Theresa Wise T Wise Consulting
Theresa Wise T Wise Consulting
Sport as a genre lends itself extremely well to technology-led improvements in the customer experience as it is both fast-moving and detail-hungry
We might not have enjoyed… the excellent Footballers’ Wives were it not for the committed expenditure of the newly enriched WAGs of the Premier League players
ITV
Footballers’ Wives
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To support Sky Sports 2 (launched in 1994, followed in 1996 by a third, and in 1999 by a fourth, dedicated sports channel), other sports deals were needed. Cricket plays a key role in maintaining interest during the summer months, although not quite enough to prevent the annual increase in churn in this period. As for that all-important question of brand, there are few television sports brands in the world with Sky Sports’ stature – the notable exception is ESPN in the US. Such is the power of the Sky Sports brand that research indicated that customers who sign up to cable competitors believe they are getting a pay-TV service from Sky because they receive Sky Sports via cable. Sports passion brands, led by Premier League football, have also had a substantial overspill into the overall Sky brand. This gives the broadcaster a male and aspirational quality that other mass-market television offerings – ITV comes to mind – find hard to achieve because they reflect the skew of mass-market television to the older, female demographic. Critical to Sky Sports’ – and Sky’s – aspirational and hightech positioning has been the development of the offer over the years. Sport as a genre lends itself extremely well to technology-led
Television | www.rts.org.uk | February 2011
improvements in the customer experience as it is both fast-moving and detail-hungry. Aside from a more contemporary editorial tone, Sky Sports developed innovative on-screen ways to show sports performance. There were some excellent examples in the recent Ashes series, such as the “flower” pattern from the batsman, not forgetting television betting, high definition and, latterly, 3D. Across the board these have raised the game for the broadcasting of British sports. Critically, they have kept Sky Sports at the brand leading edge for the genre. Early on in its life, BSkyB, never a company to miss a commercial trick, understood that the sports viewer and the pub goer were overlapping markets. Moreover, pubs – facing competition from other places where drinkers could raise a glass or two – were desperate to maintain the number of customers coming through their doors in order to support their “wet take” (beer consumption). Sky Sports focused considerable effort and smart pricing to develop this as a highly profitable segment. It has succeeded to the extent that many commentators agree that, while the consumer-channel service does not deliver a profit on a standalone basis, the pubs service delivers very satisfactory margins. Sky Sports has had, and not always intentionally, a helping hand from the singular nature of the British television market. Unlike Germany, which remains a challenging market for Sky Deutschland, the British only had access to four channels in 1991. Moreover, in Germany key league games were listed, unlike the UK, so pay-TV could not show them exclusively. In Spain and Greece, many of the top teams negotiate their own rights (rather than going through their league). The result is that league packages are very challenging to piece together for the bidding broadcaster. To date, we have had a scenario where the fortunes of Sky Sports and those of the English Premier League are symbiotic. The English Premier League depends on Sky for around 20% of its substantial revenues and for Sky’s role as a market maker for rights pricing. Sky depends on a level of exclusivity for
Premier League games to keep its economic structure stable. This is in part because a Sky subscriber cannot receive most of the Premier League matches without subscribing to a profitable basic-tier package. And, as we might expect from the general level of economic activity, we are finally coming out of the period of sports-rights hyperinflation. The UK market in general appears to have become more rational. There have been fewer bids of the type that Hutchison 3G made for rights to mobile, which expired before the network was even rolled out, and fewer bidders in general. Consequently, some of the juice has been taken out of the market. We have even seen some sports-rights deflation in the non-English Premier League areas since Setanta exited the market in 2009. In the coming years a bidder with a different set of economic imperatives might decide it is in its interests to bid above Sky, and to offer unbundled matches to customers – in which case the current structure could unravel. But at the moment it is difficult to imagine this occurring. However, hypothetically, if BT decided that offering Premier League games exclusively to customers could bring it a large number of broadband customers (and the lifetime value of these was well in excess of the admittedly substantial price of the rights) then one could envisage a structural change. Currently, the numbers would not support a bid like this, but we have seen some activity on this theme in France, where Orange has now exited the sports-rights market, and in Germany. In 2009 Deutsche Telekom acquired the Bundesliga rights exclusively. Despite these recent changes and potential future challenges, it is worth asking ourselves whether any of the other players in the market have the stomach for the early risks that Sky took. That DNA may serve Sky Sports very well for the next generation of business battles. n
Theresa Wise runs T Wise Consulting and is a former executive at Walt Disney and partner at Accenture.
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