Author(s): Paolo Pescatore
Amazon recently sent shockwaves around the UK sports broadcasting market when it outbid Sky for the TV rights to live ATP tennis matches.
Sky's existing five-year agreement with the ATP is due to expire in 2018. The deal gives the broadcaster access to the ATP World Tour Masters 1000 and Masters 500 events from around the world, including tournaments in Indian Wells, Madrid, Miami, Monte Carlo, Paris and Shanghai. This covers the main men's tournaments except the grand slam championships.
In my opinion, the move from Amazon is a real game-changer and lays down a marker for future sports rights auctions. The company now represents a serious threat to rights holders in this space, not only in the UK, but also in other markets. In fact, this is its first step toward owning sports rights outside the US, where it secured a deal to live-stream 10 Thursday-night National Football League games. Furthermore, I believe Amazon's play will put pressure on Apple to start investing in rights for sports content (see CCS Insight Predictions for 2017 and Beyond).
Sports is one of the few genres still driving live TV viewership and people are willing to pay a premium for this type of content. However, the battle to win rights is also leading to a surge in prices, which is ultimately forcing consumers to consider alternative ways to access content, such as through illegal streams on the Internet.
Amazon's latest effort is hot off the heels of its recently introduced its Amazon Channels service in Germany and the UK; a service available only to its Prime subscribers, allowing them to sign up to specific channels for a monthly fee without a contract (see Instant Insight: Amazon Launches Disruptive Pay-TV Service in Europe). The launch marked the first time that premium channels like those offered by Discovery, such as Eurosport, have been made available without a traditional pay-TV bundle.
Amazon has also forged an agreement with Discovery allowing its Channels service in Germany to air programmes from Eurosport. I expect these initiatives to encourage many households to rethink their pay-TV subscription and "cut the cord", a trend we've seen in the US, particularly if Amazon plans to add more live TV content such as sports in the future.
The company is certainly building a strong set of capabilities in hardware and services to rival Netflix and others. Its latest deal will prompt competitors to consider decoupling their TV services from broadband access, making them available as an online video offering to all customers — akin to Sky's Now TV service. Amazon was late to market, but has been catching up to Netflix very quickly, taking an alternative approach. We shouldn't rule out the possibility of Amazon launching a fixed-line broadband service in the UK, which would put it in an enviable position.
These announcements align with one of CCS Insight's predictions: that the move to Internet delivery of TV programming will see a return to large bundles of content. There's been a rush toward online video services and so-called "skinny" bundles, accompanied by a proliferation of separate apps for each provider. But in reality, customers will not want to sign up to numerous services, receive more bills and be forced to open several apps to find the content they want. In my opinion, the disparate and disjointed nature of these apps will lead frustrated customers to reengage with big content bundles delivered over Internet connections. Video is proving to be a battleground for all Web providers.
Providers such as BT and Sky are under an immense amount of pressure from rivals and disruptive players such as online providers in all content genres. Sky has previously revamped its Sky Movie channels under the new branding of Sky Cinema. It made a similar change to Sky Sports by replacing numbered channels with dedicated channels focussed on specific sports. However, this didn't include tennis coverage, which is only shown on one of the mixed sport channels.
There's undoubtedly a new player in town in sports rights. The likes of BT Sport and Sky in the UK, as well as rights owners in other countries need to keep a watchful eye on Amazon. The UK auction of Premier League football rights in early 2018 will also intensify competition in the market: Sky can't afford to lose its crown jewels, BT Sport will be very keen to broadcast more matches, and the Premier League will want to see new companies driving prices to unprecedented levels.