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 After tossing the coin to decide whether to sue or partner with YouTube, the big question which has dominated the sports new media industry over recent times is that of optimal rights structuring, writes Rhys Beer, a sports and media consultant (pictured right), who was recently head of broadband at Setanta Sports.
Federations and rights-holders need to maximise the total value of their rights. Broadcasters and buyers are not only trying to win rights but increasingly make sure that they have acquired the correct ones. “Oh, we forgot the on-demand rights…it’s OK we’ll go back and get them included” rarely proves an effective stance.
Having worked on both the supply and acquisition of new media rights, I have enjoyed an interesting vantage point of the market development over recent years. So where are we now and where are we going?
To recap for those readers never having had the pleasure of discussing with the lawyers the critical difference between fibre-optic and coaxial cables, I attempt to summarise a brief history. Those were the days….. Back when pundits were far more sensible than to predict a successful season for Tottenham Hotspur, the picture was much clearer. In the UK, the BBC’s live rights to the FA Cup Final for example included the holy grail of ‘all media’ – this included audio for their radio stations and video for TV. Indeed in owning ‘all rights’, broadcasters had exclusive control over linear, on-demand and archive viewing, via any commercial model and through any delivery platform they chose. The simple fact was that for a long time, broadcasters only had one way of delivering live audio-visual content – free-to-air analogue terrestrial. Exclusivity on this platform meant exclusivity across all platforms.
BSkyB’s emergence in the 1990s allowed the industry to embrace the relatively straightforward differentiator of pay and free-to-air television and along with it a major injection of cash.
It was, however, the emergence of ‘new media’ technologies and platforms that provided the most fervent head-scratching. Initially, in identifying potential value of mobile and internet rights, federations sold them outside of broadcasting contracts. What rights were licensed were commonly in the form of delayed clips – this went on to became the subject of a sector enquiry and the EC soon started exerting pressure on federations to ensure sports rights were not being withheld from full exploitation over new and emerging technologies.
The industry responded by embracing platform-neutrality. UEFA’s 2005 Champions League tender not only provided live broadcasters with the right to simulcast over the internet, but also the obligation. The FAPL followed suit and now leading rights were being defined increasingly by time-windows with all technologies and receipt devices fair game in exploiting your tightly defined content.
There appeared to be convenient dovetailing of the way in which rights were taken to market and the way in which multi-platform ‘360 degrees’, ‘audience-defined’ broadcasters were looking to acquire rights. Sky and ESPN were forbearers of strategies based around delivering content to customers by the means and to the device they wanted it and the fact that federations were selling on a complementary basis led to the potential of a happy status quo.
The industry embraced this strategic clarity and many federations and rights-holders adopted the model. The challenges of future-proofing and outdated definitions seemed solved and rights holders didn’t have to fear repeats of conflicts in Germany and Italy which saw large chunks of rights revenue lost to compensation and/or the courts. Increasing resistance  But if we were expecting a smooth path to fully converged positions in all of our contracts, we were mistaken. Despite embracing the logic of convergence, there are signs of increasing resistance. A number of reasons can be identified:
(1) some federations reversing the trend for platform-neutral tenders as a response to the perceived ‘bulldozing’ tactics of major broadcasters;
(2) no consistent international regulatory stance;
(3) sponsorship deals, particularly for certain international rights such as Australian Rules and NRL, provide sponsors with digital content rights for their websites with accompanying restrictions on international broadcast partners;
(4) rights may be sold to agencies on a platform-neutral basis, but they in turn are often finding the splitting of rights by technology remains a lucrative model (particularly in North America where internet broadcasters such as Mediazone are competing strongly).
With regard to the first of the above points, I expect to see a continuing/increasing trend of federations splitting rights in tenders in an attempt to force the dominant players into recognising the value of new media distribution (which they are being perceived as neglecting as part of their 360 degrees strategies). I’m sure federations don’t wish for rights to be split by technology (it fundamentally weakens their key value driver of exclusivity for a start), but they do seek valuation and monetisation for each different type of exploitation right. They will attempt to force the multi-play broadcast and Telco companies to recognise the value of the different type of rights core to their converged businesses.
The technology change and the fragmentation of media have created much of the recent buoyancy in the market and thus you can understand the desire of certain federations and agencies to retain the importance of these factors.
Broadcasters getting savvy  As for broadcasters, they should be looking to ensure that their rights are valid across all existing, new and emerging media. Additionally, if identified as part of their strategy and so as to maximise the capabilities of broadband, cable and IPTV platforms, they must ensure they also have rights to offer content on-demand for a certain minimum window. Download-to-Rent will generally suffice in enabling a catch-up service and provides the vendor the comfort of retaining full control of the long tail archive value.
In entertainment and factual programming, the trend known as ‘360 degrees commissioning’ has been embraced by buyers and one of the most telling developments has been the consolidation of the industry in this respect. In the UK, multi-platform distribution and catch-up services are central to BBC, ITV and Channel 4’s plans and as such they form a united front when it comes to the non-negotiable core exploitation rights that underpin a commission or acquisition. Production and licensing houses have less room for manoeuvre than in sport, where because of competitive tendering, the game of cat and mouse can continue.
Broadcasters must remain strong when dealing with vendors, and I believe they have a compelling argument when resisting having to match the valuation of an internet broadcaster for online rights for example. Yes, online broadcasting rights may be worth a lot to an interested website, but the cost to the broadcaster of losing cross-platform exclusivity is far greater and this should be reflected in the bidding process.
Within this stand-off, arguments will become increasingly adept and well rehearsed: why multi-platform rights are deal-breakers for broadcasters and why deals can’t be done without valuation and contribution towards new platforms for federations.
Whose stance is likely to win out? Like many commercial rights cases before it, money will talk and for sports reliant on the revenues from their traditional TV deals (or the sponsorship income generated from their reach), I expect to see the broadcaster enjoying the upper hand. The threat of taking away their money for core distribution unless all requirements are met is a strong position and one many rights holders and federations will be unable and unwise to resist.
Opportunities remain for rights holders of the most sought-after content to dictate somewhat more, or at least force the ‘bulldozer’ to acknowledge the value of their new media rights and use this to drive up value.
At a customer level I expect to see the convergence of broadcaster offerings continue. Content differentiation will still be the key competition driver and as fans and customers we will become used to the message “only one place to get it, but in many ways”.
Rhys Beer is an independent consultant to sports organisations, advising specifically on new and emerging media trends. Until recently Rhys was Head of Broadband at Setanta Sports, responsible for the international broadcaster's New Media operations in North America, Australia, Ireland and the UK. Rhys oversaw the successful launch and operation of Setanta's Broadband and Mobile subscription services as well as identifying and managing the distribution and affiliate relationships key to their commercial success. Rhys has worked on the multi-platform acquisition and exploitation of a range of leading sports rights including the UEFA Champions League, FA Premier League, US PGA Tour and Rugby World Cup 2007. Previously, Rhys was the English Football Association's Media Rights Manager where his remit included the development and exploitation of The FA's New and Ancillary Media rights in the UK and overseas. Through his experience on the sides of both rights holders and broadcasters, Rhys has extensive experience of the changing nature of sports rights agreements and content exploitation.
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