Untapping The Potential Of Sports DTC

The media industry is in the midst of a wholesale move toward streaming, first in the entertainment sector and now in sports. Over the next 10 years, more than 50% of audiovisual revenue will come from over-the-top (OTT) services. According to Strategy Analytics, OTT revenues will surpass pay TV for the first time in 2024. Much of the momentum over the next decade will come from live, and in particular sports, with rights holders expanding on current DTC experimentation by placing more of their properties online and by traditional pay-TV like Sky and Comcast substituting satellite and cable with leaner fitter faster IP delivery.

This article looks at the trends and technologies impacting the sports market as investment shifts dramatically to OTT.

Initially, OTT D2C services consisted of VOD libraries such as Netflix, Hulu, and Disney+. Today, we are seeing more live streaming offerings from players including DAZN, Amazon Prime, F1TV, and ESPN+. In parallel, broadcasters have been building up their offerings with live and time-shifted services mostly targeted at second screens.

We’ve also reached the point where OTT service providers are simultaneously streaming multiple live events, such as a boxing match, F1 race, and football games, to the main screens.

Telco and cable operators, such as Bouygues in France and Sky in the UK, are launching pure streaming services. As opposed to using complex set-top boxes, they are targeting connected TVs.

“This trend of moving video delivery to streaming will continue to accelerate, and in time audiences will tune out legacy broadcast systems like satellite and terrestrial TV,” says Xavier Leclercq, Vice President Business Development at Broadpeak.

COVID-19 accelerated the adoption of streaming in many households. Netflix grew faster during the lockdowns and ended up about six months ahead of its own growth plan.

Another effect of the global health crisis is the renewed consumer interest in having a high-quality broadband connection. As broadband became a lifeline for work, school, entertainment, and more, many customers upgraded their packages to get higher speeds. This means that larger pipes are now available to deliver streaming services, and the capacity of the access network is less likely to be an issue.

“While D2C in sports feels relatively emergent, it’s important to recognize that there have been many globally successful models in place for some time,” says Steve Russell, Chief Product Officer, Red Bee Media. “So, what is new? My sense is that the risk-reward balance has tipped. More consumers are willing and able to access and pay for D2C offerings, and simultaneously the bar has been lowered in terms of time, risk and cost to get a service to market.”

 Xavier Leclercq, VP Business Development at Broadpeak.

Xavier Leclercq, VP Business Development at Broadpeak.

OTT Sports Are Thriving

For D2C launches, Covid has arguably been both an accelerant and a deterrent. Ampere Analysis notes that, in some cases, broadcasters and rights sellers have extended broadcast deals to maintain stability and this has tied up significant rights for a long time, such as the Premier League in the UK. In other cases, however, tensions have been heightened between broadcasters and rights sellers. Mediapro, for example, cancelled its reported €780m contract with France’s Ligue 1 and caused a decline of around 42% in the league’s broadcasting income. Similar situations may prompt rights holders into a change in strategy, particularly where their valuation of the product is different to that of the broadcasters.

It’s easy to see why OTT sports distribution platforms are thriving. Streaming enables native content personalization. It is easier to insert targeted advertising in video streams than a broadcast. Tapping into these new and more lucrative revenue sources is a significant opportunity for all parties, whether it is the rights owners directly monetizing their content, an OTT distributor such as a TV channel, or a telco or cable operator.

Nadine Patry, Products & Solutions Marketing Director at Viaccess-Orca says, “OTT is easier to deploy than traditional broadcast infrastructure, offering direct access to users, enabling better insights into user behaviour and consumption with analytics, offering new interactive experiences, and opening up new revenue opportunities such as targeted advertising and on-demand content.”

Streaming of sports content can bring viewers new experiences, including live content with watch party and multi-view features to drive better viewer engagement. PCCW Media in Hong Kong for example created a Watch Party for its Now TV customers during the UEFA EURO 2020 championship. 

“Most importantly, the next generation of viewers, aged 18 to 24 years, prefer watching pure OTT services on mobile devices,” Patry adds. “We often talk about cord-cutting, but today we see cord-never growing. More and more consumers are not subscribing to pay TV, and they enjoy OTT services, with on-demand content and the pay-per-view model. In fact, pay-per-view services are growing everywhere. Users are willing to pay to watch a specific event. For instance, an MMA match can be sold for up to $30.”

It is worth noting that D2C in sports is not just about the most watched games and sports. It is also a unique opportunity for smaller sports organizations to find their audience. Given that perspective, the OTT model (in particular one which is as-a-service) has reduced adoption barriers and enabled niche sports organizations to embrace video streaming.

“More generally, says Eric Gallier, VP, Video Solutions at Harmonic “sports organizations also have the opportunity to leverage a broad range of content for their D2C presence, beyond what would already be available on TV, including untapped archives, youth competitions that would require retaining rights, or new editorial forms (i.e., game highlights, storytelling content). D2C is also a way for sports organizations to address underserved markets.”

Russell reports that many of Red Bee’s customers see DTC as a complementary offering – a way of monetizing a differentiated offering and creating far closer fan engagement while accessing the “data gold” on viewing behaviors. Some rights holders see D2C as a strategic “hedge”, others as a fully-fledged core offering. “Of course, there is no universal answer – perhaps the most high-risk play would be to avoid the D2C opportunity altogether,” he says.

Combining sports data, or new camera angles, or second screen gaming all form part of the new options for consumers, and rights holders that can simplify the experience for fans will be the most successful. This image courtesy Grabyo.

Combining sports data, or new camera angles, or second screen gaming all form part of the new options for consumers, and rights holders that can simplify the experience for fans will be the most successful. This image courtesy Grabyo.

Technical Challenges

Going from traditional TV broadcast to an OTT direct to consumer product is a significant jump. There have been several failed attempts at going D2C with sports already and there are technological and distribution risk, which can damage a sport reputationally.

Some of these issues are ironed out – in particular the technological one. Ampere analyst Ben McMurray thinks the gap is starting to bridge and OTT / D2C is becoming a more appealing strategy.

“Where competition is high and the value of broadcasting rights is being driven up, rights holders will likely continue to sell their rights, but where competition is low and broadcasters underbid, going D2C is a real option, especially out of market,” he says.

Streaming issues are something that DAZN has been scrutinised for in Italy after acquiring rights to all Serie A games (with 30% non-exclusive). There have been frequent problems with the quality of service, but this has been attributed by DAZN to an adjustment period. This type of adjustment is something we might expect if other tier 1 events go OTT, particularly in a territory like Italy where the transition to fast, fibre broadband is still a work in progress.

As they grow, OTT services face a trade-off: on the one hand, provided the capacity is available, OTT services could pay for more to ensure that capacity limits are not hit when demand on their network increases; on the other hand, however, any capacity not used could be seen as inefficient, as it’s only certain games that will cause network congestion. 

Nadine Patry, Products & Solutions Marketing Director, Viaccess-Orca.

Nadine Patry, Products & Solutions Marketing Director, Viaccess-Orca.

Buffering And Congestion

“Almost every service that has tried this has suffered a system failure early on, but as time goes on the services will get better at anticipating demand and finding the right balance between cost-efficiency and seamless experiences,” says McMurray. “For tier 1 events, we are only starting to see OTT players acquiring the rights and placing a huge bet on being able to build direct-to-consumer relationships. These events will put a country’s internet infrastructure through the test of scale, and there will be failures along the way. But equally all these failures will serve as lessons in how to prevent a repeat of those situations.”

On a global scale, the internet is not yet ready to support a shift where everyone starts “watching TV” online. With that said, it is still possible to stream large scale live events to millions of viewers worldwide. For live events, it’s rarely the video distribution and streaming quality that will cause problems. The challenges usually lie in authentication, payment and getting access to the stream.

“The streaming platforms need to be scalable enough to handle millions of users trying to access the event more or less at the same time,” says Anders Wassén, Head of OTT Development, Red Bee Media. “To achieve this, you need to build a complete workflow, prioritizing scale, and resilience. Streaming platforms that are built correctly, will be ready to handle millions of viewers on live events.”

Anders Wassén, Red Bee Media

Anders Wassén, Red Bee Media

Latency Tackled

This includes latency, perhaps the biggest bugbear sports streamers need to solve. Latency mainly exists because of the buffer introduced in the video players. Since content is delivered over the top, without guarantees from the networks, a safety net is introduced to absorb some of the network problems.

There are technical innovations that mitigate or solve latency issues in streaming, but there are different pros and cons depending on the solution.

“You need to carefully evaluate the real need when selecting technology to lower latency, Wassén says. “Unless you need real-time interaction or live betting you don’t need sub-second latency.”

He says you could achieve “acceptable latency” for most scenarios by only adapting the normal adaptive bitrate distribution parameters. For cases that require even lower latency, there are open standardized protocols for most devices and platforms.

Broadpeak’s ‘cure’ for latency is similar. The key to reduce latency is to deliver the streams over a more deterministic and reliable network. There are two ways to do that, Leclercq explains:

  • Reduce the distance between where the content is served and the end user. This involves distributing the CDN capacity closer to the consumers to avoid potential problems. By reducing the network distance, you reduce the probability of something going wrong. We see customers deploying more caches, closer to the consumers, because in the video world proximity means quality.
  • Leverage multicast technology, not in the shape of legacy IPTV delivery to a set-top box, but by combining multicast with adaptive bit rate technology (ABR) to scale streaming to any device in the network. With multicast ABR you benefit from the scalability of multicast combined with the versatility of ABR. This allows distribution of live streaming content with maximum quality and minimum latency.

While the individual components of the delivery chain can be improved to reduce latency most observers believe it will take time and considerable technological innovation before OTT services can compete with ‘traditional’ DTT, DTH or cable distribution.

Harmonic, however, suggest that with DASH and LL-HLS, “it has been proven” that the overall latency from the camera to the display by the end device is the same – around 5 seconds – as current traditional broadcast latency.”

“We are confident that in 2022, more and more sports streaming services will implement these low-latency streaming formats,” says Gallier.

Buffering has also dogged the live OTT experience, a function of OTT’s ability or not to scale on demand.

“There are multiple factors that need to be considered,” says Prasoon Thakur, Business Development Executive, Online Video, Telstra Broadcast Services. “Tens of thousands of subscribers is purely a function of scaling the platform end-to-end. Whereas the buffering is related to quality of network. Maturity of network deployment and quality of bandwidth plays a very important role in delivering good quality content in the right format to the subscriber. An unreliable service provider with an unmaintained network can lead to poor viewing experience. However, it’s usually the OTT provider or content producers that end up taking the flack for that.”

Buckle In For The OTT Ride

Many players have already made significant investments in OTT for sports, including leagues and federations, clubs (a trend that started in the U.S. but now extends to Europe), broadcasters (with sports services such as ESPN+ and Eurosport Player), telco operators, and pay-TV aggregate bundles of content and channels. Streamers like DAZN (reportedly in advanced negotiations to buy BT Sport) are offering sports-only aggregation services while the likes of Amazon are buying sports rights (like NFL and tennis majors).

Simply, in a more connected world, the audience expects content to be accessible everywhere at all times and at a price point that makes sense. Forcing viewers to sit in front of the television to watch live sport in real-time as the only option for consumption is not realistic and will hamper the growth of sports in the future. Sports must keep up with media consumption trends if they want to stay ahead of the competition, not just from other sport rights holders but all content in the market, from gaming to entertainment and other media. 

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