Turning passion into profit

If there’s one segment of broadcast keeping regional audiences glued to their screens, it’s sport. The recent World Cup further moved the goalposts. Official broadcaster BeIN Media Group recorded more than 5.4bn cumulative views across 24 MENA countries over the course of the tournament.

The region is home to myriad sports, from cricket and golf to horse racing and martial arts, and hosts several category-leading international events. But those numbers don’t always translate into broadcast success. Nor is the case for monetisation quite as straightforward as converting a penalty.

While big sporting events serve to bring in viewers, retaining those eyeballs is another matter altogether, particularly when there are more ways than ever to access content. Further, balancing the high cost of rights fees with the need to sustain profitability can keep executives up at night – and the events’ rights holders may not be inclined to help. In addition, issues such as piracy act like an ongoing case of bursitis, limiting performance at the most inopportune moment.

BroadcastPro ME brought together industry executives for a panel at the recent Future of Sports Broadcasting Summit. Titled Cracking the Monetisation Code, the dynamic session featured Danny Bates, Chief Commercial Officer, StarzPlay; John-Paul McKerlie, VP Marketing & Sales, TOD; and Zahra Zayat, Chief Commercial Officer, evision and e& life. Joe Morrison, a live TV anchor and commentator for Facebook and Sony ESPN, moderated.

Morrison opened the conversation by comparing monetisation to the Holy Grail. The recent World Cup widened viewership considerably, both as a result of being hosted by Qatar and because so many Arab teams performed well.

Shifting consumption patterns in a dynamic market

Those expanded numbers offer an opportunity to acquire new viewers, said Zayat from e&, pointing out shifting market dynamics at the same time. “So far we’ve invested a lot in sports; obviously it’s a great monetisation opportunity and the opportunity to bring in customers at a lower acquisition cost, and to scale at a faster pace.”

She noted, however, that in the race for larger audiences and greater earnings, it’s worth understanding if there is a limit to how much revenue can be generated from sports. And if there is, at what point do additional investments in sports start to become less profitable? Here, shifting viewership patterns require careful consideration.

“However, we also see a change in the viewing behaviour and customers’ viewing trends. We saw more customers going towards public viewing instead of watching from their home. So while we quadrupled our numbers on public viewing venues, the growth was below expectations in the direct-to-home (DTH) and the individual household segments.”

For the industry, then, the 2022 World Cup served to spotlight a dynamic market. “I think a careful selection of what sports rights would work at and what is the ticket size becomes crucial at this stage. It’s good to have it all, but it’s not feasible to have it all. The market is very fragmented,” Zayat said.

Part of that segmentation has to do with the burgeoning volumes of sporting content now available. In that context, where do broadcasters draw the line? How much is too much? At what point do revenues begin to tail off? Fragmentation is leading broadcasters to rethink what they’re paying for the rights to air events in the region.

“When we look at the rights that are available in the region today, some of it is way beyond what you could ever monetise on that content. When I look at the rights fees, say for the EPL or the Champions League today, I think we would make a loss if we acquired those rights,” said StarzPlay’s Bates. “So, I think monetisation comes down to what you pay for the rights originally. That’s one of the most important steps in this whole process.”

He cited a recent conversation with a sporting league he didn’t name that wanted $175m a year in licence rights for its product. “That’s just insane,” he said.

StarzPlay follows a simple equation, Bates added. “If you can pay the right cost at the start, then you have a chance to monetise those rights and get a return on them. If the number doesn’t make sense, we won’t buy those rights.”

Zayat, whose company evision/e& life owns a majority stake in StarzPlay, added that it is important to establish clear routes to revenue before committing to purchasing the rights to sports events. Rights owners are often inflexible because their expectations are shaped by previous receipts, and there is no regard for considerations such as market demographics or piracy protection expenses.

“I think the key change happening now is that we are only making calculated and measured commercially viable decisions. So, in the last year, we’ve tried to establish and build monetisation opportunities [for] those rights before we commit to them … We did let go of rights where we could not justify that investment or where there was not enough commercial opportunity to support it,” she said.

Not all players have the same considerations, however. For TOD’s McKerlie, monetisation follows brand awareness. Morrison noted that during the World Cup, BeIN Media Group put out a significant amount of free-to-air content.

“Sport is a social event, so it doesn’t surprise me that when you have an event as big as that one in region, people share that experience,” McKerlie said.

As a local-first company, TOD was able to use the World Cup to build a stronger position. “I thought it was a fantastic outcome for TOD; we saw a lot of adoption and we saw a lot of monetisation models. We were building them as they were rolling out, and we just couldn’t do enough, fast enough. That was the experience that we had.”

The streaming platform has several benefits from being part of a larger network. The fact that ARPU values may be different for North America and the MENA region may be balanced out by target KPIs.

“You need to recognise you will have your loss leaders when you build a sports bouquet. So, you’ll end up with some that may be over-indexed. They may be your acquisition tools, but your monetisation model comes in through the others and you end up with a portfolio of assets,” he explained, adding that those decisions are taken on a larger level by the acquisitions team. “Our challenge with TOD and the vision for this business is how do you approach and create a proposition that serves that segment without cannibalising that high-value market that you have. People are prepared to pay for sport, always have been and probably always will be.”

Moving the subscription goalposts beyond sport

Sport, unlike entertainment, serves as a first point of access for many viewers on a streaming service. Live sports events especially are significant demand drivers, and piggybacking on the interest in them can grow subscriptions. Bates explained that it is this organic reach that led StarzPlay to engage more closely with sport. From there, it’s a matter of converting viewers to other offerings such as entertainment.

“An entertainment show is not a success overnight, or it’s rare that entertainment is a success from day one. The difference with sport is that almost overnight, subscribers come in when a league starts. There’s that passion for sport that brings the subscriber on board.”

The platform has opted to bundle entertainment and sport over longer periods so that entertainment’s higher ARPU balances out the higher cost of sporting properties. “One of our biggest costs in this business is CPA, and being able to reduce that CPA and sell that customer other products has been very important,” he said. For the World Cup, StarzPlay squared its costs by giving sports customers its entertainment product for free over the duration of the event. Similar tactics have worked for the Cricket World Cup.

“We kind of use the combination of our products to retain customers. Now obviously we didn’t retain everyone, but we were able to reduce those losses and retain a further lifetime value on that subscriber over that period. When it comes to churn, it’s also how you set your business model. You shouldn’t assume a 12-month subscriber – that’s not [necessarily] going to be the case.”

Zayat takes a slightly different view, given her company’s joint-service business model. “We try to offer an ecosystem to the customer and be part of the different moments of life of a customer, not only on TV but also on other adjacent products. That helps keep the customer on board so that he stays with us longer. Whether this is mobile or data or e-commerce or gaming or FinTech, we are keeping that customer within that ecosystem.”

For his part, McKerlie advised thinking along the lines of mobile services providers when looking beyond the prized but small pool of high-value subscribers that pay for services on an ongoing basis.

“You need to think almost like prepaid recharges … How often can I get that user to top up their credit so that they have access to our service? And so immediately you’ll see some of the propositions that are coming up with access for intervals, accesses to a match or a league, something that’s a very much cut-down version of the all-in service.”

It’s a principle TOD will rely on as it enters its second year of operations, he added. “You’ll see substantial changes in the way we set ourselves up to extract value out of the assets that we have, and retention will take on the form of subscriptions, not subscribers.”

Tackling piracy to reduce value erosion

Discussions about monetisation inevitably swing around to piracy and how value leaks can be tackled. Piracy has become a growing problem in recent years on the back of emerging technologies. Bootleg operations are now more sophisticated, and users can find and access pirated content more easily.

Price has traditionally been viewed as the major reason consumers turn to illegal services. But as Zayat pointed out, it also comes down to consumer behaviour. “I think some people are just not used to actually paying for content, even if that was premium sports,” she said.

E& life has been successfully working with ecosystem partners to combat piracy. In the UAE, for example, the Ministry of Economy and the Telecommunications and Digital Government Regulatory Authority have helped bring down pirated websites to combat the issue.

“We managed to bring down more than 200 sites this year. But the reality of the Middle East market is that people are leaning towards piracy, specifically for sports,” she said.

Now the challenge is to get other parties involved, Bates said. It’s difficult to fight web piracy because of new links and quick spin-ups, but a larger problem is that pirated content is available on mobile apps in the App and Play stores. During the last Cricket World Cup, he explained, five of the top-10 rated apps there were pirate cricket apps. Social media networks also allow such products to advertise on their platforms, which goes against their stated policies.

“Rights owners don’t take the problem as seriously as they should,” Bates said. “They need to be clear with the Googles and Metas of this world about their expectations, and the platforms need to stick to their claimed standards. That’s another part of the equation that really needs to change.”

McKerlie turned the discussion on its head with a different perspective. “Piracy is unmet demand,” he said. “Not all piracy is free. Nowadays, people often subscribe to a pirate site. They are paying someone for access to that service.”

Piracy can fuel innovation, he added. Pirated content platforms operate in a legal grey area. By bypassing regulations, they can be more flexible and can experiment with new business models, pricing strategies and user experiences, as well as innovative technologies and approaches to deliver content to users in new ways. In that sense, distributors must look at how their own offering compares.

“The sort of functional requirements that your content provider puts on – those don’t exist in a pirate universe. So, you can, for instance, have six screens running in parallel, watching all the games at once, which … our rights prevent us from doing. So, you get a different experience. In some ways, piracy may be a bit of a lighthouse for where you might be going.”

McKerlie acknowledged that pirate platforms may suffer from other issues, such as sound quality. However, users may be willing to put up with these.

In recognition of the new ways of consuming content, TOD offered daily and event passes for World Cup matches, and over 26 games were broadcast for free on YouTube. “The group’s immediate ambition with TOD is to address the lower-value segment. Our challenge is building awareness … We don’t have that brand equity yet to break down the piracy network at this point in time, but I suspect strongly over the next couple of years we will. And then the game may pivot … because we don’t have any bugs.”

Predicting the future of monetisation in sport

With the world of sport having undergone a massive transformation in recent years, what might the future hold? Morrison closed out the panel by asking speakers to anticipate how the monetisation of sport might evolve.

Technological developments will have the biggest impact, the panellists agreed. Zayat pointed to esports and the metaverse as potential areas where sport could soon be monetised virtually. “This is an area that is advancing and progressing very quickly, and I think execution is going to be fast. I do not know if it is going to be successful. But it’s a field that we would like to explore.”

Likewise, McKerlie believes that while people will continue to watch sports, the way they do so is changing. Short-form content has become more popular, and people are engaging with sports beyond just watching the entire game. Consequently, engagement could pivot towards access-based propositions, such as virtual seats at the stadium or fantasy tipping. The key to monetisation will be to build all the necessary parts around the product to generate revenue. While this is a tough challenge, it’s an interesting dynamic that will change how value is generated from sports broadcasts.

For his part, Bates sees monetisation as dependent on region and market. Outside the MENA region, DAZN has hired its CEO from a sports betting background, he said, a clear indication that the OTT service could be moving into sports betting to compensate for revenue losses from rights acquisitions. But what works for DAZN may not work in the MENA region, and generating a return on rights investment is an evolving process.

“It will be a lot of testing by everyone on this panel and finding the things that work and then doubling down on that,” he concluded.