UP523 The Bundle: Paramount's Relevent entry; Sky's UEFA return; Apple's MLS exit; Netflix, TNT, WTF?

27:53Murray Barnett:By the way, there'll be a ton of people on LinkedIn and across the sports media industry that will be telling you that this is another dawn of the great age of sports on Netflix?

28:05Yannick Ramcke:No, I really think that could mean all or nothing for sports because I honestly and personally, I really needed to read up on the separation that is scheduled for Warner Brothers Discovery, which is still supposed to happen and be executed before the acquisition actually takes place into Warner Brothers, the studios and streaming part and Discovery Global, which is like the linear TV assets kind of things. But interestingly, and this was new to me and news to me, that the TNT Sports UK and the Eurosports assets, so pretty much all international sports assets, are actually in the studios and streaming division.

28:48Yannick Ramcke:While the domestic sports, so TNT Sports US, Bleacher Report, and all these kind of assets are in the Discovery Global division. so and given that this process is not done yet and has also not been informed by the likely acquirer in the form of netflix i still think there might be moving pieces where the one or other puzzle one or other puzzle piece might be moved around across those two divisions because this is pretty much the delineation line now between what is acquired by netflix and what is not. But I considered it super surprising that international sports assets are in studios and streaming.

29:33Yannick Ramcke:The part of the business that Netflix is acquiring, while domestic sports assets are in the Discovery Global, where the, I'm not saying it's the Bad Bank, where the linear TV assets are housed, but these are in that part of the post-separation split. And I think that is something worth watching. Other than that, I think we can just conclude, don't believe anything that Netflix says. It's all gospel until it's not. I think there are no... It's a recurring theme, right? With advertising, with password sharing and crackdown, with sports, with not being interested in M &A, instead of buying, all these kind of things.

30:14Yannick Ramcke:I would say, it's hard to say that there's a theme, a recurring theme to be observed.

30:19Murray Barnett:I think there's a whole thing to be done separately i was talking about this differently you've got this story but also running in parallel completely unrelated in many ways which is the um omnicom ipg merger in the market you know marketing agency side and it's one of the problems with these massive mergers is just living through that period it's a really horrible experience for everyone who's working there and it also completely destabilizes people's idea about what the company is and who's doing what to who and there's a sort of huge amounts of duplication which has to be worked through and you you know you're very aware that it's a just sort of financial engineering instrument where you're we're moving you know Zaslav is making however many millions hundreds of millions from the deal and and those personal incentives you're Ellison who's worth god knows how much you know hundreds to billions and it's sort of quite dispiriting you know because you sort of lose you sense that any of the narratives that we talk about in you know sport can be just repurposed and bunged in front of the stories at some point but it's quite a difficult you know it's very difficult to live

31:31Yannick Ramcke:through that period no i think it would be very a very bold assumption to say that netflix will do business as usual over the next year or two while this is going through the process and through the authorities that might be the intention but practically and in reality it's just not possible i think actually warner brothers is like a textbook example for this since the to put it lightly they have changed hands more than once they are sort of you know a conglomerate of you know it's a debt

32:02Murray Barnett:upon debt upon debt and that's why they exist in the first place so it's sort of again it's so far from any working out what the media strategy is going to be even gen you know the general media let alone the sports right strategy is so far down the chain because at the moment all they're doing is looking at this stuff and repurposing it and this is wall street you know selling to itself the key thing for the sports world is that there is some clarity by the end of 26 because certainly when you look at it through a very uk lens you're going to start looking at premier league auction and the last thing that they want is a lack of clarity about who the bidding partners could be because well i guess you could argue that in the gray that that gives some opportunity to create a new a new structure to it in terms of bidding partners and so on but I would think the conventional wisdom is it's important to have clarity for everybody as quickly as possible in order to to be able to understand what it really means in certain individual markets do you think Murray just on that just and it goes back to the first story do you think that that the Premier League will look at UEFA and the global package and this you know the luring of the streamers is that do you think what they will now be looking to do that they will try and isolate some of their inventory for a global streaming package whether it's a netflix or a paramount whoever you know we don't know but given that proximity of that right cycle which again is massively important in terms of the the just iconic moments in the media right cycles what do you think do you think they're gonna i guess the last it's too early to take lessons from it but they will be looking and analyzing this very carefully presumably in terms of what went right for UEFA in this and what the lessons are of it yeah I mean it's really difficult when you when you see a lot of the sort of dross that is out there that's been reported about how successful this bit this this has been or not that you know the narrative is incredibly positive but you peel the skin back on it a little bit and as we talked about earlier you know without paramount it wouldn't necessarily have seen the big increases that everybody was hoping for.

34:21Murray Barnett:And even the global streaming package doesn't seem to have been a completely, you know, hit-it-out-of-the-park home run. But you'd be crazy if you weren't the Premier League and looking at every option that was out there. And I think, you know, a global streaming package could be something, you know, there aren't many properties that are going to be really that interesting for the global streamers. but Premier League is certainly right up there with it. And I could imagine a scenario where you'd get a game a week on there. But when I was preparing for this, or when I was thinking about talking to you guys, I was thinking there's this really interesting thing about partnership with rights holders, right?

34:59Murray Barnett:If you look at the most successful relationships or the most successful commercially successful leagues, they're all the ones that have built partnerships with their rights owners. So there is a symbiotic relationship between the Premier League and Sky, formula one and sky when you talk about it in a in a uk context and i'm sure there'll be a lot of conversations that are going on with sky as the biggest incumbent for premier league about what makes the most sense for you where can you where can you take some pain that might help us in other areas it's also don't forget like the only league that is fairly evenly balanced between its international revenues and its domestic revenues um and you know that makes it that much more interesting for for them to perhaps carve out a global streamer package but then you also have a regulatory issue which does a global streamer package get past the you know inability for sky to acquire premier league on an exclusive basis and i guess the answer is yes it does and is that more palatable for sky to have an amazon as a partner than it is for them to have a tnt or a premier sport or whoever it is or a zone as a partner in the uk and those will be the conversations which are happening right now.

36:15Yannick Ramcke:Yeah, I think just answering the question regarding if will there be such a package, I think as you said, Premier League and whoever is consulting or advising them, if any, wouldn't do their job if such an option would not be available as a pure measure to increase choice and options for the potential bidders. Do I think that, fast forward, once bids have concluded and packages have been assigned, that there will be a global package acquired and assigned. I don't think so, but maybe it's just, it's a trick back to what's your core job and what's the job to be done, create a competitive scenario.

36:58Yannick Ramcke:And if that increments the competitive tensions to give that option to the market, then it's pretty much a done deal that this will happen. and the Premier League will be the measuring stick for such kind of a package because exactly for the reason that you mentioned and I think we can even put this more straight to the point Premier League is the only league that makes more money internationally than domestically and I think hence it might be the most or the best fit for such a package but again do I think it will happen even for that kind of international league rather than domestic league I don't think it will happen.

37:41It's interesting that in terms of that percentage number,

37:45Murray Barnett:you keep bumping back into it. We talk about it, you know, the Indian market with the IPL, I think it's 2 % international rights and the NFL is 3%. And so it really is an outlier in that sense, in terms of just when you look across the marketplace, which again is sort of trying to work out, we keep coming back to these themes of the global fan, you know, who is watching the Premier League. internationally and whether it's club driven, whether it's league driven, all of these questions are wrapped up in it. I am no further forward about what Netflix wants than I was six months ago.

38:20Yannick Ramcke:One point on each regarding international versus national or domestic. I think the case of the National Football League, domestically speaking, and the case of the English Premier League, internationally speaking has created false illusions in the marketplace because especially on the football side it was always okay domestic market is saturated let's move and beyond the domestic borders international is the big growth area but it does not have or it has not materialized because you are not the premier league it works for the premier league just like slicing and dicing the domestic rights packages 10 different ways.

39:01Yannick Ramcke:It works for the National Football League in the United States. That doesn't mean that this works for any other league because they are not the National Football League. I think there's a lot of faults in the market among rights owners because laws, I guess, apply to the very top tier of the pyramid, which is the Premier League and the NFL. And last point on Netflix, I really think that no one is happy right now, not even Netflix, because this for me, just zooming out, is more playing defense instead of offense. It's more like a reactive move than a proactive move this entire acquisition. It's more like something that has been accelerated by Paramount by aggressively bidding.

39:49Yannick Ramcke:I'm pretty sure Netflix would have preferred to have that kind of discussion and that kind of M &A consolidation, like down the road in two, three years time. But it's pretty much buying competition of the market, I think. And even if they have to pay the breakup fee, which is in absolute terms enormous with more than 5 billion US donors, I think. But if this now goes through a one or two year process and it is not greenlit, like If the landscape looks so differently, it might have even been worth it to spend the five billion on the breakup fee. That's one of the running periods, isn't it?

40:29Murray Barnett:It's never going to happen because they've essentially hedged eight billion quid, whatever the write-off fee is, against. They're worried about Paramount more than anyone else. And therefore, that's a way of keeping them out of the game, keeping it locked up in regulation for a couple of years. And Ellison is 81 and will die soon. and the strategic thrust of the company will dissipate. That's today's theory that we've seen banded around. Again, there'll be others as the thing goes on. These stories just generate narratives very easily. It's good fun. I'm very conscious of time. We're going to move on to DAZN and European football.

41:15Murray Barnett:Because again, you mentioned this, Murray, as in you mentioned the sort of these conversations between right partners and rights holders of risk what is happening what and DAZN there are sort of echoes here of the NFL and ESPN's relationship in the states but just take us what what is actually happening with DAZN what what piqued my interest about this was actually a long piece by Carlo Di Malchis about what's happening in Italy where there are apparently very early stages between the league Serie A and DAZN about the possibility of a number of Serie A clubs taking a stake in DAZN in lieu of fees, which very much looks like it's aping the discussion that happened between or the deal that's happened between ESPN and NFL.

42:04Murray Barnett:But, you know, it comes at the backdrop of, you know, straight rights deals that DAZN have done with LFP, which got terminated, with Belgian League that got terminated. They've renewed the rides for Syria, but now they're coming back and saying, what, you know, one interpretation of it is, help us, let's share the upside together, or let's take away some of our immediate cash flow issues or needs by giving you some stock instead. And it's kind of an interesting sort of thing, going back to this whole thing about partnership, rather than sort of very transactional relationships. And it perhaps also talks a little bit to this idea of, I was speaking to PMS as one of the sort of commentators on Belgian and French football businesses.

42:54Murray Barnett:And he reminded me that, you know, DAZN doesn't want to be the Netflix of sport. It wants to be the Spotify of sport, which is to effectively pick up assets that are relatively low risk for them, but to create a great platform for them. And I think that's a really important distinction to make. Because I think we talk a lot about the shorthand of DAZN being the Netflix of sport, and that is just not proving to be the case, because they have acquired, you know, intellectual property in terms of rights. But we've now got two cases where it's not worked out for them, for whatever, you know, slightly different reasons in each market.

43:33Murray Barnett:But the point being is they're now turning around and saying to Serie A, well, let's look at something where there's a bit of shared risk between us and we're kind of in it together as opposed to sitting on opposite sides of the table.

43:45Yannick Ramcke:Yeah, I think you can crop me either from the last episode or the one before that this has the potential for a very dangerous precedent setting, what the zone is currently doing. Just pulling out of media rights agreements for not random reasons, but reasons that I think everybody could make if they really force or want to make. Reasons like of support by the clubs, rampant piracy, yada, yada, yada. So I think that can set a bad precedent or a risky precedent for rights owners. And I think we see a couple of other exams that are tending towards the same or similar scenario. In the Netherlands and India, we have a couple of rumors or reports.

44:33Yannick Ramcke:So that's one. By the way, Italy, they have already negotiated or had negotiated or renegotiated the media rights agreement last summer, where they were asking for make goods, which they got in the form of friendly measures and so on. So what's happening there now, it's not the first time that the zone tries to address this problem. And the second point is, and I fully agree, and I have said this, I think by now five years ago, that we will move towards a more, call it partnership, but partnership might be the wrong word, call it cooperative model or simply more revenue and risk sharing, which it ultimately is between rights owners and rights holders.

45:20Yannick Ramcke:Whether that is always underpinned by like a corporate structure like a JV, I don't think that has to be the case because minimum guarantees are pretty much a full transfer of economic risk from the rights owner to the temporary rights holder. And I think whether it's the zone or anyone else, it's not the most pleasant situation to be in to be at the full risk of that business, especially in the uncertain environment that we are navigating right now. And DAZN, I think you see a blueprint or like a strategy with DAZN from a little bit like from publisher to platform with their channel store business carrying like a multitude of third-party streaming services that are sold as premium add-ons to the base DAZN subscription.

46:09Yannick Ramcke:I think you see a shift in business strategy and it almost looks like that they want to shift their media rights acquisitions to this new model of operations to be more a distributor, revenue share, sharing of...

46:26Murray Barnett:I can see this from DAZN's point of view, broadcaster's point of view. I mean, I think the lessons of the French market are this idea of partnership is nice in theory until someone comes with a bigger check and then all bets are off. And then I think that though that type of relationship is very vulnerable to just the next paramount, the next whoever it is that comes with the checkbook that needs to make a big statement. That's what sports rights, to your point, right at the very beginning, Yannick, is that it's all about creating a market, you know, come the time then you bring your rights to market.

46:58So I think I get it.

47:00Murray Barnett:I understand it. But I don't think the real world works like this.

47:04Yannick Ramcke:And let me be clear, this is not the preferred model for the rights owners. This is why I'm saying dangerous. The rights owners have a huge fixed cost base, primarily in the form of player or athlete salaries. They have no interest at all to share the economic risk. Otherwise, like budgeting and all of these kind of things. This is not what the sports model is compatible with, as the sports model is with fixed salaries and so on, is organized as of today. So this is the last thing that leagues prefer. They will always take the biggest, most guaranteed check available until it is not available.

47:47Murray Barnett:There's always one more sucker rule, isn't it? And, you know, you've seen that churn through in France where they've basically gone through everybody that's willing to pay for a pay for rights, a standard rights agreement until there's nobody left. And that's why they're in a situation where they're having to go and do it themselves. Yeah.

48:05Yannick Ramcke:And I think they do a tremendous job and they are outperforming business cases, business plans and everything. They are still at around maximum 50 percent of the money that they earned before in a guaranteed way. And those 50 % that they're getting right now is very hard-earned in terms of producing and distributing everything in-house via the multipliers that are telcos, that are the zones, one footballs and others in the world.

48:31Murray Barnett:Well, I did a very back of an envelope analysis of the entire revenue that that's currently being generated gross for the French for French Ligue 1 is about the same as that goes to one Premier League club in terms of their distribution. So, I mean, that's the quantum that we're talking about, that it's fallen, if you like. Wow, it's incredible. there's a i think the next story again the apple and mls go their separate ways a story that i think pulls together quite a few of these themes because again a few years ago or even less we were a lot of people were talking well look here is a global deal with a streamer a massive brother biggest brand in the world getting into football all of these things and it's not worked so are there anything is there anything that we should know about this is it or is it specific to apple in the MLS?

49:22Yannick Ramcke:I think it says much, much more about Apple than about the MLS. I mean, MLS is what it is, right? A mid-tier sports property, especially in the US, not the favorite participating nor spectator sports. So I think we knew and we know what the MLS is. I think it says more about Apple. And speaking of a more cooperative setup or model just a few minutes ago, I think it pretty much is admitting the failure of proving the concept of such more cooperative approach, selling MLS, a single property proposition as a a la carte option in the Apple ecosystem. And I think it proves the point or unproves the point that you can just plug in any sports property into the Apple distribution engine and it's getting sold.

50:18Yannick Ramcke:I think the learning, and this is now also why I think it was a decision preempted by the Formula One rise acquisition is that they don't even try the same concept, which they wanted to prove with Apple in order to then scale to bigger and even greater properties in the future that they don't even try the sell through concept. They just collapsed their entire video inventory pretty much into one single Apple TV proposition. and here I actually think that can be a pivot to a turnaround to actually make Apple TV best case scenario, a mainstream streaming service. But the learning is that those sell-ons, add-ons, sell-throughs for sports, despite this huge distribution engine and ecosystem that Apple is, doesn't work.

51:11Yannick Ramcke:So they focus on one single streaming proposition and I'm actually quite excited what Apple can do both with the MLS but also with Formula One to lower or lesser extent with MLB because it's only one game per week and it's domestic only. But what they can do in terms of innovation by owning actually the flow from glass to glass or from production to play out. And I think there's a lot of innovation in there. But I think the initial hypothesis with which they started is pretty much dead. And now they are just another streamer, quote unquote, including sports.

51:51Murray Barnett:Murray? We've talked a lot about how Netflix is looking at eventized sport and how eventized Formula One is. And the fact that you've got a limited number of exclusive assets and you've got three days of Formula One leading up to the race, I think it sets it up for the reasons that Yannick said, but also the fact that it's more eventized and a more rare commodity to be much more successful than perhaps MLS was. Also, I think, you know, not just the learnings about the structure of Apple TV, but also about what's required in terms of the promotion and development of sport. And I know that that was a big factor in why Formula One went with Apple, was that Apple presented its entire ecosystem as being something that they would put behind Formula One.

52:42Murray Barnett:Whereas if you remember back when the MLS deal was done, it was a little bit more transactional in terms of the way that they positioned the deal. And we keep using this word partnership. This is very much more being positioned as a partnership between the two to fully unlock all of the Apple assets. You've obviously got the F1 movie, which I don't know how spurious it is. I saw that the second one has already been greenlit. So there's another movie coming down the pipe. and it makes it sets the stage for a lot a lot more success with Formula One perhaps than they than they could have achieved with it's sort of I mean just to finish this off it's quite interesting it will you know we will see what happens won't we in terms of it it sometimes feels it's and there's an echo this is one of the themes of this it's sort of like a how big is sport really in the context of the strategy so you've got these enormous companies it you've said this in the pass money it's not like dealing with sky sports or fox sport or a sports channel where sport is everything and they're throwing the kitchen sink at it they don't need to do that and if the focus isn't on it it very quickly drops down their agenda that's the sense that i get because it if it doesn't work great okay fine we've learned that and we'll move on but from a sports point of view it's very hard to have any confidence that they are going to also who doesn't who wouldn't want to be across the Apple ecosystem but it just whether it works or not well in business in general cultural fit is such an important thing and you know I mentioned this when we talked about the F1 MLS F1 Apple deal before is that you know they've been working together for two years on the movie so I think that there is a you know they've they've done all of the dating if you like through the movie process and they they have a shared common vision so it's probably stands a lot more chance of being successful than mls did which was as we talked about quite transactional now they're into the minefield that is the marriage yes yes well there's a pre-dug

54:37Yannick Ramcke:yes but but i think it's fair to say that sports has not been inherent to the dna of apple and i think you have seen some growing pains but they seem to rise up still it still feels weird still

54:48Murray Barnett:feels weird doesn't just you know i think you know i just think it's all i think they are sharpening

54:53Yannick Ramcke:fine-tuning the strategy and i think this is really like a fundamental pivot that they are doing right there but including things like it was probably almost a non-negotiable until recently that if we get into sports we in the form of apple it must be all inclusive it must be global it must be 100 of the game inventory but if you look at what they did for example the mlb where they have one game per week. There was some recent data actually where MLB is by far every single week the biggest acquisition driver that Apple TV Plus ever had for like the past two seasons. So sports is the cog in the machine.

55:34Yannick Ramcke:It is a part of their content portfolio and strategy. And I think moving from Apple TV Plus plus add-ons to simply Apple TV and collapsing the entire proposition in one single streaming service that you probably continue to get free when you buy a new iPhone, iPad, MacBook or whatever, I think has actually a path towards mainstream relevance. And I look forward for how this evolves.

56:02Murray Barnett:Brilliant. Okay. As ever, thank you both. And we'll meet again. Have a good Christmas. And we'll do the first bundle in January. See what the stories are. Well, yeah, there's a prediction. There's always going to be predictions. right until next time happy christmas see you guys