Having learned to live with its old adversary, pay-TV, how can the EBU withstand the new challenges of a fragmenting broadcasting market? Stefan Kürten, the EBU's director of sport, believes he has the answers.
9th March 2018, 11:08
There was a time, not so long ago, when it seemed that free-to-air sport on television in Europe was destined to become irrelevant, a sideshow, as the European Broadcasting Union, the umbrella body that acquired and distributed sports rights on behalf of its public-service TV members, fought a rearguard battle against the incoming tide of pay-TV.
From its birth, pay-TV had laid claim to live coverage of most top soccer leagues, while top tournaments in a range of other sports, like golf and tennis, were also prepared to sacrifice exposure for rights fees. In 2009, Lagardère, the French media group, even acquired Olympics rights for 2014 and 2016 and headlines screamed that the hallowed games were under threat (despite listed events legislation and the International Olympic Committee's own restrictions on exclusive pay-TV coverage). That incoming tide seemed set to severely undermine the concept of free-to-view sport – and maybe the EBU itself.
But a glance today at the EBU’s rights portfolio suggests that those that wrote off sport on free-to-air TV, as they anticipated a pay-TV apocalypse, might have been too hasty. The EBU has rights deals with over 30 federations and 18 sports, including soccer’s Fifa World Cup in 2018 and 2022 - and it’s in the market for rights for the Euro 2020 European Championships.
It also has rights for: this summer’s inaugural multi-sport European Championships; the Paralympic Games in 2018 and 2022; the Tour de France; swimming's World and European Championships; top winter sports events like biathlon World Cups and World Championships, figure skating and skiing World Cups; and a wide range of other World and European Championships for mainly Olympic sports, such as athletics’ top-tier World Athletics Series and World Championships in all cycling disciplines.
Not, on the face of it, the rights portfolio of a failing organisation. The most obvious gap in the line-up remains the Olympic Games, but this was a conscious decision, Kürten says, in view of the fact that four successive editions of the games, summer and winter (Rio 2016, PyeongChang 2018, Tokyo 2020 and Beijing 2022) are taking place outside the borders of Europe. Actually, the EBU did bid for the rights initially, but declined to raise its bid as competition for the rights intensified.
Speaking at a London hotel (he’s a regular visitor to the UK from the EBU’s headquarters in Geneva, in the build-up to the European Championships, which are taking place in Glasgow and Berlin), he says: “All the properties we lost were properties we lost because we decided not to contribute as much money as expected. It’s not that the EBU, as a concept, was wrong. Others were prepared to take a big financial risk. Clearly, that was the case with Lagardère – and they had [generated] a deficit.”
Lagardère distributed the rights in 40 European countries for the 2014 and 2016 editions, but was forced to book a ‘provision for risk’ of €22 million ($27 million), with the agency hit by shortfalls in Eurozone countries such as Greece, Cyprus, Portugal and Ireland where the economic decline had severely affected broadcasters.
Lagardère was succeeded by Eurosport and Discovery, which in June 2015 made their most high-profile rights acquisition to date since the US media giant’s takeover of the pan-European sports broadcaster, by acquiring the broadcast rights in Europe to the Olympic Games between 2018 and 2024.
The exclusive agreement covering 50 European territories (excluding Russia) is worth €1.3 billion, comprising rights in all languages across all platforms, including free-to-air and pay-TV, internet and mobile phones.
However, Kürten describes the acquisition as a “different concept because Europe will only host once out of four times [Paris in 2024].” Besides, he claims, in Europe, ‘listed events’ legislation and other factors (the IOC demands that 200 hours of summer Olympics and 100 hours of the winter games appear free-to-air in each territory) have ensured that 80 per cent of the revenues brought in by Discovery has come from EBU members. “It’s a proof of the pudding that without free-to-air broadcasters these sports would not survive,” he argues.
Kürten’s argument is that the market for sports rights can be divided into two: the ‘acquisition market’, by which he means deals such as those of Lagardère and Discovery; and the ‘sales market’, which is the one that operates when rights actually get bought by the broadcaster that will televise the event. In the sales market, he claims, “the process often ends up with our members. Acquisition is driven by several motives – other reasons.”
The EBU is the most relevant player to allow the widest audience to follow sports events of international relevance and to provide solid adequate financing long term for federations
What does he mean? What motives? What other reasons? The acquisition market, Kürten claims, is being driven by hidden agendas. The EBU, he contends, is “the most relevant player to allow the widest audience to follow sports events of international relevance and to provide solid adequate financing long term for federations. We are not biased or led by non-sports-driven criteria.”
On the other hand, he argues, “I see that, currently, vertical and horizontal integration of sports properties in wider business models is seen as very critical to long-term financing. Technical providers are accessing sports content to promote channels. Players from other markets and environments want to use sport as a vehicle to embed properties in a wider business case. I think it’s probably a risk for sport. We want to keep interest in sport as the predominant factor, and not depend on other markets that cannot be influenced.”
The EBU clearly maximises the combined buying power of its members. But does it ultimately matter whether EBU members acquire rights via the EBU or via third parties, if they end up getting the sports they want anyway, I ask? This question, of course, threatens the fundamental raison d’être of the EBU, so Kürten is quick to quash it, saying: “It matters a lot if they acquire through the EBU or other third parties, because they face certain restrictions [if they acquire rights through third parties], which might not be the best solution. If you look at the Olympics, it’s interesting to see that the partner that contributes a small percentage to finance the Olympics [Eurosport] is considered as a key and main partner for such an event. Without free-to-air, these sports would have difficulties in Europe.”
Asked if the EBU would be in the running for Olympic rights again if and when the games return to Europe (the 2028 edition is destined for Los Angeles, but at least two European cities are in the race for the 2026 winter games), Kürten says, “Yes, we would bid for rights if Europe hosts,” adding that the structure of future tender documents might change, with free-to-air linear exploitation more clearly defined, at least for “certain sports.”
So what is the view of the EBU’s former bête noire, Lagardère, on the future of sport on free-to-air TV? Andrew Georgiou, chief executive of Lagardère Sports, tells me: “Free-to-air broadcasters can continue to play a significant role in the broadcasting of sport, certainly in the near term and especially if they continue to enjoy the benefits of listed events regulations in their markets. However, longer-term, the EBU’s membership needs to innovate quickly in order to compete with tech giants who are controlling a large portion of the global advertising spend and OTT platforms who are disrupting traditional models. The real question is whether they can find new models and innovations to compete with the new players.”
Those listed events rules have traditionally played into the EBU’s hands, certainly. But what is their value in a world in which traditional viewing is fragmenting and linear TV viewing becomes increasingly outdated?
Georgiou cites a blizzard of statistics to support his view, including this: the trend away from TV is particularly stark among Generation Zs (born 1996 onwards), according to Trifecta Research, which says:
• 60 per cent of the video consumption of Gen Zs is done via OTT services as opposed to 29 per cent for TV;
• 70 per cent of Gen Zs watch more than two hours of YouTube each day;
• This is in contrast even to Millennials (born 1977-1995), for whom TV and cable still form a large part of their media consumption.
Georgiou continues: “These new market entrants will only become more dominant as they continue to adapt more quickly to consumer trends. And the trends are clear: young sports fans no longer watch TV but are mobile-first; digital-first and on-demand; they aren’t prepared (or don’t have the means) to pay for content that is not premium or more content than they want; they delete advertising from their lives; and they want customised, dynamic viewing experiences where they are closer to the action and have access to the stats and information that are personal to their passions.”
They won’t pay, and they don’t watch advertising? So that’s both pay-TV and commercial free-to-air TV done for then. Sounds like good news for the EBU – if it can only fend off those preying, prowling tech giants.
Actually, the EBU has also been changing the way it works, entering into partnerships with pay-TV broadcasters such as ESPN and Perform’s DAZN, the over-the-top streaming service, to acquire and distribute certain properties, sleeping with the (erstwhile) enemy, so to speak, in a way that would almost certainly have been regarded as anathema a few years ago.
We are on the servicing side [already], but we’re discussing also on the rights side. We’re interested to continue the exchange. Whether highlights or live, we reach a wider audience via our members
Kürten has said publicly several times that the EBU is especially interested in acquiring rights in team sports. “We’ve seen it with ice hockey,” he says. “Certain events could be interesting for a wider audience. It’s the same in handball, field hockey, we believe there should be better exposure in rugby and basketball for national teams. Not for the full series, and only in co-operation with third parties, like Perform and DAZN. We can build up interest through highlights. We are on the servicing side [already], but we’re discussing also on the rights side. We’re interested to continue the exchange. Whether highlights or live, we reach a wider audience via our members.”
In August last year, the EBU and ESPN Media Distribution, the media rights arm of the international sports broadcaster, teamed up once again, this time to distribute media rights for the IAAF’s major events. The deal followed a similar tie-up between the two organisations and FINA, aquatics’ international federation, announced the previous year.
The IAAF agreement covers three editions of the World Championships (2019, 2021 and 2023) and World Indoor Championships (2018, 2020 and 2022) and more than a dozen other competitions in the World Athletics Series.
The EBU is representing the free-to-air television rights to its members across Europe, while ESPN is representing the free-to-air rights across Africa. The two organisations will work together on the sale of pay-TV and digital media rights across Europe.
“It’s the same thinking,” Kürten said. “We don’t claim to be, through our members alone, in a position to cover all sports 100 per cent. But we believe strongly we have to allow the widest access on all platforms to sports. Therefore, any kind of co-operation we will look into to promote them better. All our bigger members cater for most solutions, but other territories are less advanced. The same goes for rights our members are not using. Although they hold them they can go for a tailored approach of specific interest to them, and the remaining parts can go to partners.
The aim, Kürten says, is to partner with those that have “some experience in accessing pay solutions, and have pay contacts.” In other situations, it’s a case of identifying those that are “more focused on the Asian market.” However, there remains, he says, a “clearly defined set of core rights of members that have acquired rights. Then there’s the group of territories that, due to no interest or unacceptable offers, is more open to a market sales approach.”
In the case of the IAAF rights, he says, the EBU would “work together with ESPN to find the best offer for these territories. We tackle the members and ESPN goes for the non-members. The co-operation is working very well. For both sides it’s different cultures, but the first month was very positive for both the IAAF and broadcasters.”
Asked if the EBU would seek to replicate the arrangement for other properties, Kürten says: “Yes, we’ll replicate it with ESPN and others,” pointing out that the EBU is also working with IMG on distributing equestrian rights.
The agreement with world governing body the FEI, which was renewed in 2014 and runs until 2022, includes live, news, highlights, magazine and other FEI programming across events such as: the 2018 and 2022 World Equestrian Games; the FEI European Championships in the Olympic disciplines of dressage, eventing and jumping in 2015, 2017, 2019 and 2021; and the FEI World Cup Finals through to the 2018-19 season.
IMG is tasked with distributing European rights that fall outside of the agreement with the EBU, plus international rights.
So, the EBU seems to be coming to terms with its old adversary, pay-TV. But what about those tech giants? They’re “not a threat” to the EBU, and the kind of sport it seeks to broadcast, Kürten claims, arguing that the tech giants “hunger for more regular content,” not the cycle of Olympic sports, in which events “come up every two or four years.”
He continues: “Again, the infrastructure [of the tech giants] has to be adapted. It’s [the market] currently more national. To get the experience, knowledge, commentary and experts requires a huge investment, on top of the rights. This leads to the question of, ‘why the GAFAs [Google, Apple, Facebook and Amazon]?’ For them today content is free. To pay for it is a complete change of concept - plus infrastructure costs. It might be the case for individual properties, like tennis.”
What about OTT? Might not rights-holders be tempted in future simply to bypass the traditional (and expensive) broadcast paraphernalia of satellites, uplinking, downlinking, cable and/or broadcast spectrum and aerials and deliver all of their content via the internet? “Good luck with that,” Kürten scoffs. “They don’t know what they’re asking for. To get the same revenues and income guaranteed on a mid- and long-term perspective?
“I don’t know the business models of some streaming solutions, although I understand the interest in data [that can be derived from ownership of an OTT customer base]. But if you look at the [viewer] behaviour in sports, it’s very conservative. It might change by three or four per cent a year. So, the data, if you have a seven-year contract, it’s not a seven-times increase. It’s still the same data. I wonder if it’s worth paying for seven years to get the same outcome? It can be done far better in co-operation with traditional broadcasters.”
This is not to say the EBU is being left behind in the digital revolution, Kürten contends. For example, in the field of social media it’s in discussion over “solutions for the European Championships” with Snapchat, the instant photo and video messaging app, which live-streamed content from an Olympic Games for the first time after its parent company, Snap Inc, teamed up with NBC, the US national network and Olympics rights-holder for the PyeongChang games.
Similarly, the EBU could carve out clips rights, for example, for the likes of Snapchat. “We’re discussing with Snapchat the possibility that they do the storytelling of individual athletes,” Kürten says, “adding that the EBU would only “allow clearly defined access to rights.” He adds: “I’m in favour of strengthening relations with newspapers, as well. This is not yet fully covered. When I look at what l’Equipe [the French newspaper] is doing for biathlon, and how they use the online offer with l’Equipe TV, mutual promotion leads to fantastic figures on both sides.”
The Amaury Group-owned free-to-air digital terrestrial channel which is also called l'Equipe last year extended its broadcast rights in France to biathlon’s major competitions until the end of the 2021-22 season.
“You have to understand these kinds of co-operation will be a new approach to rights,” Kürten continues. “Sharing is sometimes better than fully owning and using.” However, he cautions, “Exclusivity is still the key. The further away you go from live, the redefinition of non-exclusivity will become relevant. I don’t see too many operating models where the business case is operating well without the broadcast media in traditional sports and Olympic sports.”
Where there’s a threat from social media and the growing appetite for clips, not traditional long-form content, Kürten argues it’s the rights-holders, the international federations, that are most at risk. “I see it as a big threat to the commercial model of the IFs,” he says. “I’ve not seen too many of these players willing to throw big sums of money to the IFs. They’re asking for free-of-charge access to clips.
If the broadcast model falls apart and federations are hoping for huge increases from future players, they might be disappointed
“The commercial model seems to be still under development. There have been tender procedures which have focused on social media players and there’s been disappointment at nobody coming. That goes not just for football, as in the UK [where the Premier League has yet to find buyers for two of its rights packages] but other sports under our responsibility. If the broadcast model falls apart and federations are hoping for huge increases from future players, they might be disappointed.”
ESPN has been given clearance by the IAAF to broadcast athletics via its OTT digital player in selected markets. Would the EBU consider creating its own player to give exposure to events in its portfolio in markets in which it struggles to find a broadcaster (as long ago as 2008 it launched Beijing Live, an internet portal streaming coverage of the Beijing Olympics) ? Kürten doesn’t dismiss the notion, saying: “We are very much free-to-air driven, and this will be the focus, but I still believe there might be opportunities. The technology is already there. What we are delivering is not only rights, but also a full set of services, a one-stop solution. In this respect we are extremely close to developments. A player solution is technically possible, but the business case needs further study. I don’t see a workable business model, but it could only be complementary model in territories where rights have not been sold.”
So, what does all this mean for the future of sport on free-to-air television? One senior media consultant, who prefers not to be named for fear of offending clients, says: “TV will prove to be quite resilient versus online, partly because TV will reinvent itself by adopting new ways of viewing. For instance, BARB figures [for UK viewing] say only 56 per cent of TV viewing is of linear channels.
“The reach and viewership of a major EBU member is still bigger than that of the largest online players in that country. Admittedly the gap is closing.
“There are some sports and events that, for a variety of reasons, prefer free-to-air and its reach and have always resisted pay. Likewise, pay broadcasters have tended to focus on season-long key sports (like football leagues) rather than short events (like Olympics or European Championships). There are also listings rules to focus on.
“As pay broadcasters concentrate their budgets further, that has to leave space for others, making the EBU more competitive.”
A guaranteed means of infuriating the EBU used to be to drop the forbidden ‘d’ word: dinosaur. When I ask Kürten if he believes it’s shaken off the tag (whether fair or otherwise), he replies equably: “We are a bit ‘Jurassic Park’, in that we are still alive while lots of players who called us dinosaurs have left the market. We have changed dramatically. In production and technical services, we are providers for the big federations that are defining the next generation of sport.
“We’re moving from a pure, member-driven-only approach to multi-dimensional exploitation, with or without rights. When I look at sports and the development of sports, our co-operation with our members allows us to understand the sports, not only their delivery. We are on the edge of what can and should be done to combine free-to-air with new solutions.”