UP503 The Bundle: New season, new YouTube strategy; UFC's PPV exit; Agency collusion; Ligue1's Opening weekend

30:55Murray Barnett:And should you be monetizing all eyeballs? Surely some are actually engagement tools and promotional tools, which then, you know, lift up the whole of the sport. So, you know, I think I would argue that people that watch a lot of NBA or indeed any of the, you know, docu-series that we've talked about before, Last Dance, you know, Quarterback, whatever it is on Netflix, you know, all of those, yes, they've monetized those individual programs a little bit. But really, what do they serve? They serve you to be much more interested in the longer form content. And, you know, with something like clips of NBA on YouTube or on social media, at least theoretically, it's not about monetizing those in isolation.

31:44Murray Barnett:It's actually about how do you then monetize those through these long form broadcast agreements that you have?

31:51Yannick Ramcke:Even though I think there's a lot of friction in that concept, which might look picture perfect and make sense on a piece of paper. But once reality hits, I think there's a lot of friction. And as soon as some engagement and some non-monetizable engagement becomes a substitute for actually engaging and being interested in the product that you actually monetize, I think it becomes a risk for the business and the industry needs to figure out if there is not this clear linear connection between from engagement to interest to monetizing the way they have always monetized. I think the industry in the long run needs to find a sustainable way to also monetize that alternative form of engagement.

32:36Yannick Ramcke:Because I think for a large part or large segments of the consumer market, highlights on YouTube or the field documentaries might have become an alternative way to follow the sports and the competitions. And that is an existential threat to sports.

32:56Murray Barnett:It's interesting. OK, I was at the Two Circles Summit last week and the big mantra being revenue following audience. And it's interesting, Murray, what you said there about, you know, the monetising eyeballs is quite a good definition of the intangible, isn't it? In terms of trying to work out who's out there, everything that moves. we're all Man United fans we're all Formula One fans we're all because the the research will drag us wherever we have been across the internet and plonk us into one massive bucket because why wouldn't they but the challenge now and the promise of sort of the digital era was that we were going to solve this problem and now we're thinking actually I'm not sure it is a problem that we want to solve because actually if you if you identify every set of eyeballs perfectly you lose the intangible of the product i think we're in a really interesting spot and i think for a

33:57Yannick Ramcke:long time it has not been considered a problem that we we in in form of the industry want to solve it because it was always considered marketing and promotion for the sports and for the game that will be monetized once they then tune into the long-form live broadcast of the very much competition. But back to being ahead of its time and being the wizard of all things media rights and media consumption, there have been quite distinct approaches between the NFL and the NBA to the topic of short-form free content. The NBA has always pushed this as marketing and promotion, just like subscription-based streamers may have pushed account sharing as a form of marketing and promotion but at some point you don't have more buttons to push left to generate growth than to look at okay do we actually need to do something about it because something non-monetizable might not be the best thing ever and the NFL with coming down hard on free highlights on social platforms from the beginning might have put themselves in the best position possible or at least in a better position than many many other sports owners when it comes to the quote-unquote problem of being a highlights based sports well richard you shared something

35:17Murray Barnett:from linkedin which i'm just trying to find now it's is it david prokovich he put something out about the nba highlights and i thought that the actual killer part of that was the very last sentence in the article or one of the last bits in the article which says um talking about the nba the league will eventually have to pay for their fans engagement and it won't be with the meager crumbs of highlights tossed from the media table now maybe i misinterpreted this but does that mean that he's sort of saying that at some point in the future rather than it being this sort of altruistic work anybody can put highlights up on the social media and you know we're giving it away for free and all the rest of it that there's going to become a point in the future where actually youtube will be saying well we're going to turn the tap off nba highlights are available on on youtube unless you pay us to put those up there and that i guess is the big question is you know do these social media platforms get so big that there comes a time where they actually can start charging for that access absolutely it just takes a new owner it takes a different direction that's what happened on x at a much lower level in terms of being allowed to use the data funnel from from x musk came in and said no you can have to pay and it paid a lot a lot of businesses that were selling themselves as research businesses based on the audiences scraping twitter either went bust or found that their margins were incredibly squeezed because they couldn't afford the fees that they were being charged.

36:57Murray Barnett:I think the history of the platform era has been be careful about building your house on someone else's algorithm. I know I'm mixing metaphors there. Well, or it's to be careful about pulling up the drawbridge behind you. You know, you can chase the money. That's some more metaphors, does it? You know, and put it in a walled garden, but you have to, you have to you have to grow you have to you have to sow some of the seeds outside of that

37:24Yannick Ramcke:wall garden to be successful right yeah yeah no no i i think we we touched on it in the past the topic of value creation value capture who is benefiting more from those kinds relationship and i think if you ask the rights owner it is that we have created a lot of value which was all captured by the platforms why the platforms may follow the argument from mori to say look we We created actually so much value that you are dependent on us that we should even capture more value of what we are creating. RKR, you may pay us for us to put your content on our platform and the builds and reach an audience that comes with it.

38:02Yannick Ramcke:So probably not a thing that we solved today.

38:05Murray Barnett:One final point on this is it's also volume, right? So like the NBA, you have such a massive volume of games that ultimately you've got this huge amount of content to create highlights from. And in some ways you need to create the highlights to build the narrative around the whole sport. NFL playing 16, 17 games per team, one a week, allows a real build-up of the narrative. So there's less perishability around the highlights for something like an NFL game than there is around an NBA game.

38:38Yannick Ramcke:But I think the one thing, Stan, that if it becomes a substitute, For the monetizable long-form product, it might become a problem. If it's a teaser, an appetizer for the long-form monetizable product, it can be a much really beneficial setup.

38:57Murray Barnett:But that's what I'm saying is that it's more risky for the NBA because they have such a high turnover that their highlights aren't worth as much. arguably because a game is happening every two days rather than NFL where you have a week to build up to it and time for people to to build the narratives across the league but Richard now

39:16Yannick Ramcke:you need to give me the one right hold on do I think that NBA will be able to put the genie back into the bottle I don't think so because it's too much of a learned behavior and consumer expectations right now so instead the question is okay how can i actually capture value of all the engagement and value that i create for the consumers how can i translate this into more tangible benefits because on a piece of paper conceptually it makes sense as a lead generator as a funnel to translate that interest into monetizable engagement but i think in more cases than not it has actually not worked and is more like a substitute to cautiously follow the nba rather than engage in a meaningful way that translates into monetization.

40:04Murray Barnett:Right. Okay. I'm going to move us on because we have got some other very interesting stories to get through. Right. The death of pay-per-view, question mark. UFC, we need to just talk about this because this is a massive deal. And Paramount acquired American UFC rights for$7.7 billion, moving all pay-per-view events to Paramount Plus at no extra cost to subscribers. This follows WWE's similar move to streaming, potentially marking the end of the traditional pay-per-view model. And just a bit of context, the McGregor-Khabib fight in 2018 generated 2.4 million pay-per-view buys at$80 each. so it was a substantial business now all 13 numbered events and 30 fight nights are included in a$7.99 a month paramount plus subscription so murray take us through pay-per-view are we looking at it through the rear view mirror another metaphor i suspect that all of these things are cyclical and it's not the complete death of pay-per-view it'll come back in another form and i think you know whilst a few people in dana white and others have sort of said that this is the end then they've also sort of said well maybe there will be certain events that happen in the future but i think what you'll see is a lot more stunty pay-per-view type stuff so you know the the youtube influencer type boxing events when they're not on netflix or somewhere else i could see those still being pay-per-view but i think just the sheer fragmentation in the marketplace And then the cost on top of that of pay-per-views, as well as this kind of arms race for subs at the moment between the different platforms, primarily in the States, are making it very difficult for pay-per-view to stand alone rather than having a Paramount or somebody come along.

42:02Murray Barnett:or in the case of WWE ESPN, basically saying, look, we want to have this great marketing message of having everything. And we're willing to meet you, I won't say halfway, but some way towards what you might have been getting for pay-per-view revenues. And as long as we can bundle them in with our subscribers. There's also like, if you remember back in the day with boxing, you know, boxing pay-per-views would be in vogue. Then they would go out of vogue because they became so niche. then they ended up going back onto mainstream channels, which then elevated them again. And then you'd see them go back onto pay-per-view.

42:38Murray Barnett:And so there's a little bit of that going on with, you know, I'm sure if you're sitting at UFC, you're saying, well, this is quite a nice scenario for us because we've seen a big increase in our fees, but we're also reaching a relatively wide audience if the 79 million subs that Paramount have is something that you believe in. So I think There's a sort of, you know, it's a fragmentation and cost argument as well as sort of a cyclical one.

43:04Yannick Ramcke:No, I absolutely agree from a paramount perspective as well as from the UFC's perspective. For the UFC, this was too good to pass on. And I'm pretty sure we discussed this when Netflix was reported to be interested that if Netflix acquires UFC rights and they make it part of the base subscription without any pay through of additional pay per views. given the reach and the built-in audience that Netflix has, both domestically and internationally, this would be too good for Paramount to pass on as long as Netflix is paying somewhat market rate for the rights, given just the reach that would be untapped without sacrificing too much on revenue.

43:50Yannick Ramcke:Now that Paramount came in and blew competitors completely out of the water from a revenue perspective and even provided significantly more reach than the previous media rights deal as part of the buy-through on ESPN Plus allowed for, this was a no-brainer for UFC, absolutely. Today, tomorrow, and probably the day after. At the same time, from a power mount perspective, I think, and I would have said this two weeks ago, and I say it even now or even more so now after a report surfaced that Paramount is also interested in buying WBD, so Warner Brothers Discovery. For Paramount post-acquisition by Skydance, it's about go big or go home.

44:41Yannick Ramcke:So this is not a rational deal. This is not a deal that you can fill in the exit sheet and this will be profitable when you look at it on a standalone on isolated basis. This is a deal that is supposed to send a message to many, many different stakeholders across the sports media and entertainment marketplace. But from a UFC perspective and for any other sports rights owner, hoping that strategic prices are paid, hope is not a strategy, right? Good for them, but it's not like that this is reflecting like the economic value of the UFC in today's entertainment marketplace, but good for them. Reasons and rationale might be multifaceted though on Paramount's side.

45:28Murray Barnett:There's another interesting dynamic to it as well, which is sort of the juicy sidebar, which is did they need to pay this amount in order to curry favor with the regulators in the US to permit the Paramount Skydance acquisition merger in in the first place because obviously it's been well reported about the the close relationship that Trump has with with UFC and this is ultimately probably also they've got one eye to the fact that they needed to do this deal at this kind of level to smooth out that pathway because Dana White has you know a direct direct access to Trump and is even going to have a UFC event happening at the White House and I'm sure that people will be delighted that it's not going to be pay-per-view, that it's going to go to a very wide audience.

46:21Murray Barnett:And just finally, who and what is Skydance? Larry Ellison. Larry Ellison. David Ellison. So in a future stage in the bundle, a future episode, we will be talking about their potential buyout of Warner Brothers Discovery. Apparently there's an offer that's going to be made this week I think as soon as tomorrow for the combined assets of it's not 100 % clear yet whether it's the combined you know separately Warner Brothers and Discovery are sort of splitting and it's not clear yet whether the Skydance Paramount offer will be for everything or whether it will be for one or other of the of the two operating companies and sport within the deal is I mean TNT is the one that over here people will be thinking about is that by an euro sport and euro sport that's on

47:12Yannick Ramcke:the warner brothers i keep forgetting because it was it's on the discovery side okay and this regard i think a big input to consider is that okay do you buy all of it immediately right now i mean pending and subject to approval processes or do you wait for the split to happen and then make a bid which would enlarge the timeline by three to four years and then you may have the crown jewels and can be more picky and specific for what you acquire but you would lose two three four years for that to close i just wanted to make one point because it's now sounds like this is a sweetheart deal and it's not based on fundamentals and economics do i think that the strategy might be the right from paramount here go big or go home absolutely because i think otherwise it would be somewhat stuck in the middle 70 to 80 million subscribers it's not really at the scale of Netflix, YouTube and similar competitors.

48:07Yannick Ramcke:But it's also not a niche streaming services with much more healthy economics, less price sensitive audiences and cohorts. So it's stuck in the middle. The barbell, another metaphor. The barbell, there you go. Squeeze middle and the barbell. Exactly. And it is one approach to attack this. And it might be worth paying a premium and doing this mixed calculations of strategic and maybe some benefits here in antitrust challenges or whatever. So I like the idea, but I think it's fair to say if no one or what the discovery also follows, then they go really big or home, one of the two.

48:47Murray Barnett:Go big or go home. Brilliant. Okay, so next up we have Ligue 1's OTT early return. So this is a story that everyone's been looking at. Ligue 1 Plus launched with 600 ,000 subscribers on opening weekend, priced at€14.99 a month, half of DAZN's previous price point of nearly 30. The service needs a million subscribers by the season end and two and a half million by the end of year four to meet previously published revenue targets. It's distribution challenges available through major telcos and Amazon Prime video, but notably absent from Canal Plu and missing BN Sports exclusive Saturday game. So let's just talk about this because this is, you know, again, people project onto this about OTT, whether it's about that, but it's just so it's got such a backstory, which we've covered, I think, a lot and in great detail.

49:47Murray Barnett:So people can go back into the archive and, you know, the story as it's evolved. But Murray, give us a top line view on this. We've said this so many times. OTT is really, really hard. And I think Ligue 1 being as smart as possible about it in terms of pricing, in terms of being fairly conservative about what their subscriber projections are. But to get to anything like the kind of revenues of the other big leagues, it's going to have to be a monumental success. And I think that there are a few headwinds. There's the issue with the BN game not being part of the bundle, which doesn't give them total exclusivity.

50:32Murray Barnett:There's Canel Police holdout, as you mentioned. And I think if you were to do a summary, if you were going to give them a scorecard, I would sort of give them like a C plus or a B minus. It's not been bad, but there's a long way to go to see whether it's going to be successful or not. And just one other sort of detail about this. It's interesting about the pricing because one of the reasons why they've gone with this lower price is that they're hopeful that this will significantly combat piracy. because they were citing this as being one, and Beane have said this a number of times as well, as have DAZN, that this was one of the major reasons why a subscription model for Ligue 1 has not been successful.

51:20Yannick Ramcke:I mean, you can make the argument that DAZN should, or Mediapro for that matter, should have thought about the fact that privacy might be a problem before they submitted bids that are fully guaranteed. but we discussed before that this might open Pandora's box.

51:36Murray Barnett:Well, this bit obviously wasn't fully guaranteed.

51:39Yannick Ramcke:I mean, it was, but we discussed that that might open Pandora's box if you can blame piracy for not pegging the guarantees that you underwrote before. But with that being said, I think it's important to highlight what are we actually talking about here. It is pretty much compounding self-exploitation of media rights. So a league trying to do things on their own without the guarantees that normally come along with licensing and simply licensing your media rights to third parties. So self-utilization or self-exploitation of the media rights, including or excluding any guarantees that normally come with the licensing business, combined and compounded with OTT streaming economics.

52:24Yannick Ramcke:We also discussed in the past why OTT, less scale, less stickiness, less pricing power compared to the linear pay TV bundle. Why this is so much more challenging as a business model. So this is like componing two different things that really showcase and show how difficult and how much of an uphill battle this is for the French League One. to get anywhere close to the numbers that it got in the past by simply signing something and having the money, the guaranteed money coming in month over month over month. And the reason why many, many other top-tier rights owners are looking actually how this is going, because whether it's the Bundesliga, the Premier League, the La Liga or any other top European sports rights owner, this would provide tremendous tremendous leverage if this actually would work out in terms of any further and future discussion with potential media rights licenses i've got i've got a question

53:27Murray Barnett:the opening weekend question just strikes me i mean we quite often talk about that in films and you know it becoming a big that's a key data point and they talk about you know it opened well what's the significance when you're launching something like this of the opening weekend because it's got to go a long way, isn't it? 600 ,000 to 2.5 million. That's 2 million it's got to find in four years. But so the opening weekend, just talk about that for a minute. What's... Well, it's momentum. Yeah, the big end. And it's perception in the marketplace. And then it's also revenue because each month that goes by, you've got a month's less revenue.

54:04Murray Barnett:Yeah, my assumption would be the number would go down from opening weekend. That was what, but... No.

54:09Yannick Ramcke:That's a wrong assumption. at least or like let's hope for everybody let let let's hope for everyone involved and most importantly the lfp that this is a wrong assumption because ultimately you buy not you buy you actually you buy a subscriber base but you build a subscriber base over time and ideally you have more cross additions than substractions or shown each month so that month over month you have a higher average subscriber base than the ones before so it should grow from here obviously baking in some seasonality so maybe over the short winter break i think the french league one still has a short winter break but especially then over the summer period you will have some seasonal

54:53Murray Barnett:but what what i mean i get that from a i get growing a subscriber base but if i if i'm in the French in the market for French football and I've not signed up for the opening weekend I'm trying to think of the arguments I would make if I was targeting the other two million I think you know the end of a season is more interesting than the beginning of a season you know the top teams tend to bring the most subscribers in any league and hopefully they're in the mix for trophies and to do well at the end of it so you know there's a there's there's always a sort of a ramp up when you get to the sort of pointy end of a season if you if you're operating operating any kind of subscriber model and then the key is how do you how do you keep them when it starts to become apparent that you know the worst thing for this will be if psg is already what has already won the league by you know whatever it is april because then it becomes a difficult narrative to to kind of keep people wanting to subscribe to see the outcome and as yannick knows you know once you get to the end of a season it's kind of you you're in retention mode like how do you say like subscribe for the whole of next season now and you pay for eight months instead of 12 or you know whatever it is you're trying to make sure that you reduce the churn so you don't have to you know it's much it's much more cost effective to retain a subscriber than it is to acquire a

56:18Yannick Ramcke:new one okay yeah like going down the rapid hole of retention strategies i probably have a whole different podcasts, but I think it's fair to say that the 600k that they acquired first opening weekend was a low hanging fruit. It only gets more difficult from here. These were the early movers, early opt-in. Yeah, that was my assumption. They were cheap to acquire. Each incremental subscriber from here is probably more expensive to acquire up to a point that will become cost prohibitive to sign someone up because actually you will never make up the value in customer lifetime value when you spend hundreds of euros and that's indeed what you spend there hundreds of euros for the incremental subscriber to sign up as Murray said at this stage it's much more cost efficient to retain one instead of getting or growing by

57:08Murray Barnett:acquiring new ones and just just to finish off I mean being sport has a big game on a Saturday PSG is strategically vital. Both of those entities are owned by the same bloke. Is there some protection for the league that being in sport just doesn't have PSG every week? Or I'm assuming it can't be that, but can that be playing, if I'm a sort of conspiracy theorist? It's all time at picks.

57:35Yannick Ramcke:There are a lot of safeguards in Clemente when it comes to actually picking matches. And you can only pick a team so many times, not back to back, and so forth. I think this legal dispute that there is ongoing between being in sports and LFP is back to the fake what we mentioned before. If you are like a broadcaster in the league and anyone in between involved in sports media rights, you need to be good at compartmentalizing things. If I'm being in sports and I see what has been going on between the zone and LFP, the zone just pulling out of a fully secured and guaranteed media rights agreement, it's just your fiduciary duty to make sure that you get the best deal possible and this is what they do right now but i don't think that will change the fact that they will be in business for the rest of the media right cycle just on the best terms possible for each party involved and that is what they are fighting over but i don't think that has anything with conspiracy to do with responsibility, serious, or like this.

58:39Murray Barnett:Yeah, I like it when you say fiduciary duty. It's up there with monetizable eyeballs. I like that as well. That's one of your phrases. Right, we're going to just finish off now with the agency story. So sports rights agencies in collusion case. So Italy's antitrust authority concluded that IMG, MP and Silva and B4 Capital were party to anti-competitive agreements regarding Syria, our international rights across three cycles from 2010 to 2018 the league claims 180 million euros in lost revenue with some estimates pushing it much higher than that at 570 million very good story by frank dunn in sports business media as ever syria are clubs eye a windfall as cartel case against img enters final straight mario just give us a bit a line on this this is sort of pass me by a little bit yeah it's a it's a little bit nerdy but it's for people that are interested in sports agency selling sports rights i thought this is quite fascinating and if you look at the three cycles which they've talked about it's interesting that the level of the the number of individual bidders for each of those significantly dropped through each of the three cycles to i think it was for the 2015-16 to 2017-18 season down to something like three bidders in total from sort of 15-ish at the are the first of the three cycles and obviously if you're looking at that as Syria you're saying well so what's happening here and it's kind of like there's always been a little bit of collusion that goes on between right rights rights sellers and I don't mean collusion in a necessarily in a bad way because I think you naturally when you're going to acquire rights you you're or you're looking to bid for rights you're looking around to say look there are some things I can do directly and there are some things where I don't have a specific area of expertise so you know traditionally somewhere like Latin America or Asia has been one where certainly European agencies have said look I don't have the direct expertise so I'll talk to market specific agencies or region specific agencies and say, hey, if I'm successful, you know, what would you contribute towards this?

1:01:10Murray Barnett:But from a lead perspective, what they're worried about, of course, is that as soon as you reduce the amount of competition that there is, it depresses the price because somebody will say, well, I'm already in bed with another agency because I'm going to take on Latin America for them or I'm going to take on Asia for them. So I don't want to go and go direct and go over their heads um so i think that there's something really interesting here about you know yes there is collusion but it's not always necessarily a negative thing sometimes it's it's because that delivers the the best outcomes but it can be open to a situation where it is anti-competitive because you know there's strategic partnerships and alignments that you're making between different agencies which are preventing them going head to head on certain rights but i've been around long enough to know that on a more macro basis this is much more about the the death of global rights deals for for major properties you're not getting agencies who are you know back in the day you know this this basically started from in 2004 with uefa and fifa taking rights in-house and subsequently you've now got and janik tell me if you can think of somebody i'm trying to think of one major rights owner that has a global right media rights distribution partner and i can't think of one right now that does everything again you know you've got various different models whether that's fibra's joint venture partnership with the zone or whether that's you know la liga having peak as a sort of an advisor advisory capacity but then La Liga also owning part of peak it's it's not like it used to be where somebody would just an IMG could go and acquire global rights to something and know that they could make a margin off the top of that and then do all these kind of sub deals underneath it whether that's directly

1:03:06Yannick Ramcke:with agencies or directly with broadcasters yeah I think like federations are the one type of organizations left for such deals are actually lived as we speak right now you have I mean UEFA now has split into two different mandates. But I think if you look at Comebol or also the AFC in Asia with this in-house agency called AFG and also the CAF, the African Federation of Football, I think this is like the biggest ticket mandate that are out there when it comes to such global mandates. And probably one of the last chances to or for agencies to secure their spot in the media rights value chain. And I think this whole story is also a sign of times because this was at the height of the rights trading, the middleman setup, where those agencies made good money by buying and selling on rights with a significant markup.

1:04:05Yannick Ramcke:I would be surprised if we see a similar story today, because today they are much more afraid of keeping, and it's much more an existential threat for them to keep their position in the value chain, not being disintermediated by leagues, clubs, federations, just going direct to local media rights licensees. But back to why this is important and why the Serie A in that case is pushing for not only, sure they push in order to get financial compensation but back to the fact that their main mandate is to steer up competition and if there are like illegal things going on that like lessen the competitive scenario this is pretty much impeding them on doing their best best job possible so this competitive scenario steering up competition between different bidders I can understand why a league would make sure that this is not happening again.

1:05:05Yannick Ramcke:But at the same time, I also think it was a sign of time that this happened at the peak of agencies. Nowadays, I would assume they are much more egoistic and self-centered around it because priority number one, two and three nowadays is to secure their spot in the marketplace rather than like endangering this with any dubious handlings left or right.

1:05:31Murray Barnett:Okay, right. Excellent. Right, we're going to draw a veil there. That was really good. I thought there was a whole load of different things in there that I learned loads anyway, as ever. So thank you very much, Murray Barnett, for your time. Thank you, guys. And Yannick Oramka.

1:05:46Yannick Ramcke:Pleasure, as always.

1:05:47Murray Barnett:See you both at Sportel. We will meet at Sportel, if not before.

1:05:54Thank you.