encouraged to livestream and distribute all the build-up, in-match, and post-event content across all their broadcast, social, and digital channels. This will help them reach a larger audience and benefit from live and long-form viewership, which they invest in currently and the engagements, shares, likes, and other interactions from short-form content generated throughout the event. It will bring the audience into their content ecosystem, delivering sponsorship and subscription value and a revenue return on their investment.

To remain at the forefront of digital and social content engagement and distribution, MRPs must invest in the content creator economy and the resources, expertise, personality, and technology to suit every platform and audience demographic. They should share their strategy, people, resources, and delivery schedule with all stakeholders. The goal is to generate a virtuous circle of content distribution from a single provider that continuously rolls for everyone’s benefit.

Taking a bite out of the Apple and MLS Partnership

Recently, one of the most talked about broadcast media rights partnerships was the one between Apple and Major League Soccer (MLS) in the U.S. This is an excellent example of how a federation, broadcaster, teams, and athletes have combined for a single purpose.

The billboard announcing Lionel Messi’s arrival encapsulates that partnership. The GOAT was Messi, the Pink was Inter Miami, and the message promoted Apple as the broadcast partner. Simple and brilliant.

With the launch of the season on Apple TV+, every time Messi scores a stunning goal, it is shared across social media channels, making Apple’s 10-year $2.5 billion investment in this Tier 2 Sport appear more intelligent each week. Almost everyone who is a Messi, soccer, or MLS fan knows that an Apple T.V. subscription is required to watch his games in the MLS. As Eddy Cue, SVP of Services at Apple said in a recent article,

“For the first time in the history of sports, fans will be able to access everything from a major professional sports league in one place. It’s a dream come true for MLS fans, soccer fans, and anyone who loves sports. No fragmentation, no frustration — just the flexibility to sign up for one convenient service that gives you everything MLS, anywhere and anytime you want to watch.”

In return, Apple has offered the MLS an extensive distribution network, continuous content creation, technological innovation, and adoption to globalise the MLS as a sporting product and stay at the forefront of the ever-changing sports media landscape. They will monitor all the emerging technologies, consumer behaviours, and evolving trends to identify new revenue streams and engagement opportunities, including virtual headsets, Web 3, Blockchain and NFTs. Apple’s agility will allow the partnership to capitalise on the full potential of current and new platforms and technologies while maintaining a solid foundation in traditional, paying media channels.

While achieving a global rights deal of this magnitude is beyond many sports, the principles of the agreement and how going all in with your media rights partner is a compelling business strategy for sports moving forward.

Conclusion:

The future of sports and media lies in new media. Still, it can only be considered the ultimate revenue source once it generates revenue that can match or exceed the revenue generated by traditional media. Traditional media companies and new players like Amazon, YouTube, and Apple hold the golden egg of the sports rights industry: ownership of long-term broadcast or digital streaming media rights. To keep these institutions interested, a competitive, exclusive, cross-platform marketplace must be created for them to benefit from.

Protecting this asset is essential, as it would be in any other market. NGBs need to ensure that their content remains of the highest value to these institutions and, in return for their money, trust that they have every available digital communication channel, the necessary expertise, personalities, and network to distribute their Content and message effectively.

The success of competitive auctioning of media rights resulted from their exclusivity. Applying this approach in today’s decentralised content market can revitalise it. NGBs and their partners should focus on developing strategies to offer rights and ownership to MRPs that expand this revenue stream and protect their most valuable assets.

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