Sorrell expects incumbents to pay big to fight off Silicon Valley's Premier League interest
By Jonathan Rest
The domestic rights fee for English soccer’s Premier League will rise substantially once again in the next cycle on the back of aggressive bids from new digital players such as Amazon, Apple and Google, Sir Martin Sorrell, founder and chief executive of advertising behemoth WPP, has predicted.
Pay-television giant Sky and telecoms group BT are shelling out a combined £5.14 billion ($6.83 billion) for live Premier League rights in the UK in three-year deals expiring in 2019, but the interest from Silicon Valley companies in live sports rights means the incumbents face paying big to maintain their status.
Market analysts have estimated that Sky could have to pay a 30-per-cent premium to keep its dominant position when the auction takes place early next year, and Sorrell believes the property is so valuable to both broadcasters’ business models that they cannot afford not to compete.
Speaking on the opening morning of the Leaders Sport Business Summit in London, Sorrell said: “People keep saying that, at some point, rights fees will have to come down. But in Amazon, Apple, Google, Facebook and Microsoft you have five of the biggest companies on the planet, plus then you have the Chinese two, Alibaba and Tencent. They are all worth more than half a trillion dollars, and all seven of them want to be bidding for content.
“The demand for content is going to be so strong and so varied, it will have major implications. Demand will exceed supply.”
He continued: “It [the Premier League] is such a valuable property that you just have to have it. It is that important. Incumbency is a burden. The incumbents always look to their position in a different way to the challenger. They look at the cost structure. The challenger looks at it as an add-on. Challengers are always more aggressive than the incumbent thinks. When you lose as an incumbent, you always say, ‘Why did I not go a bit further?’
“As an incumbent, you just cannot afford to lose it.”
Amazon and Facebook continue to make moves in sports rights acquisition and, while arguably overhyped, recent developments point to a heightened appetite.
Amazon recently secured the UK rights to the ATP World Tour in its biggest sports content deal outside USA, an agreement said to be worth up to £10 million per year. Last week it kicked off its global rights deal to stream 10 Thursday night NFL games in the 2017 season, in a $50-million agreement.
Meanwhile, Facebook was unsuccessful with a $600-million bid for digital rights to the Indian Premier League over five seasons.
Sorrell said: “My view is that they will be in the picture. Amazon already have Bundesliga audio rights, and I know they pitched one of the [soccer] leagues in Europe, so that shows where their interest lies. I think they will be a force. Facebook bid big for the IPL and forced Star’s hand. I don’t think anybody anticipated Star having to pay that much.”
He added: “Apple will be there as well. They are reported to be setting up a $1-billion content company, and Google will be in the conversation too.”
Last month, Simon Green, the head of BT Sport, cast doubt over whether digital giants will compete for the premium major sports rights packages in the next decade, given uncertainty over how such weighty investments would be monetised.
He told the Guardian newspaper: “It’s hard to say how the sporting rights market is going to play out with those brands. The only one which has really dipped its toe into the water is Amazon, who bought the rights to the ATP tennis.
“What’s Amazon’s business model? Is it to sell tennis rackets on the back of showing it? Over a five- or 10-year span, I don’t see those brands competing in the sports rights buying market in the way ourselves and other established broadcasters are.”