UP548 The Bundle: Gary Neville's Noise Strategy; What World Rugby sees in IMG; Amazon pitches for the Super Bowl

26:22I agree in the sense that to future-proof yourself,

26:28Yannick Ramcke:I think, yes, the first step is to be technically from a functionality perspective in the position to go B2C. That is now what the DFB has been doing, what UEFA has been doing, what many others have been doing. The second part is to also create this from B2B to a B2C mindset, not from a technical functionality perspective, but from a mindset, from a capability, from a human capital perspective. And I think this, obviously the urgency is much lower because your preference is not to go B2C. It is like to leverage and to amplify the B2B competitive tension and make more money on the licensing side.

27:10Yannick Ramcke:and when the backup becomes the best option available like it has been with the league in France, you need to build up the D2C mindset within a couple of months. This is pretty much what the league was forced to. Now that this is the one and only option left, you pretty much do this whole transformation which I think very wise rights owners now are with more lead time setting them up for if and when this becomes the case that they are much more prepared but for example you need to go through that evolution like within

27:45Murray Barnett:a two or three months notice these are just it's just a different business though isn't it i mean it's just like this assumption that you can sort of change or it's just different people it's a it's a totally different organization it's a different reason to get up in the morning i don't i just sort of it's such a massive thing i mean i think the less of the last 10 years has been this sort of overreach of what a sports organization can be or is and wants to be i think you're seeing a lot of change in the roles that even sports organizations are hiring for now and i think that there's a there's been a bit of inertia because obviously once you're in one of these jobs the last thing you want to do is say hey i'm a dinosaur shoot me now you want to get somebody in that's what you want to say look i'm part of the change but over time we are seeing that these organizations are becoming very different to how they perhaps were 10 20 years ago do you think ott was oversold initially and now there's a sort of there's a move to something that is a bit more realistic it's an add-on in various markets it depends what you mean by oversold i mean i think it didn't work and it cost loads of money well i think that everybody We've talked about this many times before.

29:03Murray Barnett:It's very easy to say, I'm Manchester United. I've got a billion fans. If I get a billion fans paying me£10 a month to watch mutv.com, whatever it is, all of a sudden I've got a great business. But there's been a rude awakening about the complexities of it and the conversion of it. And again, it comes back to the skill set of how do you actually put together the right people? And this is why companies like Global are investing in podcasts and why everybody else has got their eyes on it, why the BBC is putting content on YouTube. It's because all of a sudden they're saying, hey, I'm not sure that I've really got the stuff at my fingertips that can really take advantage of these newfangled services that are out there that seem to be getting all the audience.

29:46Murray Barnett:I think the danger is, as you said, is that there's a lot of hype and misunderstanding about what these are actually going to deliver for you and the technical difficulty of actually reaching those audiences. And there's a slew of consultants that we all know that are out there that are busy advising people how to think like they're in the 21st century.

30:05Yannick Ramcke:Even though I think that reality check is healthy and that there is more to future proof yourself than just having technically the functionality to go T2C, but there's much more attached to it, that there is a need to insource industry knowledge. I think this open-mindedness and this shift in thinking has been very helpful for rights owners, but I think it also gives the opportunity for new companies, new businesses. And I can just speak for ourselves what we do at OneFootball in the sense that we have now launched OneFootball channels as a white label. So it's pretty much combining the best out of B2B and B2C.

30:47Yannick Ramcke:So you can launch your streaming service pretty much on the OneFootball platform by running a OneFootball channel. You minimize time and cost to market. You don't have the optics of running and marketing a streaming service. You are not building an audience from scratch, but tapping into the millions of consumers that are already on the platform while having all the benefits of running a D2C business, including a path towards customer co-ownership. So I think there are also new business models that emerge as a result, because rights owners understand that it becomes more likely that D2C will become an option or must become an option.

31:29Yannick Ramcke:But also it is not as simple as originally thought.

31:33Murray Barnett:OK, right. Let's move on to which is a sort of related story, actually. So World Rugby and IMG and talking about a global governing body, can't even say that, a global governing body. so Murray just talk to me because you're obviously on your cv you're very long cv not long I don't mean that in that way I meant as in what I meant as a cv storied history storied history world rugby appears and I thought that world rugby had taken more in-house for the last world cut and now they're going back to IMG is that is there a pendulum swinging do I sense yeah I mean I think what caught my eye about this story is that there is definitely in this particular example a pendulum swimming swinging back towards img working in a more consolidated way with world rugby and historically it had all of the commercial it was effectively world rugby's commercial agent across sponsorship hospitality and media rights it swung away from it a little bit and took a lot of that stuff in-house and maybe there was a realization of just how difficult it is to do all of that in-house and there's a bit of a swinging back now towards using an expert agency.

32:45Murray Barnett:I mean I think there's some specific reasons why that's happened. Certainly I think there's a high comfort level from a world rugby perspective that they've got a lot of historical knowledge about IMG and how IMG's worked with rugby. IMG can talk a lot about their experience across rugby and not only that this kind of more integrated model is something that IMG have already launched with Rugby League. And indeed, you're seeing other governing bodies like FIBA look at that with DAZN, that whatever it is, seven years into a long term relationship with DAZN, which covers media rights, where you're trying to cherry pick a little bit what the best is for that each party has to offer that can support the activities.

33:37Murray Barnett:So undoubtedly, this particular agreement with IMG specifically relates to the fact that IMG have got a high degree of expertise in Australia and in the US, which are two areas where you've got obviously the men's and women's World Cups being both in Australia and then both in the US. So I think World Rugby are looking very much at that and saying, look these are markets which we don't necessarily have a huge degree of expertise in and we're taking some pretty big puns certainly in the case of usa if you'll excuse the if you'll excuse the pun but you need as much support as they can get to get this right and img's the perfect partner for them to do it with so what problem is img solving just a lack of expertise on in world rugby to reach if it reached particular markets because the american rights are sold aren't they i'm just trying to there were on cbs previously nbc before that i think it's more that it's maximizing revenue it's not that the likes of world rugby couldn't reach out directly to the us broadcasters it's actually making sure that they get the right that the right agreements and what are markets which are super important for them from a growth perspective i think that But the interesting thing is the way that the press release actually reads is it shies away from sort of picking it out, sort of just talking about that it is a media rights advisory.

35:08Murray Barnett:It kind of talks much more about it being sort of partnership and strategic consultancy advice, which suggests that IMG are involved in a lot more than just sort of fairly transactional sort of broadcast type agreements, which also suggests that IMG may be having to work harder to get these big rights holders to work with them. So this is a guarantee, is it? Do you think it's back to those days of IMG putting up a number? I don't think, well, it's certainly not been written that IMG are in any way underwriting anything, but I'm sure that there is some sort of strategic thinking going on about future revenues and the way in which IMG might be remunerated for helping in certain strategic areas.

35:58Murray Barnett:Is relevant relevant here? Boom, boom. As in, you feel like that relationship with UEFA, the UC3, the creation of that, the promise of that, and we're seeing deals coming in, and there's been a lot of sort of positivity around the money coming into UEFA post that deal. Do you think and specifically about the way they talked about America and selling to America and just creating an office in America, all of those questions, do you think that is now part of the sort of playbook of the big agencies? They've learned from that and need to sort of evolve that story. It's an interesting question. I think it's probably as simple as you see the staggering growth that there has been recently in US media rights.

36:47Murray Barnett:and if there's an agency or an organization that tells you that they're going to help you be a part of that then you you welcome them with open arms because we've talked about the sort of stagnation and indeed coming down of prices for rights in Europe and we can come and talk about the growth that that relevant has managed outside outside outside the U.S. in a second but in general I I think that there's this allure that like this is a massive market that you have an opportunity to really help and grow.

37:22Yannick Ramcke:Yannick? I mean, I think my limitation, but also benefit is that obviously I'm not in the in and out of all things World Rugby Federation. So for me, outside looking in, this is like on the left hand side, right owners are trying to future-proof themselves, like all the things that we already discussed. And then on the right-hand side, on the other end of the partnership, it's like trying to reposition itself and to ensure that there is still a reason for them to exist in the value chain by positioning itself more strategically, like from boutique to through 360 degrees, like positioning of a sports agency attached with a lot of value added services, which can be expertise, which can be a banking function, which can be many different things.

38:17Yannick Ramcke:And this is, I think, more thematic or representative for what's going on up and down. The sports media value is shown that they integrate up and down. Like, for example, here, that is now an agency trying to become more attached, more locked in, more strategically together with a rights owner. but we have also seen this at other steps of the value chain like we have seen on the tech side like a data tree getting into some kind of a rice acquisition with the lega serie a basketball in italy we now had just the announcement with the zone integrating into the text tech layer with the view lift acquisition so like on a more abstract level i think it's just representative for everybody fight for their positioning in the value chain, because there's always this risk of disintermediation of different parties.

39:14Murray Barnett:Murray? Well, Yannick, to your point, I don't know if you saw in the notes, but there's a lovely little quote in the press release that came from IMG, which I'll just read out, which is, the mechanics are very much plugged into building development capabilities that help our key partners like World Rugby now develop all of the context and connective tissue between individual capabilities and commercial programs and then drive the best outcomes based on fan engagement, audience, and the currency of that attention and experience economy. I love connective tissue, don't you? i mean it's i think what it's saying is we are trying to be more integrated with our partners yeah but again even that even that needs to be sort of worked out what that means i think there's a i was thinking of cvc as you were reading i wondered what have they got any they haven't got a relationship with world rugby or have they they get there as in they haven't got a stake in them i'm trying to think what the sell is of cvc global sports group versus img now if img and there's always been that sort of blurring between the financial side of big agencies because of the guarantees where the money came from you take money from one side promise it to the other work to try and make a margin that model whether the guarantee is still is relevant or not but actually what you're getting and who you get into bed with now if you are a global governing if you're alan gilpin at world rugby you're thinking okay well what are my options here we've had the r360 moment i imagine there'll be a lot of players looking at world rugby and say okay well come on then it's yeah you didn't let us join that but i now want to make more money so have at it and what's going to happen and you've got very rugby as ever is a sort of shit show of boards versus boards and club v country and calendar chaos.

41:15Murray Barnett:And it's a sort of just a nightmare scenario if you look at it through one lens. And the players are in the middle of it, getting battered, limited career span, and they want more money now. So I think there's a sort of interesting moment that we're in and IMG step into this, but I don't quite know what the difference, I guess my question is, I don't know what the difference between IMG and CVC sport is now.

41:38Yannick Ramcke:I mean, I think the twofold proposition that private equity tried to approach rights owners with was one, the banking function or financial function and operational expertise. I think in many cases, this has been descoped to a pure financing source. And like an IMG, having actually this operational expertise can make a quite compelling case and pitch to rights owners that we can also bring the banking function to some extent but more importantly we want to reposition us from this as you were referring to which at this rice trading angle money in money out rather to this full-fledged strategic partner across all facets of the b2b sports business so i think there might be the difference that you can get what you have from private equity and it doesn't have to be equity can be dead or like any mixture of this, but actually bringing this operational expertise to the table by value adding services, because ultimately if they can prove this, then they will ensure that they will be around as middlemen, but going forward as a more strategic middleman slash partner than they have before.

42:56Yannick Ramcke:Because again, this risk of disintermediation without like a reimagination of how an agency can be, it's always out there.

43:03Murray Barnett:yeah i mean it's interesting that obviously img's shareholders are some of the pe companies that have tried to go direct into sports and so it'd be easy to build the bridge that maybe they've sat back and said exactly as yannick said look we've tried to offer expertise and money and realize that money is the only thing that we can really sort of offer realistically but hey we're a shareholder in this thing called img what about if we work with them to give them the best of both worlds which is the operational expertise and then the likes of silver lake have the understand about loaning money to sports being a shareholder in a business that is also at risk

43:46Yannick Ramcke:because the traditional business model is not as smart and rich as it has been so it's to transform itself and that might be the better horse to bet on in terms of i see there's value in both banking function and operation expertise but the sports agency who has been doing this for many years under a different model may have been or maybe better positioned to do this in the pure PE investments and operators.

44:14Murray Barnett:Okay right we're going to jump to just to finish off with some shorter stories here let's I want to start with the I want to start in Germany Yannick because we've talked about rugby not your strong suit but we're going to move to your market now can you talk to me about what's happening of RTL and Sky because I think some a major sort of announcement last year has just been ratified this year but just talk to me about that what's happened. Well can I just say I was desperate to talk about this with Yannick because you look at the how much Sky paid for Sky Deutschland or Comcast paid for Sky Deutschland and then you look at what it's selling to RTL and I'm desperate to understand what's happened in the meantime.

44:57Yannick Ramcke:No, absolutely. So let's deep dive on that for like a second. I think the announcement that you were referring to Richard is simply, or quote unquote, simply the confirmation that the acquisition has been approved unconditionally by the regulators, which nowadays is always like, or sometimes more than a box just to be ticked. But this has been, this went through unconditionally. And now the acquisition will close as of June 1st. and to what you said more in the sense of okay if we discussed this like what why is the if you look at the revenue multiple like it's almost ludicrous how cheap this is there's like a flat fee between 300 and 400 million plus an earn out based on share price performance so it's like minute if you look at the billions of annual revenue that this guy still does but i think it's a much needed consolidation within the European media market.

45:55Yannick Ramcke:It's a little bit like go big, go home. And I see the rationale from both sides, including from the Sky side, where obviously Sky UK via Comcast decided to divest the German operation. And I think the most relevant point here is that Sky Germany has worked multiple years at breaking even, breaking even and they just reached and achieved that major milestone and achievement but just because you're not loss making anymore doesn't mean that all of a sudden you are bleeding profits or that profitability scales from here it would be and would continue to be like a constant battle around this break even line maybe a year you are slightly profitable the other year you are slightly in the loss making area, but it will never scale in terms of profits and cash flow back to the mother company.

46:54Yannick Ramcke:So I think this is like why in terms of price tag, this was as low as it was. And on the other side, RTL, I think RTL is really on its way to trying to be like a European champion with all the international competition coming into the European marketplace and their whole positioning has been about aggregation not only video but also audio textual content everything like this media go to hub in the german-speaking marketplace but so if you're pro-sieben how do you perceive what's happened i think if you're pro-sieben you have bigger things to worry about in the sense of i mean there are the their own mna rumors and reports with the italian coney family owned media conglomerate like about to acquire they already have a significant ownership stake in the company but back to there must be consolidation one way or the other the question for posim is it like an acquirer or an acquiree so at one what end of the of the equation or ultimate m &a activity they will be so what's under the roof now then you've got quite a

48:10Murray Barnett:lot of very premium rights i mean you've got formula one premier league 87 of bundesliga is that right as you say it's been ratified and the regulator has sort of waved it through the argument there is that okay we're in a different world now it's a streaming world that you're competing against netflix amazon blah blah blah youtube and therefore yes it's okay to consolidate i'm wondering what this means for the punters at the other end does this is this good news bad news is it higher prices lower prices for sport how do you see that because it would be it would be like murray sort of itv and sky coming together here i think not enough yes yeah

48:55Yannick Ramcke:no i think you always need to look at the cost and very new synergies right keeping it in the terms and terminology of news and those kinds of transactions. I think on the cost side, just part of the investment rationale has been significant cost synergies. Everybody can imagine what that means, right? It's not only harmonizing the IT backend, I dare to say. So there will be more cost reductions and minimizing of duplication upcoming. And then on the revenue side, I think like pricing power is obviously one thing to look at and i think it's also something that the regulators will have looked at because consumer welfare is often like an important point to to consider if you green light or not those kind of things and but i think what you already see is that it's also about improved utilization of the content portfolio that you already have and i I think not only between Sky and RTL, but at large, I think advertising will become a big theme of this next year and beyond.

50:05Yannick Ramcke:And what you already see is that there is a lot of content sharing, especially from behind the paywall in front of the paywall to amplify RTL's free-to-air commercial broadcasting business. because they obviously think there's more media budget to be had without materially undermining or diluting the pay value of Sky's paid sports programming.

50:30Murray Barnett:Isn't that the interesting thing for RTL is that you've got effectively 11.5 million odd premium level subscribers, which the average revenue per subscriber is obviously greater than the advertising play that there is there. So it's a thesis that they think that they can grow that to whatever the number is, 15 million over the next couple of years, along with the cost savings. And then it almost becomes a cost neutral acquisition for them, because if I understand correctly, they haven't paid a huge amount, somewhere like half a billion, I think, for it, compared to the, was it 2.6 billion, 2.9 billion that Comcast paid for it.

51:10Murray Barnett:And then there's lots of add-ons, but only if the RTL share price gets to a certain level. So it feels, I guess I'm not sure what I'm trying to say here, but I think it feels like it's incredibly de-risk for RTL with some quite high strategic upside. I fully agree.

51:27Yannick Ramcke:And I think from an individual perspective, whether that acquisition is good or bad for you as a consumer, it really depends on if you have been subscribing to both services in the past. is going to be a very good, if not great deal, if you only subscribe to one or the other and are forced in a future scenario, even though in the short term, they're supposed to keep operating independently from each other. It may provide a step up in ARPU because effective prices for those kind of customer cohorts may increase. But whether it's a good investment or not, always depends on the entry price. And the enterprise in that specific scenario for the reasons that we mentioned and the circumstances existing was quite attractive, while there was limited alternatives for RTL to stay competitive in the broader European marketplace.

52:23Murray Barnett:Okay, right. Just to finish off, we've got a question. Will Amazon be the first streamer to show the Super Bowl? Murray Barnett, yes or no? absolutely it will be this was in puck news so i'm not sounding like i'm super clever they were they've come out and said that it will happen in sometime in the next 10 years and maybe it doesn't seem like a big deal for us but this would be such a seismic change to what has gone on in the past and would just be an absolute validation of the way in which the nfl has managed to or just shown that the streamers are are here to stay and indeed probably the future of was he talking about a monopoly exclusive yes so exclusively on amazon that would yeah i mean there's a there's an interesting piece buried here about how thursday night nfl on amazon has now surpassed fox sports previous viewership for thursday night and again that's just one thing in isolation but i think it means that the big reason why they wouldn't go with the streamers in the past was because they felt that the audiences were not going to be big enough i think whether you look at the christmas day games on netflix or indeed the get the games which are currently on amazon they've proven that they can get audiences just as big as as everybody else and the growth of the of the ab tier and sponsorship is skyrocketing skyrocketing for

53:47Yannick Ramcke:amazon so i agree for three reasons number one the nfl has been always at the forefront of a platform shift from broadcast to linear pay tv or from linear pay tv to streaming so history says there will be streaming only super bull rather than later number two what you were referring to i think amazon pretty much has completed this consumer adoption cycle so it always takes some time users getting used to new platforms and destinations i think the technical reach was never the limiting factor for Amazon because pretty much every or many consumers had Prime Video as part of add-on for your toilet papers.

54:28Yannick Ramcke:But now all this consumer adoption cycle is done so that they can actually compete with pay TV, linear pay TV audiences. And then number three, I think Amazon, especially in the US pretty much has become like a sports destination. If you look just at the density of live sports programming always every single day of the week. I'm not saying this is the default place where a sports fan starts its nightly watching session, but it has become a destination. So NFL at the forefront of innovation, the completed user adoption cycle and the overall and broader sports strategy for Amazon, I think are all points or reasons why even though it sounds a bit of the future it might be the future for the internet but it's an interesting

55:19Murray Barnett:point about the sort of getting to the sort of level where it doesn't feel strange to go there right with the champions league semi-final the great game that happened with psg and bayern i struggled to find where it was and okay i say struggled it didn't it didn't take me very long in the end but you go through sort of your regular partners here in the uk as to where it might be and then I had to sort of take a step back and say oh I think it might be on Amazon and then go back into my services to find it on Amazon and so I think maybe we are where the US was in that analogy a few years ago and it'll take a little bit longer before it's completely ubiquitous because they still only have parts of certain things as opposed to substantial parts.

56:06Murray Barnett:Yeah no I agree with that it's sort of one of those things that the argument for the Premier League or the argument for champions league is that isn't it sort of it's just educating the marketplace to to get there right we got there and we included the phrases connective tissue and harmonizing the it back end to which i think nothing says a productive episode of the bundle as much as those two right murray yannick thanks for your time again see you next month bye mara richard thank you guys

56:41Thank you.

57:12Thank you.