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Big Media, Silicon Valley Battle for Multibillion-Dollar Sports TV Rights

The year is 2034. The Olympics that have been a fixture on channels owned by NBCUniversal since 2002 have disappeared from TV altogether. Instead, the Winter Games stream live to your phone courtesy of Amazon, which bid the rights away from all of the biggest media companies. The downhill skiing competition has never looked better in 16K screen resolution, with not a hint of buffering.

This fictional scenario may sound inconceivable, and no company is known to be making a play for the rights to the Olympics just yet. But as NBC is set to blanket the two biggest sporting events on American calendars — Super Bowl LII (Feb. 4) and the 2018 Winter Olympics (Feb. 9-25) — across screens everywhere next month, tech titans are making an unmistakable advance on sports telecasts that were once the exclusive preserve of traditional media companies.

Mikaela Shiffrin, 22, is the reigning Olympic champion in the slalom, after taking the gold in Sochi in 2014.Carlos Serrao

Over the past two years, Amazon, Facebook, Twitter, YouTube, Verizon and Yahoo have picked up smaller sets of mostly nonexclusive rights to different packages of live pro games, essentially rebroadcasting what’s seen on TV to a fraction of the audiences coming to linear channels. But the current bidding war for primetime TV rights to “Thursday Night Football,” which the NFL is shopping to broadcasters and streaming services alike, is indication enough that Silicon Valley players are poised to snatch away all of the rights packages they’re currently content to share.

“One day you’ll wake up and say, ‘Son of a gun! The NFL is no longer on X network — it’s in a new place,'” predicts industry vet Michael Kassan, founder and CEO of consulting firm MediaLink.

In the U.S., TV and streaming rights for the most popular leagues are (mostly) locked up until 2021. But digital platforms may strike sooner on foreign shores: In the U.K., for example, bids for English Premier League soccer rights are on the table this year — and Amazon has been rumored to be a serious contender to vie against current rights holders BT and Sky. The crown jewel of European sports rights, EPL cost the two companies roughly $7 billion in 2015.

New media’s most powerful entities are mum on whether they’re willing to strike for the biggest rights deals. Sports is “an area we want to continue to invest in,” says Dan Reed, Facebook’s head of global sports partnerships, declining to get specific. “We see all kinds of fans on our platform, ranging from the most popular sports to niche sports.”

While the scale of their ambitions is unclear, some of the tech giants certainly have pockets deep enough to easily bid up the multibillion-dollar price tags on game packages. That could put them beyond the reach of media companies already suffering financially as ratings for some top sports attractions sag. But if incumbent rights holders are feeling the pain now, that’s nothing compared with the world of hurt that awaits them in the event they lose the content that’s the linchpin stabilizing many of their businesses.

“Sports obviously is the glue that holds the pay-TV bundle together,” says CFRA Research senior media analyst Tuna Amobi. He pegs the prospect of traditional TV nets losing key sports rights as a medium-term risk factor: “What makes it unsettling for the traditional media conglomerates is that they know the digital companies have a lot of firepower if they decide to ratchet it up. It’s only going to get more and more intense.”

DEALS ON DECK
Several soccer rights packages expire in the next three years; NFL and MLB soon after
PROPERTY EXPIRATION
DATE
CURRENT RIGHTS
HOLDER
MARKET AVG. ANNUAL RIGHTS FEE
Italian Serie A 2018 Sky Italia, Mediaset Italy $1.1B
English Premier League 2019 BT Sport, Sky U.K. $2.2B
WWE 2019 USA Network U.S. $140M
La Liga 2019 Mediapro, Telefonica Spain $1B
Ligue 1 2020 BeIN Sports France, Canal Plus France $1B
NFL Monday Night Football 2021 ESPN U.S. $1.9B
MLB 2021 ESPN, Fox, Turner U.S. $1.9B
UEFA Champions League 2021 Multiple (U.S.: Turner) Global N/A
Bundesliga 2021 ARD, Sky Deutschland Germany $1.1B
NFL Sunday Ticket 2022 AT&T/DirecTV U.S. $1.5B
FIFA World Cup 2022 Multiple (U.S.: Fox, Telemundo) Global N/A
NHL 2022 NBC U.S. $200M
MLS 2022 ESPN, Fox Sports, Univision Deportes U.S. $90M
NFL 2023 CBS, Fox, NBC U.S. $3.1B
NASCAR Cup Series 2024 Fox, NBCSN U.S. $820M
Olympics 2024 Multiple (U.S.: NBCUniversal) Global N/A
NBA 2025 ESPN, Turner U.S. $2.6B
Sources: GroupM “The State of Video,” November 2017, Variety research. NBCU’s Olympic broadcast rights extend through the 2032 Summer Games.

Of the digital sportscasting rookies, Amazon and Facebook have been the most active in seeking out bigger-ticket streaming rights, according to industry execs. Besides “Thursday Night Football,” both have signaled interest in bidding for WWE’s “Raw” and “SmackDown” franchises, sources say, ahead of NBCUniversal’s USA Network deal expiring in 2019. In addition, UFC’s pact with Fox ends this year, and the mixed martial arts melees could be an opportunity for one of the streamers to jump into the sporting ring.

“The tech companies have a lot of money,” says Richard Hampson, senior VP of market insights and analytics at GroupM’s ESP Properties. “They can afford, as rights become available, to invest in and understand how that content performs on their platforms.”

Among other usual suspects, Google at this point isn’t seen as throwing its full weight into bidding for premium sports. Apple and Netflix are dumping truckloads of cash into original scripted entertainment. Netflix content chief Ted Sarandos has repeatedly sworn the company has zero interest in getting into the sports game — but “there’s never a never with Netflix,” says Eunice Shin, managing director and head of consulting for Manatt Digital.

Industry execs expect significant moves from Facebook — which hasn’t hidden its hankering for sports. Earlier this month, the company hired Peter Hutton, CEO of Discovery-owned Eurosport, to lead its negotiating team for live-streaming sports deals, sources confirmed to Variety. He’s expected to join Facebook after the conclusion of the Winter Olympics. Hutton comes aboard after embarking on a search to recruit a sports dealmaker who will have “a few billion dollars” to vie for global rights deals, according to a Sports Business Journal report. Meanwhile, the social giant last fall entered a $600 million bid for five-year rights to Indian Premier League cricket matches, ultimately losing to Star India (which bid $2.6 billion for TV and streaming rights).

The company’s interests even caught the eye of Rupert Murdoch, who observed in an interview in the wake of 21st Century Fox’s announced asset sale last month to Disney, “The one that’s coming for sports is Facebook. … We don’t know which country they’ll go after or what they’ll do.”

Live sports is a key component of Facebook Watch, the company’s platform aimed at driving “high intent” viewing of episodic programming blended with community and discussion features. “We think sports is a natural fit for Facebook,” Reed says. “It’s inherently social and it’s very popular.”

“I want to partner with ESPN and the NFL — not disrupt them.”
Anthony Noto, former Twitter COO

For Amazon, live sports serves a different objective: It’s designed to drive consumers to Prime, the membership program centered on free shipping (so they’ll buy more stuff), which also includes unlimited access to Prime Video.

Like Facebook, Amazon is cagey about how big its appetite might be for sports in the coming years. “We’re still in the very early stages of this,” says Jim DeLorenzo, head of sports for Amazon Video. Right now, he says, the company is trying to “provide additional content we think our customers will love.”

Amazon’s sports lineup has included 11 NFL “Thursday Night Football” games this season and the Assn. of Tennis Professionals’ Next Gen Finals (through the end of the year); it also inked a two-year pact to live-stream the AVP Pro Beach Volleyball Tour worldwide. “We’ll have to see how things pan out over the near term just to see if there’s additional content that makes sense going forward,” says DeLorenzo.

Amazon streamed “TNF” to Prime Video customers this season after Twitter had the global internet rights in 2016. For the past two seasons, the NFL has used “TNF” as a sandbox to test out digital deals to supplement its primary TV distribution. All told, Amazon’s streaming of the games drew 18.4 million total viewers in 224 countries and territories. The average-minute audience watching NFL contests on Prime Video for at least 30 seconds topped 310,000, 17% higher than Twitter’s results the season prior.

Mikaela Shiffrin, 22, is the reigning Olympic champion in the slalom, after taking the gold in Sochi in 2014.
Carlos Serrao

That, according to the NFL, boosted overall consumption of “TNF” by about 2.5%. The league touts it as a win. “In a world where people are trying to drive as much incremental consumption as possible, this is a small but growing asset for us,” NFL senior VP of digital media Vishal Shah said at an industry conference last fall.

Last month, the NFL told prospective bidders it would consider granting “TNF” exclusive rights to an internet service — which would mark the first time the league sold a multigame package to an over-the-top distributor. But observers see this as a negotiating tactic to spur a TV network to buy the entire 11-game “TNF” package, including online rights. Facebook, for one, will sit out this round of NFL haggling, per a Bloomberg report. “I don’t think any of the networks are going to take the threat from the tech companies lying down,” says one top TV sports programming exec.

To be sure, if the tech players do move to snare top-flight rights, the TV giants aren’t just going to quietly fold their cards. They’re prepared to mount an aggressive defense to maintain possession of what’s become the most valuable live content available anywhere.

“For us, it’s pretty simple. It’s the wheelhouse; it’s the essence of our company,” says Burke Magnus, ESPN’s executive VP of programming and scheduling. The Disney-owned programmer — jolted by last month’s exit of president John Skipper and a string of layoffs — in 2017 spent more than $8 billion on sports rights, according to estimates by SNL Kagan.

Rick Cordella, exec VP and GM of digital media for NBC Sports Group, asserts that broadcast TV is still unmatched at reaching a massive audience — while at the same time, NBC is delivering a massive streaming lineup for fans who want to watch on other devices. The NBC Sports app pumps out about 20,000 hours annually of live programming, and this year it will deliver an additional 1,800 hours for the Winter Olympics from South Korea.

TV sports execs say that compared with the newer digital entrants, they have a track record to give rights owners confidence they’ll continue to reach fans regardless of the platform. “If you’re a league or governing body looking to sell your rights, there’s no better place to sell them than broadcast TV,” Cordella says.

Through a certain lens, the stage looks set for serious drama. There’s an epic clash looming between upstart digital players and TV networks for the future of sports broadcasting. It would be a category-altering move if one of the insurgents forced a turnover of, say, “Monday Night Football,” which has been a television staple for nearly five decades.

Some have even suggested that streamers-versus-broadcasters is a false dichotomy because the leagues could essentially cut out either and begin distributing directly to consumers, as if media companies were just middlemen easy to disintermediate. It’s a theory Netflix’s Sarandos proffered last December as a means of explaining his own company’s disinterest in sports. But speaking at a Variety event days later, 21st Century Fox president Peter Rice dismissed the notion.

“It’s not just someone with an iPhone at the league streaming the game,” Rice said. “We have an expertise in how to do that. It costs us a billion dollars a year to produce games. The leagues are not set up to do that. It’s not their expertise.”

But there’s still another narrative: the idea that tech companies are more friend than foe to television networks, because they actually broaden a TV network’s reach — not cannibalize it.

KEY STREAMING RIGHTS DEALS
New media players such as Twitter, Facebook and Amazon are increasingly adding sports content to their lineups.
DATE SERVICE PROPERTY DETAILS
July 2016 Twitter NHL, MLB Weekly games
Jan. 2017 Twitter PGA Tour 31 events and 70 hours of total coverage for the 2017-18 tour season
March 2017 Twitter MLS 22 games through 2017 regular season
April 2017 Amazon NFL Thursday Night Football $50m, 1-year deal. Includes 11 games, available to Prime Video members in 200 countries
May 2017 Facebook MLB 20 MLB games throughout the 2017 season
May 2017 Twitter WNBA 3-year deal (2017-19). 20 games per season
May 2017 Twitter MLB Expands 2016 deal to include a weekly show featuring live look-ins, highlights and analysis
June 2017 Facebook UEFA Champions League Streams 2017-18 matches through quarterfinals on Fox Sports Facebook page
August 2017 Facebook NCAA 15 live college football games (9 Conference USA/ 6 Mountain West)
Sept. 2017 Facebook NFL 2-year deal includes highlights from all regular-season games, as well as playoffs and the Super Bowl
Nov. 2017 Amazon ATP World Tour 5-year deal includes live coverage of 37 events (U.K./Ireland). U.S. subscribers get access to Tennis TV
Nov. 2017 Facebook NCAA Basketball Partnership with sports net Stadium includes 47 college games in 2017-18
Dec. 2017 Verizon NFL $2b over 5 years. Includes all in-market and national games (preseason, regular season, playoffs/Super Bowl)
Dec. 2017 NBC NFL Sunday Night Football Expands prior deal to include mobile platforms starting in 2018 season
Dec. 2017 Facebook WWE 12-episode in-ring series for 2018
Dec. 2017 ESPN NFL Monday Night Football Expands agreement to include mobile phone streaming for ESPN subscribers
Sources: Company Data, Jefferies estimates

That’s what DeLorenzo suggests. He points out that Amazon Channels recently launched CBS All Access as an add-on subscription option for Prime members, delivering another option for customers to access live NFL games and other sports. Under the ATP deal, Amazon will offer the association’s Tennis TV service in the U.S. as another part of Amazon Channels. And in the U.K. and Germany, Amazon tenders Discovery-owned Eurosport as a subscription channel.

“We haven’t looked at it as if we were competing with the broadcasters,” DeLorenzo says. “There’s no reason to think we can’t continue to work with them as partners.”

Twitter tells a similar story of TV coexistence, although that’s probably mainly because it doesn’t have the heft to vie for exclusive sports rights given its size (with a market cap of less than $18 billion). The social service’s strategy is about helping leagues, teams and rights owners access an audience they wouldn’t otherwise be able to reach, according to Anthony Noto, who recently left his post as Twitter chief operating officer. He describes Twitter’s ability to connect with younger viewers who are “not watching TV or not at home,” and to generate incremental advertising dollars for TV partners.

“There are going to be big tech companies and new entrants that want to create a unique offering and disintermediate [other] distributors,” Noto says. “That’s not us. I want to partner with ESPN and the NFL — not disrupt them.”

The other key opportunity for Twitter is to stake a claim on less popular sports that aren’t widely available on TV. “We know that on Twitter if you care about
the WNBA, the NWHL, lacrosse, cycling or fencing, we can serve those audiences well,” says Noto, who before joining Twitter was an investment banker at Goldman Sachs, and prior to that was the NFL’s chief financial officer.

“The one that’s coming for sports is Facebook. We don’t know which country they’ll go after or what they’ll do.”
Rupert Murdoch

Verizon has made a strong sports play recently, including an NFL streaming pact worth $1.5 billion to $2 billion for U.S. mobile rights and an expanded deal with the NBA to offer out-of-market subscriptions, aiming to make live sports and related content a much bigger part of its Oath division, which includes Yahoo Sports. The telco’s hypothesis is that it can build a sports streaming brand to cater to a generation of consumers growing up outside the pay-TV walled garden. “It’s our ambition to own sports in the mind of the consumer for mobile and digital,” says senior VP Brian Angiolet, Verizon’s chief media and content officer.

Not everyone believes exclusive live sports really are a long-term strategic fit for the likes of Amazon or Facebook. David Gandler, CEO and co-founder of OTT subscription-television start-up FuboTV, argues that there’s a weak economic case for challengers to swoop in and pay through the nose for rights to premium sports programming.

“For a TV network, it makes sense to use sports to drive value — you aggregate large audiences, advertise, promote your other programming,” Gandler says. “For a tech platform, it doesn’t make sense.”

There’s a natural framework for sports rights, he says: “Long term, I just don’t see technology companies — the FANG [Facebook, Amazon, Netflix and Google] group — really doubling down on all these rights.” That’s especially true, Gandler adds, given that Amazon can see a higher return by acquiring a real asset like Whole Foods for $13.7 billion, as opposed to renting sports rights for a couple billion dollars over a few years.

Today, the reality is that even with billions to spend on sports media rights, tech players can’t get their hands on the exclusive access that they know would seriously move the needle. “We’re getting what we can get as it becomes available,” Verizon’s Angiolet says. “Are there more rights to get? Yeah, the ocean is deep. But with the NBA, NFL and soccer, there’s plenty we have there to work with.”

Whether or not tech players will try to seriously compete in the big leagues, there’s no question internet streaming is providing an outlet for a myriad of smaller sports properties that can’t get a berth on TV. And it’s an area where leagues can employ new technologies like social interactivity and virtual reality to deliver a fan experience that’s unlike anything on TV.

THE MONEY MIX
TV and streaming rights will be the biggest — and fastest-growing — source of sports revenue in the U.S.
North America sports market revenue forecast
Source: PwC Sports Outlook, December 2017 — For NFL, MLB, NBA, NHL and MLS

Look at Amazon-owned video-broadcasting unit Twitch. As part of trying to broaden beyond its video-game roots, Twitch last month unveiled a deal with the NBA to stream up to six minor league games per week during the current season. The NBA G League games on Twitch include interactive statistics overlays and a co-streaming option for Twitch personalities to provide their own live commentary.

In other words, it’s not your dad’s brand of TV sports. “Twitch elevates video in a unique, engaging way that resonates with young viewers,” NBA G League president Malcolm Turner said in announcing the deal.

Amid the rising streaming tide, media conglomerates have tried to jockey for position to become OTT giants — before nimbler rivals have the chance to sweep them off their sports pedestals.
Disney last year acquired majority control of BAMTech Media, the video-streaming unit formed by Major League Baseball, paying a total of $2.6 billion in a pair of deals for a 75% stake, alongside MLB and the NHL. The company provides the infrastructure for MLB.TV, as well as the NHL, PGA, HBO Now and WWE Network digital streaming services.

And BAMTech will power ESPN Plus, the sports programmer’s direct-to-consumer OTT subscription service, expected to launch in the spring of 2018. (Disney hasn’t divulged many details about the new offering, but it won’t include NFL or NBA games — for those, you’ll still need to buy pay TV.) Separately, Disney also will obtain 22 regional sports networks under its $54 billion proposed deal to buy a big chunk of 21st Century Fox’s assets. It remains to be seen how the RSNs will fit into the streaming-sports puzzle, but clearly Disney sees value in combining its TV sports businesses with new internet distribution.

“The fact Disney made the decision to acquire BAMTech shows its commitment to the future,” says BAMTech CEO Michael Paull, who came aboard a year ago from Amazon’s video division.

Also wading further into the digital pool, NBC in 2016 formed Playmaker Media, a similar business-to-business streaming video unit. Last summer it debuted NBC Sports Gold, a live-streaming service with different subscription packages for Premier League soccer, international cycling, track and field, rugby and other sports.

Turner Sports also has direct-to-consumer sports plans. The cable programmer struck an exclusive three-year deal for multiplatform rights to the UEFA Champions League and UEFA Europa League soccer games beginning with the 2018-19 season. Under the pact, Turner will present more than 340 UEFA matches per season. While the cabler will carry many of those contests on TBS or TNT, Turner expects to launch a new stand-alone premium sports-streaming video service based on the UEFA rights and tied to its Bleacher Report digital-sports brand.

SPORTS: PAY TV’S CRITICAL COMPONENT
91% Percentage of sports fans who subscribe to pay TV for access to live games
82% Percentage of traditional pay-TV subscribers who would scale back/cancel their subscription if they no longer needed it to access live sports
56% Percentage of sports fans who want access to more interactive content like stats, interviews and chat while watching live sports
$23 Average amount sports fans would pay for unlimited access to live sports on any platform
Source: PwC 2017 Consumer Intelligence Series video survey

One of the big reasons the likes of Disney, Turner and NBC have moved to build out their own streaming businesses for sports boils down to one thing: data.

Having their own direct-to-consumer streaming services lets them collect and analyze granular information on sports fans’ viewing behavior. In an increasingly multiplatform world, a treasure chest of rich metrics is a clear differentiator. Used effectively, they can help media companies be more valuable partners to leagues, which are looking to use data to create smarter and more effective audience development and engagement. “Data is the new black. If I’m the person who can give it to you, that’s going to be an advantage,” says MediaLink’s Kassan.

To ESPN’s Magnus, the world is a long way from streaming platforms being the exclusive solution for leagues and other rights holders. He views tech companies as the latest team of competitors, and notes that ESPN has long faced well-funded rivals in the business. “I first heard of a ‘sports-rights bubble’ 15 years ago,” he says.

What the sports world is facing today isn’t all that different from what transpired back in the early ’90s, when the seven-year-old Fox, looking to establish itself, outbid CBS with what was then an eye-popping $400 million annually for Sunday-afternoon NFL games. CBS, Fox and NBC now each pay the NFL around $1 billion per year. New bidders stand to drive up the cost of the rights all over again, which will be a challenge for incumbent broadcasters already feeling
the drag on their businesses from bigger digital giants. But that’s the price of admission in a world where very valuable content cuts through the clutter — and can amass fans in huge numbers. ESPN, like every other team on the field, will have to pick its targets.

“Sports is platinum, premier content,” says Magnus, “and there will always be a lot of suitors for it.”

Correction: A previous version of this story incorrectly reported that ESPN Plus, the forthcoming standalone sports-streaming service, will not include MLB games. In fact, ESPN Plus will include MLB games as part of the lineup of thousands of live events including NHL games, college football and basketball, tennis, rugby and cricket.

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