Race to become sport’s Spotify is slower than expected

  • Structural and technological limitations have slowed the pace of disruption in sport
  • Rights-holders and fans mostly happy with current offering from traditional broadcasters
  • DAZN, Eleven and other streaming platforms are competing on price, not quality

Speaking at the FANXP conference in Barcelona in February, leading executives from disruptive companies came together to speak about ‘the fan of the future’, and how DAZN, Eleven and Twitter are pushing the boundaries and meeting fan demand.

But when the conversation began to flow, Eleven Sports’ new chief executive, Luis Vicente; DAZN’s vice-president of acquisitions, Laura Louisy; and Twitter’s head of sports partnerships, Simone Tomassetti began discussing the inherent limitations faced by companies seeking to disrupt sports broadcasting.

Disruptive companies in film, television, music and retail have revolutionised their industries by giving consumers the products they want; when, where and how they want it.

The likes of DAZN and Eleven might be at the forefront of this movement in sport, having solved the ‘when’ and ‘where’ for sports fans in markets across Europe, the Americas and Asia. But to successfully disrupt an industry, a company must offer significant improvements on what legacy companies can offer in every area.

The most successful disruptors – Spotify, Netflix, Amazon, Uber – have achieved this by aggregating almost every product a consumer could want in the relevant category, improving the user experience in their industry and delivering the service on all devices at a lower price than legacy competitors.

At present, DAZN, Eleven and their many cohorts in the worlds of live streaming and OTT are allowing sports fans to watch when and where they want, at a much lower price than their PayTV forbears. But a strict comparison would say the quality, quantity and consistency of their product is either inferior or not superior enough to trigger a dramatic change in the industry.

The standard of broadband and mobile internet in almost every television market prevents live streaming platforms from offering a better live-viewing experience than cable, satellite and terrestrial television. Latency, buffering and reliability issues continue to plague even the most advanced OTT platforms. The technology to fix these issues – such as 5G internet – will not roll out across all major television markets for a decade or more.

An old model

Speaking at the event, Vicente was forceful about why he believes this to be the case and, in his opinion, the problem does not lie with the disruptive companies. He believes a lack of investment and risk from all corners of the sports industry – aside from companies like his own – is preventing progress.

“The traditional pyramid of sports was designed more than 100 years ago and clubs, leagues, sponsors and broadcasters had different interactions with each other back then. It’s an old model; and I’m not saying anything controversial, because it’s old. We need to try to help rights-holders to become risk-taking businesses,” he told the audience.

“The challenge we face in this decade is how we’re going to move, once and for all, from a securitized business model to a more innovative model where, for the first time, the industry will assume risk.”

Vicente believes that sport’s more gradual shift to a new model of consumption is because companies like Eleven and DAZN are the only players making serious investments to initiate change, and that rights-holders must also invest and gamble on structural changes if ever-increasing consumer expectations are to be met.

“We (Eleven, DAZN and Twitter) are all businesses that are completely focused on the end user,” Vicente said. “This is different from the previous iteration of the sports industry. We have always cared about the fan, but we are not actually delivering up to the expectations of the fan. This is changing because our businesses are pushing that change.”

He continued: “Nobody takes risk. If something happened to beIN or to any other big broadcaster and they cannot show a game, [football] clubs will not feel they have a problem. They’ll only feel a problem when the cheque doesn’t come from the league.”

One could argue that if rights-holders, clubs, broadcasters, players and fans are largely happy with the current state of affairs, sport doesn’t need to be disrupted to the same extremes as other industries. But Vicente strongly believes that without significant investment in providing fans with a better viewing experience, live sport – especially football – is at risk of becoming a part of the old world over the coming decades.

For change to happen at pace, Vicente believes sports stakeholders such as rights-holders and clubs must take more responsibility.

“Unfortunately, it’s much easier for clubs to spend €5m ($5.4m) to buy a player than to spend €500,000 to begin a data journey. But data is fundamentally important – without data, all these businesses will continue to be blind, and this cannot continue. We need to find a way to help the sports industry to understand that and move on.

“Sport still has a very conservative attitude towards external money. Forget revenue for a moment and look at profitability. Look at the cash that is generated via sports – and you can pick any sport – it’s a small amount of money. Sport cannot change itself because it doesn’t generate enough cash to change itself. That’s why we probably need someone else in the ecosystem as well.”

Glacial pace of change

DAZN and Eleven understand that until technology advances they must conform to the world as it currently is.

Both businesses began as OTT-only streaming platforms, but both are now available as channels on old-school pay-television operators – especially in markets where DAZN and Eleven hold top-tier football rights.

While the majority of shoppers and music-lovers have changed almost everything about their consumption habits over the past decade, sports fans are merely adding to their habits while keeping old ones in place. While they would like the option to watch on their devices, fans still prefer to watch live sport on a television in their living rooms, and they want that experience to be as ‘live’ and as seamless as it can possibly be.

These habits are reflected in research done by DAZN over the past two years. And Louisy and her DAZN colleagues have been shaping the platform accordingly.

She said: “It’s a common misconception that because we’re on all devices, mobile is our number-one viewing platform. It isn’t. Living room viewing accounts for about 60 per cent of our viewership because if you are a sports fan and you’re in your house, you still want to watch it on your TV. People didn’t throw their TVs out when they got rid of their cable. They’re still there.”

Louisy suggests that the low price point and monthly rolling contract offered by platforms like Eleven and DAZN means that the new wave of sports broadcast platforms are competing with the likes of Spotify, Netflix, Amazon Prime and other low-price content subscriptions, as well as with price point pay-television operators.

“There’s a question around how customers want to spend their money and how many things they’re willing to spend their money on. We do a lot of research on this, and I think the latest study indicates that consumers only really want to subscribe to maybe three to four paid-for services.”

She continued: “It’s more of a disposable income issue, because if you’re paying for Netflix, Spotify, Amazon Prime and other subscription services, you only have so much disposable income left.”

A long way to go

Neither DAZN nor Eleven hold rights to all of the premium sports content in a single market, making the user experience inferior to something like Spotify, which collates almost every song you could possibly wish to hear, in every major market on the planet. And yet DAZN, Eleven and Spotify are priced at the same point: a €9.99/£9.99 monthly subscription that you can cancel at any time.

In a bid to differentiate their offering and keep users on the platform, DAZN is focusing more on VOD content such as behind-the-scenes documentaries – the kind that have proved wildly popular on Amazon and Netflix. But the difference between DAZN and its VOD content rivals is clear: Amazon offers a wealth of other benefits with a Prime subscription, while Netflix offers a glut of film and television unrivalled in almost every major market.

In terms of user experience and quality of content, the likes of DAZN and Eleven are not market leaders in any area other than their price point for live sports content.

For OTT and live streaming to become a true market leader in sports, Vicente believes that a super-platform, aggregating all premium sports content in a given market, could be the key to a sports broadcasting revolution.

“I think many organisations in sports are starting to understand the power of being together, thinking together, of trying to make their content available in a single destination,” Vicente said. “It could also be that some platforms decide to work together and create a super platform, which could aggregate all the rights.”

For Tomassetti, OTT platforms must work not only on this, but on personalising that experience for the user.

“The OTT platform did it well: they give you the content whenever you want, and that was the first step. Now there is a second step: people want to receive content whenever they want, but the exact content they want, in the moment they want. The platform that is able to provide this kind of experience for users will be the winning one.”

For all the innovation and all the disruption of the past five years, traditional pay-television operators remain in a better position than OTT players to deliver this experience to the consumer. They have bigger budgets to acquire premium sports content; bigger subscriber bases; and the ability to agree carriage deals with multiple sports broadcasters to bring all premium sports content under one subscription.

Thus far, the only successful disruption happening in the sports broadcasting industry has been on price. Instead of asking consumers to subscribe to a wholly superior product for a lower price, a more complex question is being put forward.

Would you rather pay £60 or £70 per month for a complete live sports package, delivered as live as it possibly can be, in a way you’re used to receiving it? Or would you rather pay £9.99 for a fairly small slice of what you want, delivered 15 seconds to a minute late, in a way that isn’t necessarily how you’d prefer to watch it?