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Finding fruitful ground in the European D2C landscape

MediaKind's Dheeraj Ravula analyses the trends in the D2C sports space including the use of live content, fan engagement and monetisation

Direct-to-consumer (D2C) services are becoming an increasingly important element in many brands’ media strategies, offering a means to provide a richer experience for the viewer and essential fan data and potential revenue for the brand. As rights-holders, sports teams and leagues, event organisers, and other content owners look to future-proof their business models amid turbulent industry disruption, they must maintain direct relationships with their audiences. 

While corporate websites have usually acted as a brand’s central hub for encouraging audience engagement, D2C provides brands with a renewed opportunity to offer their compelling live content via a medium that opens up a two-way relationship. It is a market that looks set to grow exponentially in 2021 and beyond. 

The next generation of media

Streaming has evolved into an entertainment mainstay for many media divisions, particularly live sports. As a result, the way audiences enjoy and engage with content is being redefined. The UK’s BBC and ITV are just two examples of significant media players launching wholesale restructures to focus on streaming. Evolving audience habits and expectations combined with the growing complexity of some content rights markets, not least added with the challenges of a global pandemic, makes the need for alternative revenue streams clear.

The re-opening of some studios, stadiums, and arenas will partially compensate for the losses experienced during the imposed restrictions in 2020 and early 2021. Still, the truth of the situation is that rights-holders must look to engage their audiences beyond brick and mortar, embrace innovative new technologies, and evolve their business models to reach digital audiences. 

Preparing for the streaming era 

The D2C landscape is far from complete, and the opportunities for experimentation, innovation, and creativity are enormous. Last year Disney most notably re-aligned its business models to focus on streaming, launching Disney Plus in the UK in March 2020. Less than 12 months later, the platform has become a D2C mainstay; it’s now the UK’s third-biggest streaming platform with a 16.8 per cent market share. 

While many media and entertainment sectors have been quick to capitalise on this trend, take-up has been significantly slower among sports rights-holders who still focus much of their attention on securing pay-TV broadcast rights. Instead, D2C sports is an emerging market, reminiscent of pay-TV in the early 1990s. Today, it is marked by trial and error, exploration, and risk-taking, with big rewards for those who get it right. The percentage of sports rights-holders currently operating a D2C OTT service with rich content remains small. But all sports rights-holders, even those without their own platform, are exploring the commercial possibilities that emerge with D2C OTT. 

A recent report conducted by MediaKind and The Sports Playmaker found that 70 per cent of sports rights-holders currently operate a subscription D2C service of some kind, with varying degrees of content offerings and monetisation approaches. These include annual (60 per cent), monthly (58 per cent), or multi-game options, individual purchases (18 per cent), and even packages covering small portions of a game. These models each present unique challenges, mainly to do with scale and sharp peaks in audience viewing. Yet, with OTT technology becoming prevalent in entertainment viewing, the sports market has reached an inflection point.

Understanding the live sports D2C landscape 

Rights-holders have so far been apprehensive about embracing D2C due to fears surrounding sub-quality video streaming. A glitch in the feed during a high-profile live game is enough to deter some fans and can severely damage a league’s brand image. Consequentially, robustness, quality, and cost savings have become prerequisites for any D2C offering. 

Internet delivery’s bi-directional nature allows for a much richer and more immersive experience for fans than is possible with linear broadcast coverage. Additionally, it enables rights-holders to gather valuable insights into viewing behaviour. The monetisation potential here is ripe yet remains mostly untapped. For example, the same MediaKind report found that just 8 per cent of the sports rights-holders analysed incorporated a form of advertising within their OTT service. This is a missed opportunity, as the revenue potential for personalised ad-insertion is likely to surpass the revenue from subscriptions in the coming years.

Incorporating sports betting into the fan experience, particularly micro-betting and fantasy sports, is also widely recognised by rights holders as a significant pathway to boosting fan engagement. There are currently no integrated betting capabilities within rights-holders’ D2C services. Despite this, all major sports bodies in the US are presently developing services that will enable fans to place bets around the live content they are streaming. Following the legalisation of betting in the US in 2018, this momentum will continue as its popularity increases, leading to greater experimentation. We can expect to see this momentum encourage further experimentation in European markets, where sports betting is already largely embraced.

Tapping into new revenue streams

Sports rights-holders have traditionally relied heavily, or even solely, on pay-TV income, a fact that has become uncomfortably clear in the wake of the Covid-19 pandemic. According to Two Circles, pay-TV accounted for 71.4 per cent of the $48.2 billion spent on sports media rights in 2019, with this revenue expected to fall to $32.1 billion in 2020. Furthermore, as consumers become less enticed by pay-TV service bundles, the time is now for rights-holders to re-evaluate their market approach. 

OTT opens up new prospects to engage audiences in a way that traditional broadcast cannot cater for. For example, sport has traditionally been a ‘sit-back’ experience, whereby the TV station decides what the fan watches in terms of camera angles, commentary, and data-driven statistics. D2C puts the fan back in control of the experience, enabling them to lean both back and forward as they choose. 

D2C is undoubtedly an exciting development for sports fans and other audiences worldwide, yet it does not mark the end of the in-person experience. Stadiums will always remain valuable to fans.

New D2C OTT launches are being announced almost by the week, and new models and strategic relationships are being continually evaluated to ensure a return on investment. The sector is flourishing and looks sure to be the most significant media growth area over the next decade.