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NFL faces challenge to grow linear, OTT revenues in key non-US markets

MIAMI, FLORIDA - FEBRUARY 02: Damien Williams #26 of the Kansas City Chiefs dives into the endzone for a touchdown against the San Francisco 49ers during the fourth quarter in Super Bowl LIV at Hard Rock Stadium on February 02, 2020 in Miami, Florida. (Photo by Al Bello/Getty Images)

  • NFL deals have expired in the UK, China
  • League seeks distribution partner for pan-European rights
  • Subscriber numbers to NFL Game Pass grow steadily

The NFL League is at a pivotal moment in its distribution of media rights outside the US. Deals in two of the league’s most important overseas territories, the UK and China, are up for renewal. The league is also thought to be looking for a new partner for its rights across Europe.

The distribution of the linear rights takes place against the backdrop of an aggressive roll-out of NFL Game Pass, the league’s global OTT service. Increasing take-up of the service while simultaneously increasing revenues for linear rights is the kind of challenge that will be followed closely by every sports league in the world.

The Game Pass, which launched in its current form in 2015, is a subscription product that is priced according to local market conditions. Subscribers outside North America have access to live pre-season, regular season, and post-season games, while users in North America can only watch out-of-market pre-season games live. In the latter territory, full game replays are available only after their original live broadcasts. There is also a free version of Game Pass that carries a much more limited range of content.

The NFL does not provide subscriber numbers for Game Pass but claims it is the fastest growing single-sport OTT service in the world. One independent market research company puts the number of paying subscribers outside the US and Canada at between 300,000 and 700,000. Other sources say it is higher.

The UK, Germany and Scandinavia are the European markets where the service has been most successful. Other big markets include Australia, Brazil and Mexico.

International rights only make up a tiny fraction of the league’s overall media-rights revenues – not more than two to three per cent – but the league is committed to expanding its reach and revenues, and to servicing its global fanbase better.

One media-rights expert familiar with the NFL said that it would be a long time before the number of subscribers for Game Pass started to exert any downward pressure on linear rights fees.

Dan Cohen, senior vice-president of the Octagon agency’s Global Media Rights Consulting division, said: “International broadcasters are coming around to the new reality that leagues, and even teams, are developing direct-to-consumer offerings. That said, this concept is still maturing in many international markets. Some broadcasters believe direct-to-consumer offerings will cannibalise their broadcasts. The simple answer is to incorporate a product like Game Pass into a larger NFL strategy and drive tune-in across both platforms.

“The NFL has done a solid job communicating the opportunities to do so and working with their individual broadcast partners internationally to cross promote the offerings. As long as this remains the path forward, both Game Pass and broadcast rights will grow in tandem.”

Sameer Pabari, the NFL’s managing director of international media, said Game Pass was not cannibalising linear TV audiences and may even be driving them.

“We have consistently found, whether in the United States or abroad, that the more NFL content is available to fans, the more consumption we see. A perfect example of this, as it pertains to Game Pass, is in Germany,” he said. “Germany has three outlets to watch NFL games: ProSieben, our free-to-air broadcast partner; DAZN, our pay-TV partner; and Game Pass. Over the past year, all three of those platforms saw growth in terms of consumption of NFL football.”

UK deals

The UK is the league’s biggest European market by some distance. The success of the regular London NFL fixtures, as part of the NFL International Series, is one of the main reasons. The fixtures always draw more than 80,000 fans and deliver good ratings for live coverage.

The main live rights were held by pay-television operator Sky in a five-year deal, from 2015 to 2019, worth a minimum of $12m (€11.1m) per season.

Sky held the exclusive rights to regular-season and play-off games and shares live rights to the Super Bowl and London Series games with public-service broadcaster the BBC, which also holds extensive highlights rights. The Amazon Prime video streaming service holds non-exclusive rights to the Thursday Night Football fixtures through its global deal with the league. These games are also shown by Sky.

One UK broadcast source said that Sky, which has shown the NFL since 1994, would be the favourite to renew the main live package.

“Sky has done a good job of building up the NFL in the UK. It would be surprising if the relationship didn’t continue. The games hosted in the UK have become a major event. It would have seemed unlikely 10 to 15 years ago, but it is now a significant event on the UK sporting landscape and a lot of that is down to Sky. The league has always looked for a free-to-air element too, whether that has been with the BBC, Channel 4 or Channel Five. That model has worked.”

However, at least one analyst has argued the NFL should consider a different approach: distributing only Game Pass in the UK and not agreeing a linear deal. In a note in November, Ampere Analysis said the NFL could earn more money from Game Pass than from traditional broadcasting deals: “It all depends on your production capabilities but, for the NFL, which has that in their Game Pass, for them to go full DTC, that could present a big opportunity, and is an example of how tier-one sports can attract more subscribers in markets where they are a tier-two property.”

China deals

In China, the league’s exclusive deal with streaming service Tencent has also expired. The three-year deal, from 2017 to 2019, was worth about $3m. It was agreed by NFL China.

The deal gave Tencent over 100 live games per season plus extensive highlights and shoulder content. The content could be accessed via Tencent’s streaming services or on messaging services QQ and WeChat.

In the previous two years, the league had opted for multiple, non-exclusive deals with streaming services including Tencent, Alisports, BesTV, iQiyi, the now-defunct LeSports, PPTV and Sina Sports. Through these deals, it was thought to be earning about $2m per season.

NFL Game Pass is not currently distributed in China.

Pan-Europe

The league’s rights in 42 European markets – excluding major markets like the UK, Scandinavia and Germany – were distributed by the MP & Silva agency until the agency went under in October 2018. That deal was worth about $6m per season.

The league took over the existing contracts and dealt directly with licensees until expiry. The deal would, in any case, have expired at the end of the 2019 season.

The NFL is now thought to be looking for an agency to replace MP & Silva. It could, in theory, sell market by market, but the international sales team, headed by former-Discovery executive Pabari, is small and an agency deal would make more sense, experts said.

It will not be easy for the NFL to secure a deal of a similar value. MP & Silva had made a strategic investment to build up its roster of blue-chip, non-soccer clients. It is understood to have been losing about $1m per year on the deal.

Distribution switch

OverTier, a company owned by the Bruin Sports Capital investment company, distributes NFL Game Pass, in 181 markets globally, excluding the US, Canada and China. The advertising giant WPP has a small stake in OverTier.

It initially carried Game Pass in Europe only. The deal was extended to cover the rest of the world in October 2019. This meant taking over Game Pass distribution outside Europe from digital specialists the Perform Group.

In May 2017, Perform agreed a deal with the NFL to distribute linear rights and Game Pass internationally – excluding the US, Europe and sub-Saharan Africa – through to 2021. In Mexico, it distributed Game Pass but not linear rights. Perform agreed to pay a minimum guarantee of $14m per season. Above this threshold, it shares revenue with the NFL.

Perform had initially agreed a deal just for its streaming service DAZN to carry Game Pass in Canada. The wider distribution deal came about as a result of those carriage talks. Perform realised that the rights would be available in many markets and was looking at launching DAZN across many markets, so it made sense to agree a near-global deal.

After the 2017 season, it was mutually agreed that Game Pass would be removed from the agreement. The NFL’s Pabari told SportBusiness Media: “Perform was not replaced. In fact, they operate our NFL Games Pass product in Canada and continue to be a fantastic partner globally. We mutually agreed to make the shift in 2019 as they were sunsetting their B2B business, Perform, and shifting focus to their direct-to-consumer business, DAZN, which, again, we are currently working with and are looking for additional ways of working together.”

The NFL contract in Canada is now handled by the DAZN Group, following the sale of Perform Content, the data and betting side of the business in July 2019.

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