What can we learn from Discovery’s global PGA Tour partnership?

The PGA Tour and Discovery will begin a 12-year, US$2 billion global media rights partnership and launch an OTT platform in 2019. It is a unique arrangement that could hold clues for how the sports broadcast market will develop.

What can we learn from Discovery’s global PGA Tour partnership?

Earlier this month, global pay-TV and media giant Discovery scooped up the worldwide media rights, excluding the US, to golf’s PGA Tour. Beginning in 2019, the 12-year, multi-platform deal will also lead to the development of a direct-to-consumer digital product for the sport’s leading series. 

Discovery has said it will invest over US$2 billion in the new venture over the course of the partnership, between a staggered annual outlay on rights – rising from around US$50 million in the first couple of years to US$100 million and beyond as more markets come into the deal – and development spend on the new over-the-top (OTT) service. 

The announcement follows a successful first outing by Discovery’s Eurosport pay-TV network as the home of live Olympic coverage across 50 European territories for PyeongChang 2018 in February. But while senior figures at Discovery have noted the key lessons learned from that experience, they also stress that this new deal is something altogether broader.  

Eurosport Digital senior vice president for commercial Alex Kaplan has moved across to become president and general manager of the new venture. He spoke at a media briefing in London alongside Discovery Networks International president JB Perrette and Rick Anderson, global media officer for the PGA Tour, as the three men outlined a deal that could redraw the boundaries of modern media partnerships. 

“There really isn’t another one like it in the marketplace,” Kaplan said. 

What is Discovery getting for its money?

“You’ve got to remember,” said Perrette, “US$2 billion certainly is a big number but it’s over a 12-year spread.”

From 2019 until 2024, Discovery will assume a comprehensive package of media rights to the PGA Tour everywhere outside its home market – where they are currently held by CBS, NBC and the Golf Channel until after 2021 and where a new live rights deal has just been agreed for Facebook Watch. Every existing deal will be allowed to run its course, with territories including Australia, Canada, Italy and Japan becoming available in the first year; Poland and South Korea coming into effect in 2020; China, Germany and South Africa in 2021; the UK, India and Scandinavia in 2022; and France in 2024.   

“What makes this deal so unique and so compelling from our perspective is the fact that it really is all the PGA Tour’s media rights,” said Kaplan, who will be speaking at SportsPro's second annual OTT Summit in Madrid. “In every market around the world we’re going to control – obviously working closely with Rick and his team – the digital rights, the live digital rights, the non-live rights, the near-live rights, the archival rights on the digital rights, as well as everything on the linear side. So what that allows us to do is localise. We’re going to be able to create a proposition, create a product, and ultimately create a consumer offering market by market that fits with those consumers.”

Discovery is not just buying coverage but becoming a distribution partner for PGA Tour rights in a similar but more expansive way to its agreement with the International Olympic Committee (IOC). Selling on rights, where appropriate, will be one way of generating income from the deal, while the launch of the digital product will also have different financial incentives for both partners – though the specifics of this have not yet been clarified. 

“We are taking over a nine-figure business that exists today – that’s been growing significantly,” said Kaplan, referring to the PGA Tour’s existing international rights revenues. “I think the number is that over the past five years, they’ve grown that over 50 per cent. So we liked the trajectory that they were on before we got involved.” 

What will the new OTT platform look like?

OTT is clearly a rising priority for Discovery, which in 2016 announced a joint venture with Disney-owned digital services builder BAMTech to create BAMTech Europe. The bulk of its experience in sport currently comes through the Eurosport Player, that broadcaster’s multi-language, multi-territory and multi-currency digital outlet. And while that has given it a firm grounding in meeting the likely demands of its partnership with the PGA Tour, the resulting product will be more bespoke. 

“We have some work to do on what the ultimate branding will be,” said Kaplan. "That, you’ll hear from us on later this year. Certainly, when you’re talking about PGA Tour content, you’ll see significant brand attribution to the PGA Tour.”

PGA Tour Live, the tour’s existing digital service, might offer some idea of what to expect. Anderson, however, insists that the new service will be more heavily localised rather than a US export – in keeping with the wider vision for the partnership.

Pricing is another element that will emerge closer to the launch of the service next year, though golf’s relatively affluent following will be a factor. “We’re going to learn here,” said Kaplan. “It’s going to market by market. The demand, the ability and willingness to pay is going to be different country by country; the content construct may be different country by country – we may have more content on the digital offering in one market than another and that may impact pricing.”

There is an appetite on both sides to add further golf rights and coverage to the platform and make it a destination for all fans of the sport.

“If you look at this five years from now,” Anderson said, “we would love to see that you’d be able to watch everything in professional golf that you’d want to watch on this product.”

Ultimately, the shape of the digital offering will develop across the partnership’s 12-year term. “It still takes time to change habits, evolve habits, and move consumer behaviour even as fast as it already is moving in the media space,” said Perrette. 

What brought these two partners together?

“We’ve repositioned ourselves as this global leader in what we call ‘real life entertainment’,” said Perrette. “For us, we see so much happening in the media space today, and companies going after the big aggregation offerings – whether it be the Netflixes, the Amazons, what’s happening in the Disney/Fox/Comcast battles. There’s a lot of players going after the aggregation plays.”

In that environment, Perrette sees Discovery’s edge in finding “target groups of passionate fans in affinity groups”, rather than laying on a “buffet” for a general viewer. In factual entertainment, that might mean “adventure and survival, real crime, food, travel, home”, while with Eurosport the group has focused much of its rights strategy on dominating in “cycling, tennis, winter sports”. 

“For us, the focus has always been around: can we find these categories of passionate fans, robust communities of not just viewers but participants?” he said. “And categories of places where we think we can own that vertical across not just one market but, ideally, every market around the world?”

In golf, an aspirational lifestyle sport with a broad crossover between those playing and those watching, Discovery believes it has found another such fanbase. By securing a global package of rights, meanwhile, it can reach those fans in almost every market.

With that in mind, Perrette compares the PGA Tour deal not to any other sports rights play but to Discovery’s US$14.6 billion acquisition of Scripps Networks International earlier this year.

“In that deal,” he said, “we obviously fully acquired strong, vertically owned brands: Food Channel, HGTV, Travel Channel; they owned their vertical; killer IP; they own the IP all the way around the world and we can take that and not only exploit it linearly but also in a non-linear fashion. 

“And this, obviously, is not an acquisition, but it’s a long-term deal that is as close in the sports world as you could get, probably. It has the same concept of going after the vertical of golf fans and trying to grow that base and super-serve that base with a really cool and compelling digital product.”

The PGA Tour came into the deal with its own ambitions to expand its direct-to-consumer offering and its global footprint. “What we determined,” said Anderson, “was that we could do that much better with a massive partner at our side than we could do it on our own.”

Initial conversations, which also involved Discovery Communications president David Zaslav and PGA Tour commissioner Jay Monahan, gave both sides grounds for confidence. Anderson points to the breadth of Discovery’s operations, with “boots on the ground in 220 countries”, and its success in pursuing a multi-facted approach to PyeongChang 2018 as having given the PGA Tour cause to pursue talks. 

“We looked at that and said, ‘That looks like a partner that could really help us achieve our vision,’” he added. “When we started understanding the scale, it started to look like a relationship that would make incredible sense to us.” 

And a partnership is very much what Anderson now believes the tour has. 

“We would never have had interest in handing over our rights and getting a cheque and going on our way,” he says. “We wanted to be part of the process.”

What’s the distribution strategy? And what will happen to the tour’s existing TV deals?

“It was not the intention to do this partnership and then put all the content on Eurosport,” said Perrette. “We will, selectively, and we always have that option, so we will look and see where it may make sense.” 

The arrival of Discovery has been framed as a blow to the tour’s existing broadcast partners – such as the UK’s Sky Sports, which has a deal in place with with the PGA Tour until 2022 and has made a significant investment in golf programming. But Anderson sees no reason why the likes of the pay-TV giant, which has dedicated one of its single-sport channels to golf, should not be a part of the tour’s future. 

“Sky has made a massive commitment to golf and to the PGA Tour so if you’re now in the golf business, and [Discovery are] now in the PGA Tour business, that’s not something you’re just going to walk away from,” he said. “The things that they have done that go beyond the payment of rights fees: the way they’ve branded their channel, they’ve committed to golf with a dedicated channel; the things they do on the side of our events every week – none of that is something you’d walk away from lightly.”

Perrette, too, has put no limits on prospective future negotiations. “We sub-licensed the rights to the Olympics with, in theory, broadcasters who are competitors of ours in a lot of markets,” he said. “So we’re very comfortable and used to the fact. We’re pragmatic, more than anything else.”

Between sub-licensing to pay, free-to-air and even digital partners, and making more or less coverage available on the OTT platform, the strategy will vary from one territory to another. Kaplan notes, too, that content could be made available “in front of a paywall” in the digital space. 

“When you think about ‘global’, that’s one word but it’s a highly deceiving word because it sounds super-simple,” said Perrette. “The reality is it’s made up of hundreds of different markets and you’ve got to go local to succeed. You need to have local expertise, you need to have local teams, you need to have people who can figure out how to partner with the right local players. And that’s an infrastructure that we’ve invested for over 30 years in building.”

Perrette can see an editorial imperative shaping the distribution of coverage, as well as a commercial one. He suggested, for example, the opportunity to follow individual players through the tournament, to watch coverage from practice or the driving range, or take a look at preparations behind the scenes might flourish in the wider fairways digital outlets offer. “Part of that journey that we’re going to be on is: what is the differentiated coverage that we can provide in a digital space that you just can’t do on television?” he said.

That, too, would allow for further tailoring of coverage from market to market, with different stars and priorities coming to the fore in each one. “One of the great things about our sport is that you have so much content,” said Anderson, who would prefer a spread across pay-TV, free-to-air and digital. 

“They may have content that makes the most sense for that platform,” he said. “But an objective would be to try to do all of that. 

“Would we be able to achieve that in every market? No. But I think we go into it saying that we want to get this content out and distribute it in every way that we can as long as it makes economic sense.” 

A responsive, adaptable approach will also be required. “When you look at it over 12 years,” said Perrette, “the terminology that we use is out of date.”

What does this mean for a global golf tour?

The expansionist efforts of not just the PGA Tour but also the European Tour have led to many to wonder whether their future lies together, particularly when so many leading players have been known to split their time between each circuit. 

Speculation has arisen in the past about a merger, or some other arrangement that would create a single, elite global tour. Establishing a global media rights arrangement would put the PGA Tour on a solid footing for such an eventuality but Anderson insists that the two are not linked.

“We certainly know that that discussion’s out there,” he said. “Jay and others have talked about that. This deal, in particular, has made no assumptions about that. It just assumes that we have the current landscape in terms of golf. We’ve done a deal as the PGA Tour and the other properties that are out there are things that can be acquired. And if that changes over time, it just changes the potential landscape.”

Irrespective of how those talks progress, the PGA Tour sees in this deal an opportunity to strike out ahead as a global golf property.  

“We have such an amazing opportunity in the international and the ex-US space,” said Anderson. “Golf is one of the only truly international games; it’s played all over the world; people participate in it all over the world. Golf re-entered the Olympics in 2016, which I think got the attention of governments and commercial participants in different countries that maybe it didn’t have before.

"The PGA Tour is the pinnacle destination for professional players around the world and we already have 85 players from 25 countries that are outside the US playing in the PGA Tour on a regular basis.”

Could other partnerships follow a similar template?

Though the PGA Tour deal is unique in its scope at the moment, Discovery would be interested in applying the model to another partnership – and Perrette can see the value in applying its multi-platform experience in a “complicated, rapidly changing world”. 

“Over time, we’re building an expertise not just around Europe but globally to take incredible franchises and take their base and grow it,” said Perrette. “If there are other rights holders and federations over time that want to have similar conversations, we’re absolutely open for business.”

In Discovery’s case, he added, there is no “ulterior” behind its desire to build digital media platforms, such as retail or selling mobile data. “This is our business,” he said. “It’s our only business.”

Other mass media companies may have similar imperatives but their routes to achieving success will be affected by other complications – running a bundled platform, for example, in the case of Sky, or funding scripted entertainment like Disney. For rights holders, too, strategic priorities will differ.

Speaking at a press roundtable in London soon after the PGA Tour’s announcement, the outgoing Premier League executive chairman Richard Scudamore said he doubted “very much” that his successor might seek a similar global partnership. 

“It’s almost impossible to think that in the foreseeable future there’s some mega-company that’s going to buy our rights on a global basis,” he said. “It doesn’t suit us.”

It had been a “deliberate strategy”, he added, “to go market by market by market”, while he believed that introducing an overarching partner might jeopardise relationships it had taken decades to build.

“Nobody could do what we need doing on a global basis, it’s just impossible,” he continued. “So this is why we sell to the local people in India, the local people in China… I cannot see any organisation coming along and wanting our rights on a global basis.” 

Nevertheless, not many rights holders have the scale of the Premier League and even fewer would be starting from its position of strength in worldwide TV markets. Plenty more will be watching with interest to see what the PGA Tour and Discovery can achieve. 

Discovery's Alex Kaplan and Rick Anderson of the PGA Tour will be speaking at the SportsPro OTT Summit in Madrid on 28th and 29th November. To find out more, click here