A New Trend in Professional Sports

By Nicholas Knoth

Global travel restrictions and social distancing regulations this year have greatly impacted many industries. From shifts in the retail landscape to changes in the way businesses work together virtually, the pandemic has accelerated, rather than created, many ongoing trends across several industries, professional sports being among them. Although sports were among the first activities to be shut down due to the pandemic, the industry has in no way remained the same over the course of the year. One emerging trend in this arena that has been accelerated due to the pandemic is the increasing effort to provide Over-The-Top (OTT) services. OTT platforms offer streaming services that can be accessed at the consumer’s discretion over the internet. Household names include Netflix, Amazon Prime, and Spotify. 

Why Over-The-Top (OTT)?

These platforms offer many advantages over the traditional TV experience. 

On the consumer end, the experience is improved by providing more access to content. Not only do these platforms allow customers to watch sports wherever they want with their mobile devices (not glued to the couch with the TV), but they also enable consumers to watch whenever they want (not just during live performances). Similar to the way we can access Netflix or Spotify content whenever and wherever we are, OTTs (in some cases) enable consumers to watch any sports game or match whenever and wherever they want. This gives sports fans a highly flexible and ultimately more enjoyable experience. 

From a commercial standpoint, there are two main advantages. In cases where advertisement models are used, user data and real-time analytics allow for more personalized, targeted advertisements, increasing engagement and value for the advertiser. Instead of showing commercials that do not engage the majority of viewers (this is often the case with traditional cable TV), providers can use more targeted advertisements based on each user’s past activity to increase engagement. This is similar to the way that companies like Facebook and Google have managed to deliver tailored advertisements to their users based on individual internet footprints and search trends. In cases where a premium subscription model is used, the provider still benefits from more access to user data. This data can be used to make predictions about what content each user will be most interested in. Computer algorithms can then make customized recommendations that will maximize user engagement with the service. This is similar to how Netflix uses user data to predict which content they will enjoy the most. 

The Rise of OTT In Sports

Although OTTs have quickly gained popularity in the movie/show and music categories, they have not yet penetrated the professional sports industry. Nonetheless, with more and more demand for OTTs like Netflix and Spotify, media companies are increasingly looking to provide new sports streaming services. To that end, businesses are increasingly investing in sports media coverage rights. 

A key emerging player in this field is Amazon Prime Video – Amazon.com’s video streaming service. In 2017, Amazon spent US$50 million on a one-year NFL deal that included rights to ten games and has since renewed the deal each year. At a conference in 2019, senior Amazon Prime Video manager Felecia Yue recognized that “the younger generations are all about streaming” and that “they don’t have a cable package . . . but they might turn on Thursday Night Football on Amazon.” More recently, according to SportsProMedia, Amazon has partnered with the UEFA Champions League in a three-season coverage deal worth approximately US$240 million. 

This trend is also seen in other parts of the world. Two examples include Tencent, a Chinese technology behemoth, and DAZN, a rapidly growing British sports streaming platform. According to a Forbes report, Tencent signed a five-year streaming-rights deal with the NBA worth US$1.5 billion in 2019. According to Nikkei Asia, In 2017, DAZN signed a US$1.9 billion, ten-year coverage rights deal with the J-League (Japan’s top soccer league). These massive deals are only expected to continue in the future as the value of sports media rights is expected to triple by 2023, as reported by the World Economic Forum. 

The high growth rate of investments in sports media rights for streaming suggests that it might not be long before streaming sports games becomes the new norm everywhere.

Is Cable TV Dying?

The transition from traditional cable, satellite, and telecom TV to OTT is in large part already underway, at least in terms of movies and TV series. According to data compiled by eMarketer, about six million Americans “cut the cord” in 2020, marking a record-high 7.5% year-over-year decline in cable TV subscribers. Additionally, eMarketer reports that U.S. cable TV advertisement spending will drop around 15% by the end of 2020, retreating to a nine-year low of $60 billion. According to Insider Intelligence analyst Eric Haggstrom, “[TV advertisement spending] will never return to pre-pandemic levels” and “given the trends in cord-cutting, audience erosion, and growth in streaming video [OTT], more ad dollars will shift from TV to digital video in the future.” 

Recognizing the unique benefits that streaming platforms offer, the decreasing demand for traditional cable TV, the increasing investments in sports media rights for OTT platforms, and the rapid shift from cable to OTT in the movie and music industries, it is not far-fetched to assume that the sports industry will gradually follow suit.