The Bundle Bulletin - Overthinking the sports media market, for money

Prep notes, links and follow-ups from the podcast, prepared by Murray Barnett and Yannick Ramcke

Nov 27, 2024

What the WSL’s Sky deal means
Be careful with WBD’s streaming news
Why Premier League Productions cut out IMG
Decoding Netflix’s Tyson-Paul circus trick
Why is Charles Barkley so valuable to TNT?
The fragile allure of the Six Nations
PIF takes a swing at TV

Did the WSL get a good deal?

Introduction

New broadcast deals with Sky and the BBC for the Women’s Super League (WSL) totals £13m/year, which the Guardian labelled a “huge increase”.
- + £10m/Season 3/Year Barclays title sponsorship
£13m/year mainly from Sky. Current deal is £7-8m/year for the current deals, so a c70% uplift,
- EPL £5.9m/game, WSL c£100 – 160k/match
Production costs are borne by the broadcasters
- Sky’s production costs are around £6m per season (in the new deal) almost double (but with 3x increase in number of games).
- Sky also contributing VIK of circa £5m
BBC will have 21 matches per season, 14 “exclusive” on BBC TV (apparently a linear channel, either BBC1 or BBC2), and seven “shared across iPlayer and digital platforms” (not on a linear channel, behind the red button, on the website, etc). Appears financial commitment is reduced.
Sky is said to have 118 matches (some say up to 118, but Sky itself reports it will broadcast 118), with 78 exclusives, and 75% of “first picks”.
+ Youtube – Possibly 34 matches or “any matches not selected for live TV”
Sky’s main slot is expected to be on a Sunday at noon, with the BBC’s most regular slot likely to be after that at 2.30pm.
Interesting that in new deal players have access to clips for player social media

Why it matters

NWSL agreed in summer 2023 $60m/year, about 2-2.5x WSL deal.
Mike Darcey makes interesting comparison with WNBA: “Convert [WNBA deal ] to sterling (at $1.30) and make a factor of five adjustment for US vs UK market size [it is] about 2.6x the WSL deal.
WSL chair Dawn Airey last year stated her belief that the WSL would become a “£1bn-revenue” competition by 2033

Conclusions

FTA still important in delivering exposure and value for sponsors
Depending on how it is divided is £23m/club transformative (when they are tied to men’s league clubs)?
Was 5 years rather than 3 right? Balance of revenue v certainty – appetite for risk?
- 4 year cycle would have meant going to market at same time as EPL
Mike Darcey – “The market for sporting talent is global and money talks”
Would market dominance of NWSL makes other countries less competitive (EG NBA/USA)
Must be careful NWSL doesn’t pull away from WSL in terms of attracting players/sponsors/broadcasters.

It is still reach versus revenue for women’s sports, which has not reached escape velocity yet, and media rights commercialization needs to be balanced with visibility for the sponsorship-funded revenue stream and accessibility to drive consumer uptake and growth. As valuation, revenue, and audience metrics grow across the board, its comparative advantage to the men’s game (i.e. lower cost bases for leagues running the operations, or for broadcasters acquiring the rights) diminishes, and may lead to less room for innovation and experimentation — women’s sports have become a business, including all the up- and downsides attached.

DTC growth in the USA

Introduction

TNT Sports parent company Warner Bros. Discovery saw its stock price rise after reporting its best quarter of streaming growth since the launch of Max in May 2023.
- The total number of Max subscribers grew by 7.2 million to 110.5 million globally by the end of September. Specific U.S. subscriber numbers were not reported.
- Outside the U.S., WBD has some global-media rights for the Olympics, and it said the 2024 Paris Games generated more than 215 million cumulative views across WBD platforms, a 23% increase from the Tokyo Olympics in 2021.
- During Q3, WBD still felt the negative impact of selling off its AT&T SportsNet regional sports channels last year. That exit hurt the growth rate of the company’s networks segment by roughly 2%, with revenue there still growing to just more than $5 billion.
- In December, TNT Sports will add two College Football Playoff broadcasts, and then in 2025 NASCAR (races, practices, and qualifying) and the French Open to its U.S. portfolio, which will lose the NBA after this season.
Walt Disney has recorded a 3% rise in annual revenues for DTC Sports (inc. ESPN+) during the 2024 financial year, but has also seen its operating income fall.
- Operating income decreased by 5% in this quarter and by 2% for the whole year, dropping (annually) from $2.46 billion to $2.4 billion.
- Q4 operating income also fell, from $981 million to $929 million, with ESPN only generating $896 million during that period as opposed to $953 million the prior year.
- Quarterly sports revenue, meanwhile, stayed flat, moving only from $3.91 billion to $3.914 billion (although ESPN’s grew by 1%)
- the fall in ESPN operating income during the quarter was down to a combination of higher programming and production costs across US college football (partially offset by lower NFL rights costs), and lower affiliate revenue due to lower subscriber numbers.
- ESPN+ hit subscriber numbers of 25.6 million at the end of Q4, meanwhile, up from 24.9 million at the end of Q3 in June.

Why it matters

Reason for growth – still in customer acquisition phase - As NBC does with Peacock and Disney does with ESPN+, more TNT Sports game broadcasts have been simulcasting on Max in the U.S. Eventually, WBD plans to charge $9.99 per month for the B/R Sports on Max tier, but so far it has made all of its content free: NBA, NHL, MLB, March Madness, and more.
Zaslav calls for consolidation - “Consumers put on a TV set and they see 16 apps. And each of those are doing different pricing and you’re seeing it with your phone and Googling where a show is or where a sport is and you’re going from one to another and there’s so many that you have. … It’s not sustainable. And there probably should have been more meaningful consolidation … and you’re starting to see it now.”

Conclusion

Whilst streaming is growing, parent companies (such as WBD and Disney) are absorbing considerable costs and streaming is without a doubt less lucrative than cable bundles

Big if true: legacy-media entertainment companies turning around streaming into profitable business lines — at least on paper, as per generally accepted accounting practices, and probably not without some discretionary decision-making: Spreadsheet machination and favorable cost-allocations or other forms of financial engineering might have been required, as the cash flows and income statements of their collapsing-yet-profitable legacy linear cable and satellite TV businesses partially absorb CAPEX and OPEX of the new business lines — regardless of substance or sustainability, the analyst and investment community appreciated the adjusted profitability in the form of upgraded ratings and stock prices immediately. Remember also: One break-even quarter (sustainable or not) doesn’t make up for the enormous multi-billion losses to date, resulting in still signficantly negative net present values of all these DTC segments. To make streaming economics sustainable, more partnerships, consolidation, and rationalization will inevitably be ahead.

Premier League Productions goes in-house

Introduction

The Premier League is to establish an in-house media operations business, moving away from its current arrangement with IMG to produce Premier League matches under its Premier League Productions wing.
At a Premier League Shareholders’ meeting today on 22^nd November, clubs unanimously agreed the Premier League will bring all international media content production and distribution in-house, from the start of the 2026/27 season.
PLP currently produces Premier League content for more than 180 countries, with the Premier League and IMG working together on the productions. PLP produces full coverage of all 380 Premier League matches each season, as well as wide-ranging support programming.
At present, PLP said it delivers 6,000 hours of content per season to 55 international broadcast partners covering 189 global markets, along with long-form content such as magazine shows.
Premier League Content Service, which is broadcast by some of the league’s international rights-holding broadcasters as a 24/7 channel.
The Premier League says further details regarding the Premier League in-house media operations business will be announced prior to its launch in 2026.

Why it matters

For 20 years, this service has been provided in partnership with IMG, operating as Premier League Productions (PLP).
Earlier this year the Endeavor-owned IMG Media’s production arm laid off around 5% of its staff as economic headwinds hit the world of sports production. IMG makes hours and hours of sports content each year across multiple disciplines.
Ex Crystal Palace owners and talkSPORT presenter Simon Jordan previously proposed a 'Netflix of Football' idea, in which the Premier League would take full ownership of the games via one cheaper streaming service, removing the need for multiple TV subscriptions.
talkSPORT’s, chief football commentator Alex Crook said: "It sounds like this is basically the first step towards what Simon Jordan has been advocating for in this programme for a long time now - the Premier League actually setting up their own in-house television channel."
Timed for a year before end of current UK cycle of EPL rights

Conclusion

Seen as a lucrative contract, a blow for Barney Francis executive vice-president and head of global production at IMG
Allows EPL greater flexibility when considering next cycle of agreements including the BATNA of an EPL streaming service (likely only in some markets).
Follows US trend of having all media in-house – EG NBA Entertainment
Also gives time for transition

Establishing direct relationships with international media rights partners (instead of going through intermediaries) was a first step, in-sourcing match production is the next step for market-leading sports properties in vertically integrating along the sports media value chain — even though that does not mean its distribution and commercialization (in form of a league-operated DTC streaming service) is any closer or more realistic. Instead, the impact of full editorial and operational ownership of the league’s media product might be even more relevant for the domestic market landscape: Removing host broadcasting obligations for domestic media rights licensees obviously expands the universe of potential bidders and lessens lock-in with incumbent broadcasting partners. Case in point: WWE being a self-sufficient, ready-made media product with in-house production was unquestionably part of the appeal for Netflix. UFC comes with similar benefits for media rights licensees as it goes to market early next year. German Bundesliga has been a first mover among European football leagues with establishing a wholly owned production subsidiary (Sportcast) as early as 2006, but most and including all Big-4 US sports continue to rely on domestic licensees as host broadcasters — limiting optionality as the industry enters an uncertain future.

TNT and NBA resolve their differences

Front Office Sports - Inside the Rights Swap Sending Barkley, 'Inside the NBA' to ESPN
https://www.cnbc.com/2024/11/18/nba-warner-bros-discovery-settle-lawsuit-over-live-game-rights.html?utm_campaign=trueanthem&utm_medium=social&utm_source=linkedin|main

Introduction

NBA and TNT have settled their prolonged legal case that saw TNT’s package of NBA rights going to Amazon.
- As part of the league’s new $77 billion, 11-year media rights deals, ESPN, NBC Sports and Amazon Prime Video will control all U.S. game rights from Opening Day to the NBA Finals
- The NBA decided to move away from Warner Bros. Discovery as a media partner for several reasons, including losing faith in the long-term future of cable TV as a method for reaching a younger audience.

Disney and Comcast have broadcast networks to showcase NBA games, and Amazon’s package is exclusively streaming.
As part of the settlement TNT’s Inside the NBA will move to ESPN in a licensing deal starting with the 2025–2026 season.
- TNT will maintain “complete editorial control” of the award-winning studio show
- Inside the NBA will continue to be filmed in Atlanta, with the same production team.
- Charles Barkley, Shaquille O’Neal, Kenny Smith, and Ernie Johnson Jr. will all remain TNT employees, and be available for other WBD projects
WBD also gets a “fourth package” of game rights from the NBA of over 100 regular season games for in Northern Europe and Latin America.

Why it matters

Everybody ended up with something.
WBD’s TNT Sports gets free access to highlights for Bleacher Report digital news site and its social media platform House of Highlights for the next 11 years
The agreement also extends a partnership between NBA Digital and TNT Sports for five seasons that allows the NBA to engage Warner Bros. Discovery to provide promotion and “a variety of services, including production, content development and sales operations services,” according to a statement.
Disney and Warner Bros. Discovery have partnered several times in the past year, including on a streaming bundle that links WBD’s Max service to Disney+ and Disney’s Hulu, and on a sports-focused joint venture called Venu that’s currently in limbo due to antitrust concerns.
Essentially a rights swap – Inside the NBA to ESPN with partial game rights to the Big 12, Big East and Mountain West conferences as well as the College Football Playoff going to TNT.

Conclusion

Face saving for TNT and a win for both NBA and ESPN - “This is a win-win scenario for fans,” one source tells FOS. “The best sports show on TV survives. The Chuckster gets to say whatever the hell he wants. And ESPN finally gets their hands on Barkley and Inside the NBA.”
The survival of Inside the NBA “saves face” for WBD after its risky decision to sue the NBA

Not necessarily a win-win-win situation but probably an acceptable outcome for all parties involved: TNT Sports ensures talent and employee retention — finding a home for the most popular NBA pre- and post-game show — as the Inside the NBA cast remains crucial to the company’s basketball and non-basketball programming line-up. The ultimate question will be whether the sum of parts strategy (Nascar, French Open, Unrivaled, College Football Playoffs, and more) can come close to make up for the whole (NBA), at a significantly reduced cost base? ESPN, for its part, has historically struggled with pre-/post-game studio programming and in-game commentators. Paying top-of-the-market rate for Joe Buck and Troy Aikman to head the Monday Night Football coverage might have served as a blueprint: money can solve everything. Finally, the NBA’s highlights distribution strategy seemed to have been stuck-in-the-middle with its laisse-faire approach: Putting genie back into the bottle and enforce stricter content distribution rules (such as the NFL) might be have practically impossible, so it seems it goes for maximum distribution and ubiquitous availability — commercial value must be extracted indirectly, positioning it as marketing and promotion for the league’s live media product.

Was Tyson-Paul a success for Netflix

Introduction

Tyson vs Paul now sits inside the top 10 biggest gates in professional boxing history, and incredibly outsold Tyson's 2002 clash against his fellow heavyweight boxing legend, Lennox Lewis. Tyson vs Paul also set a new gate record at Texas of $18 million — double that of what the Canelo Alvarez vs Billy Joe Saunders fight generated in 2021, according to a Most Valuable Promotions statement

Why it matters

60 million households worldwide watched the main event, despite many reporting issues with Netflix’s stream with a peak of 65 million concurrent streams. The co-main event between Katie Taylor and Amanda Serrano averaged about 50 million viewers (The Taylor-Serrano fight will likely become the most-watched professional women’s sports event in U.S. history.)

Conclusion

Netflix stock up 2% - Pivotal Research raised its price target on the stock to $1,100 — reportedly the highest on Wall Street. The firm maintained a ‘Buy’ rating, projecting a 25% upside from current levels.
A Pivotal Research analyst expects the success of the fight to accelerate Netflix’s push into “eventized” live programming, potentially reducing subscriber churn while enabling price increases. He emphasized that live programming could become a key differentiator, enhancing Netflix’s ability to offer consistent, compelling content. The analyst called Netflix the “global winner of the streaming wars,” praising its massive scale, robust subscriber growth, and significant free cash flow.
- Positive view not necessarily shared across Wall street. Stock is volatile and Netflix’s P/E ratio currently stands at 49.31, much higher than those of peers such as Walt Disney Co and Warner Bros. Discovery.
Advertisers will likely look at the viewership numbers, and the hold the event had over the sports world, as a significant positive indicator.
The event showed a streaming service behind a paywall can produce enormous numbers—higher than just about any other U.S. sporting event.
The next big Netflix live challenge arrives at Christmas, when the service hosts an NFL doubleheader featuring the Kansas City Chiefs vs. the Pittsburgh Steelers, followed by the Baltimore Ravens vs. the Houston Texans.
- Netflix is reportedly paying the league $150 million for rights to the two games, which will also air on traditional TV in teams’ local markets.
Despite streaming issues NFL should not pose a problem with an average audience this season under 20m (Xmas games closer to 30m)
Could trigger the opening up of NFL TV deals in 2028

Audience metrics and technical stability dominated the post-event conversation, with two main takeaways: First, concurrent views (often used in streaming) and average minute audience (base currency in linear TV) is not an apples-to-apples comparison. Case in point: Nielsen’s Streaming Platform Ratings from that night reported that Netflix averaged 25 million US viewers on a per-minute basis in the 8:00 PM ET to 1:00 AM ET window. It’s impossible to discern from the report how many of those 25 million people watched the boxing matches. Even though Nielsen numbers (and especially their streaming metrics) are inaccurate science, the NFL’s Christmas games might put even greater stress on the streaming infrastructure than the celebrity fight when it only hits historical average audiences for these games (ranging from 20M to 30M average viewers per minute. Second, there is simply no testing environment for when it matters and Netflix followed the same fate as other live sports streamers before — DAZN (Italian Serie A in Italy), Prime Video (Thursday Night Football in the United States), and many others. The common denominator among them: Same or similar issues very rarely happened to them a second time, which should make the NFL feel comfortable and give even some sense of relief that something of a large-scale stress test has now happened (and failed). The technical issues were also another reminder that transitioning from linear to streaming also means moving from one-to-many to one-to-one deliveries, resulting in very different end-consumer experiences depending on a multitude of factors (e.g. last-mile delivery setup).

Will Six Nations leave free to air in the UK?

Introduction

Tender for next cycle is expected Q1 2024 amid increased competition. Premier Sports also has rugby – EPCR (and URC?)
The future of the Six Nations on the BBC looks increasingly uncertain after a record-breaking £100 million per year was slapped on the tournament’s UK broadcast rights.
In total across the 2023 edition of the competition, an estimated 121 million people watched the Championship.
In November 2023, it was ruled by the UK government that the Six Nations Championship would not be added to the ‘Crown Jewels’ list of sporting events that can only be shown live on free-to-air television.
Currently, the Six Nations broadcasting rights are split between the BBC and ITV, with S4C providing Welsh-language coverage. The current deal is worth £90 million per year

Why it matters

The BBC Have said they cannot afford increases – they are focused on cutting costs.
Possibly opens the door to a potential joint deal between ITV and (pay – TV) TNT Sports
TNT Sports already has PRL, Autumn Internationals

Conclusion

Likely to end with a limited number of (England) games on FTA
Sky v unlikely to enter process with a substantial offer – could lead to a challenging commercial environment
The largest TV revenue possible is essential to 6nations with mounting losses by every union:
- RFU £40m loss
- WRU £14m loss
- SRU c£10m loss
- IRFU small loss
- FFR EUR 17m
Interesting as new Nations Championship which starts in 2026 goes to market later in 2025.

Competition remains the single-most important determinant for market prices: why surrender margin as a bidder if you don’t have to. As a result, market prices can significantly deviate from the intrinsic commercial value of any given sports properties. Speaking of intrinsic commercial value, Six Nations might end up on the wrong end of the bifurcation of the sports rights marketplace, between the haves and have nots. If top-line revenues remain stable and any cost savings trickle directly down to the bottom-line, it might not be a super valuable property anymore — especially as programmers seek to rationalize and streamline their operations.

PIF moves for majority stake in Saudi’s MBC Group

Introduction

The PIF will be taking a stake in MBC Group for SR7.46 billion ($1.99 billion), it was revealed late last week in a filing. Equates to 54%
MBC’s subscription video-on-demand (SVOD) service recorded a 36% year-on-year increase in subscribers to 4.6 million, while monthly active users of its advertising-based video-on-demand (AVOD) platform rose 8.4% to 18 million as of June 30, 2024, the company said in its first-half earnings report

Why it matters

This investment by the PIF follows on from that fund’s governor, Yasir Al-Rumayyan, saying late last month that it would be cutting its international investments and focusing instead on domestic projects.
The PIF’s current overseas investments, including sports investments into properties such as the Newcastle United soccer team, make up about 30% of its reported $900 million portfolio, with Al-Rumayyan stating his intention to reduce that figure down to 18%-20%.

Conclusions

Good opportunity for PIF to consolidate (viewing for) sports they have invested in - Tennis, Golf, MMA
Not sure there is an appetite for a battle between “Saudi” and Bein
Focus is shifting to events in the region and this is no doubt a step towards FIFA World Cup in 2034 (in Saudi)

It might not be a change to PIF’s investment strategy, rather a recognition that its most prominent sports investments such as Newcastle United or LIV Golf have not been fully in line with the fund’s investment objectives: catering to the domestic population, its economy, and the government’s favourability rating, including a lessened reliance on oil and gas. The reason for the investment in the local MBC Group might be as simple as the following: beIN SPORTS having been temporarily blacked-out in Saudi Arabia in the past has shown the risk of depending on foreign broadcasters to ensure consumer access to top-tier sports. Funding and establishing a local (sports) broadcasting champion, without any broader regional ambitions and without being a threat to beIN SPORTS’ regional market leadership, might all this be. PIF has been much more inwardly focused than externally perceived, it might be simply about ensuring stable programming access to sought-after live sports programming in the country.

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Discussion about this post

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The Bundle Bulletin - Overthinking the sports media market, for money

Prep notes, links and follow-ups from the podcast, prepared by Murray Barnett and Yannick Ramcke

Highlights

Did the WSL get a good deal?

DTC growth in the USA

Premier League Productions goes in-house

TNT and NBA resolve their differences

Was Tyson-Paul a success for Netflix

Will Six Nations leave free to air in the UK?

PIF moves for majority stake in Saudi’s MBC Group

Discussion about this post