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Minal Modha | Why sport could be the next battleground in the US streaming wars

In her latest column, Minal Modha, consumer research lead at Ampere Analysis, uses the company’s data to explain why more entertainment-led US streaming services are turning to live sport to lure subscribers.

27 April 2022 Minal Modha

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For the last few years, the US has been the epicentre of the streaming wars.

The launch of studio-led direct-to-consumer (DTC) services such as Disney+, HBO Max and Peacock into an already crowded market has further complicated a landscape in which consumers already have to choose between over 100 different subscription streaming services. While the battle for eyeballs (and revenue) was initially focused on high-quality original entertainment content, the tide may be turning; sport looks like it’s going to take centre stage.

2021 felt like a turning point for sports streaming in the US market. The National Football League (NFL) penned its first exclusive national broadcast deal with a streaming service by partnering with Amazon, ESPN spent US$1.4 billion to bring LaLiga to ESPN+, and Peacock continued to expand its sport offering by becoming the home of the WWE Network.

By the end of 2021, the value of sports rights in the US surpassed US$19.1 billion, but when this is broken down by the type of buyer, only three per cent is attributable directly to pure subscription over-the-top (OTT) platforms. By comparison, in the big five European markets, this stands at 12 per cent of spend.

The main reason for this apparent disparity is the way rights are bought in the US. In Europe, pay-TV providers — and more recently, standalone streaming platforms — tend to represent the bulk of spend, and acquire exclusive rights for their own products. In the US, core sport rights are held by broadcasting groups like NBC, Disney and Warner and new streaming platforms such as Amazon Prime and DAZN have bought very few rights.

In a way, the distinction between broadcasters and streamers is becoming increasingly artificial as broadcasters use their in-house streaming platforms to host rights. For example, NBC started a new ten-year, US$7.75 billion deal to show the Olympics in 2022, and then distributed the Beijing Winter Olympics both across its linear channels available on cable and satellite products and via Peacock.

The deal architecture, and therefore attributed rights values, in the US market may not reflect the true momentum of streaming services. But it’s definitely there. As well as the more traditional OTT platforms signing online deals, the last two months alone have seen HBO Max secure its first US sports coverage in the form of rights to US national soccer team games, while Apple TV+ sealed rights to Friday night Major League Baseball (MLB) games – both domestically and in selected international markets.

So why are predominately entertainment-led services now turning to live sport?

According to Ampere’s consumer study, at the beginning of 2022, sports fans accounted for nearly 40 per cent of US internet users. It is a group which readily engages with subscription services, over-indexing against the average for household access to subscription-video-on-demand (SVOD), pay-TV and premium channels. They’re also an affluent cohort. Over 20 per cent have household incomes of more than US$100,000 per year, making them a particularly attractive target for subscription services.

Sports fans are more likely than the average internet user to subscribe to several SVOD platforms, but the majority of them still don’t have access to those now entering the sport space. For example, 77 per cent don’t subscribe to HBO Max and 87 per cent don’t have Apple TV+. This means there is a huge conversion opportunity among existing sports fans – if the content is appealing enough.

But this isn’t just about tapping into a high-value potential customer base, but also reacting to changing viewing preferences among different demographics. With the US being arguably the most advanced streaming market in the world, it’s unsurprising that viewing preferences there lean towards OTT platforms.

Ampere’s sport consumer data shows that over a third of US sport fans now primarily want to watch live sport via an online streaming service – they are 32 per cent more likely than the global average to hold this sentiment.

Nearly half of young fans in the US want to watch this way, but even among the oldest demographic we surveyed, 55 to 64-year-olds, 41 per cent wouldn’t mind watching via streaming services, which suggests a newfound openness to streaming among even the more linear-centric groups. And as these older age groups increase their engagement with entertainment-led OTT platforms like Netflix and Amazon, live sport via OTT also becomes a more acceptable means of consumption.

Offering sports content solely via OTT services is not necessarily the way forward, however. Significant proportions of those aged over 35 want to watch only via broadcast TV, so for the foreseeable future a mixed distribution strategy is needed to cater for fans across the wider spectrum. This appears to be something US rights holders are keenly aware of. The NFL’s deal with Amazon includes a requirement for the Thursday night matches to be sub-licensed to a free-to-air linear partner in the home market of the teams that are playing, something which was driven by the league.

In the context of the domestic market, US streaming platforms acquiring live sports rights in order to attract the high value sports audience and move with changing viewing preferences makes sense. However, for many of these deals, the impact is hyper-localised.

One example is Apple’s deal with MLB , which spans nine markets, with the potential to expand to more territories. Ampere’s sport consumer data shows that MLB is the third most followed competition in the US, thereby providing a significant target audience for Apple.

However, in overseas markets, interest levels drop significantly. It is highest in Australia and Brazil, where seven per cent of online sports fans express an interest, but in markets like the UK, interest is as low as four per cent among sports fans, so MLB content is unlikely to deliver a significant number of new subscribers here. This may be one of the reasons why Apple recently announced that, for a limited time, the Friday night games will be free to view on Apple TV+.

Apart from news, sport is the last ‘appointment to view’ content left on TV. Movies and TV shows can be watched at consumers’ own leisure, but once the final whistle has gone in sport, there are spoilers facing fans everywhere and the content rapidly loses its value. Viewed in this context, it’s no surprise that US OTT platforms want in on the action, because if done right, it’s a guaranteed audience each week that can bring in both subscriber and/or advertising revenue.

For US sports rights owners, increased competition among streaming services should generate uplifts in revenue at renewal periods, while the OTT platforms themselves will be hoping their acquisitions of prime sports content will help them stand out in an increasingly competitive and crowded market.

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