After a long and peaceful period in which mobile operators were offering traditional telecom services (voice and SMS) and were not under the pressure of new business models, smartphone revolution started and caused the consequent explosion of data traffic in mobile networks and the appearance of OTT (Over The Top) players in the voice and messaging world (Skype, Viber, WhatsApp, etc.). In the next phase, the fight shifted to the area of content, in other words, another business that was largely reserved for telecom and cable operators, and that is providing the pay TV services (IPTV, cable TV, etc.). The appearance of OTT streaming services and OTT streaming players (Netflix, HBO Now, etc.) enabled the users of TV services to choose to pay the monthly fee for the content / programs they have chosen themselves rather than the operators. OTT players would say they do not only offer interesting content, but provide the users with “cutting the cord” (terminating the contract with operators for pay TV services at the expense of new services based on new technologies – streaming), “rescue” the users from complicated and vague bundles and long-term contracts and give them flexibility in terms of choice and use of services. This article focuses on analysing the impact of new business models for live sports streaming on telecom and cable operators and the services they offer.

“The chicken or the egg” question

Since the appearance of the first OTT players and first OTT business models, one of the major issues in the telecom world has been whether the OTT players exploit the traditional operators and reduce their revenues without any investment or do the traditional operators need more OTT players to sell their data tariffs? The above mentioned question was primarily driven by the decrease of operator’s revenues from the traditional services and by the emergence and growth of video streaming and consequent high investment needed to increase the network capacity in order to meet high demand for video streaming services. A typical “the chicken or the egg” question. The fact is that nobody prohibited operators to introduce such services themselves before the OTT players. Therefore the question is whether the operators were “deceived”? If they had not been “deceived”, they may not have recognized the future technology trends or might have tried to protect their revenues, so they did not invest in such services, although no one prevented them from doing so. On the other hand, it is questionable whom could OTT players provide their services to if operators did not continuously invest in network development with the aim of providing state of the art quality broadband services.

From the regulatory point of view, which has a profound impact on business relations, the situation in the EU is very clear. After the entry into force of the “Regulation on Net Neutrality” in the EU, operators must treat all traffic equally, and in particular are prohibited from blocking, slowing down, modifying, restricting, mixing in individual content, applications or services. In other words, the use of applications and advanced services should not be influenced (except in some predefined cases) because the free use of all applications and services, according to the legislators, is the historical foundation of the striking growth of the internet and innovation on the internet.

To conclude, the battle is over, I do not want to announce winners or losers, but it is clear that there is a framework in which traditional operators and OTT players do business, somewhere in the way that they are rivals or competitors, somewhere in the way that they cooperate, depending on the situation on each individual and specific market.

Content is the king, but live sports content is even more than that

Pay TV offer or content is one of the main reasons for switching to another telecom or cable operator or staying with the same one and exactly because of that the content is the king. The content is the best possible way of differentiation between the operators, of course, with the quality of service and the cost of the service provided. The entry of Netflix or HBO Now had a certain impact on the number of users of pay TV services on each individual market, but it was not as disruptive as these and similar services were always considered to be complementary to pay TV services or, in other words, their use did not exclude the use of IPTV or cable television. As an expert, and especially as a user, I’ve always had an opinion that, depending on the characteristics of each particular market, the live sports content is still one of the main drivers of contracting pay TV and other bundled services with the operator. This is primarily for its great viewership, but mostly because of its live characteristics, due to which it cannot be replaced by any other service. The aforementioned conclusion could be proven just by mentioning the price of 4,464 bn £ which BT and Sky paid for the TV rights to the five main packages of matches of English Premier League for the period 2019-2022.

For the time being live sports content has remained, directly or indirectly, in the hands of the operators or part of their pay TV offers, in the way that in their pay TV offers there are programs of companies that are holders of rights to certain league or even operators, directly or indirectly, hold the rights to certain leagues. Users wishing to watch live sports content, with certain exceptions, need to be subscribed to pay TV offers of operators.

For the purpose of this article, I have analysed the distribution of TV rights for the five most important European football leagues (Premier League, La Liga, Serie A, Bundesliga and Ligue1) in all EU countries. Based on publicly available data, TV rights of the aforementioned leagues in the EU countries are usually granted for a period of 3 years. These rights are generally divided into 2-3 rights’ holders per country. Rights’ holders are mostly TV companies, sports content providers, whose business model is to find “distributors” or “enter” in as many platforms (IPTV, cable, satellite, digital terrestrial, etc.) to be accessible to as many users as possible in order to maximize revenues from the operator’s fees and advertising. In some countries, operators themselves become owners of rights to certain leagues and use them exclusively in their pay TV offers as a way to increase the number of users and thus the use of newly-built fibre or cable infrastructure and accelerate the return on investment.

But, I was always eager to know what would be the operator’s strategy when one day “Netflix for Sport” showed up?

The way of watching live sports content is drastically changing

In such a “default” ecosystem, over the last few years, OTT players that have the characteristics of “Netflix for sport” have been showing up. From the tech and e-commerce giants to the new companies that have recognized the opportunity for success in that business segment. According to publicly available information, the American tech and e-commerce giant Amazon has acquired rights for the part of the American football (NFL) matches for the US market. DAZN, sports streaming service provider owned by the Perform Group, has acquired rights to boxing matches for the US market, as well as the rights to the Japanese soccer league for the Japanese market and is, among other things, the holder of the rights to broadcast the UEFA Champions League matches to the Canadian market. At the same time, another tech giant Facebook is buying the rights for the part of the matches in the American Baseball League (MLB), while Twitter is making a deal with PGA TOUR to distribute more than 70 hours of live competition. The first thing one could say is that it’s all outside of Europe. So, what is happening in Europe?

According to publicly available information, Amazon has acquired the rights to the part of the Premier League matches for the 2019/2020 season, the exclusive rights to the US Open and ATP Tour matches, all of it for the UK market. DAZN is the holder of the rights to some of the strongest European football leagues for Germany, Austria and Switzerland, and since June this year it has become the holder of rights to one third of matches of the national football league Serie A, in Italy. All this shows that “Netflixes for Sport” are slightly advancing and increasing their footprint and that their existence and influence can no longer be ignored both by the user’s and operator’s side.

What does this mean for the existing market relations?

Obviously, the OTT live sports trend has also entered our European yard. All broadcasts related to the above mentioned TV rights will primarily be performed through OTT streaming services.