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13 February 2020

Premier League looks to D2C OTT to grab global revenue

Like many before it, the English Premier League (EPL) soccer franchise seems set to bypass the big OTT players by streaming matches direct to consumers (D2C). This new service, dubbed ‘Premflix’ by many punsters, could see the EPL rake in $billions as soccer streaming explodes – particularly across Asia.

Richard Masters, the new Chief Executive of the EPL, has come out swinging against broadcasters by revealing that a D2C OTT service is under serious consideration and has been for a while.

There is no timeline set for when this pipedream service will roll out, but there has certainly been more than a hint that we can expect to see it in some form come 2022.

Masters revealed that before the bidding for the current 2019-22 seasons, the EPL “spent quite a lot of time and invested a lot of resourses in building out our expertise and capacity in ‘direct consumer’.”

With all eyes now set on the bidding for broadcasting rights for 2022-25 seasons, Masters teased that the EPL was “ready last time and will be ready next time” to establish a Netflix-style service. Of course, drawing comparisons to Netflix and coining the idea ‘Premflix’ is itself misleading, considering the US SVoD giant quite famously is not a live a streaming platform.

It is a phenomenon of recent times that media rights have overtaken gate receipts as the biggest single source of sports revenue globally. This holds true for the EPL, which receives £3.1 billion ($4 billion) in revenue from TV rights.

Over half of this revenue, £1.7 billion ($2.2 billion), comes from UK broadcasters, primarily BT and Sky. It seems that rather than frighten these cash cows, the EPL is hoping its ‘Premflix’ platform will increase revenues in other parts of the world.

A potent example is Singaporean broadcaster Singtel, which pays £70 million ($90.8 million) per season to broadcast the EPL while raising £175 million ($227 million) in revenue. A D2C streaming service would cut out Singtel from the equation, potentially bringing the EPL an extra £100 million ($130 million) in revenue.

A two-tier system, whereby some countries receive matches via traditional broadcasters, while others stream directly from the EPL, is the intended outcome. “Eventually the Premier League will move to a mix of direct consumer and media rights sales,” Masters said.

Such a two-pronged strategy is likely to be lucrative as globalization becomes the central force behind growing revenues from TV sports rights. Our sister research arm, Rethink TV, forecasted this trend in September 2019.

According to the report on global sports rights, both China and the rest of the Asia Pacific region are set to see swift hikes in revenue derived from soccer. The forecast predicts that the EPL will increase its share of total China media sports rights from 33% to 40% over the years 2018 to 2025.

Over that same period, both China and the rest of Asia Pacific will see revenues derived from soccer increase three-fold to around $3 billion in both regions. There is a lot of revenue for the taking, and a ‘Premflix’ platform will ensure that the EPL gets as much of it as possible.

A D2C OTT platform is not new ground for European professional soccer. Spain’s La Liga delivers much of its content via standalone OTT. Top tier matches are still broadcast in the traditional way, with Spain’s second soccer league, the Segunda Division, with a whole host of other sports broadcast on the app.

Going D2C is a safe move for the EPL as it distances the group from the erratic behavior of bidders. La Liga fell prey to this when initially trying to launch its move to OTT in late 2017. The league openly appealed to big OTT players to come in, hoping that existing rights holders such as Telefonica would raise their stakes. However, this backfired as existing rights holders came together in an informal revolt to hold down prices. Telefonica declined to bid for the following round of rights, while Vodafone Spain called for a new variable cost model where it would pay a fee per subscriber, so that the rights owner would share the risk.

OTT players also held off as competing directly for overall sporting rights would likely result in prices that were not compatible with their business models. They were unlikely to recoup the outlay, so they would only pay if this achieved longer term gains in audiences or potential for earning advertising revenue.

Nonetheless, in November 2019, the Spanish service passed 400,000 global users and the number now stands at around 600,000. La Liga announced last month that LaLigaSportsTV would be available to all Samsung smart TVs worldwide.

It seems Spanish soccer just can’t crack the premium content for D2C OTT services. As we reported last week, FC Barcelona plans to launch Barca TV+ in Spring. Yet rather than offering the live streaming of first team matches, subscribers will instead receive men’s B team matches, women’s home games, live press conferences, and on-demand highlights.

The EPL is the most watched sports league in the world, broadcasting to 212 territories, over 600 million homes, with a potential audience of over 4.5 billion people.

In terms of revenue, the EPL was the fourth largest sports league in 2018, bringing in $3 billion. Rethink TV suspects that it will remain fourth in 2025 with a revenue of $5.5 billion, leapfrogging over Major League Baseball, which will grow at a slower rate, but being overtaken by the National Basketball Association which is expected to mushroom to $9.5 billion in the coming years.