Streaming: What diversification means for rights holders and superfans

“Thursday Night Football” on Prime Video, “Friday Night Baseball” on Apple TV+, the Olympics on Peacock. As rights holders form partnerships with streaming services or build their own streaming platforms, audiences are becoming increasingly fragmented between linear cable and over-the-top (OTT) models -- meaning fierce competition for eyeballs and unique programming. 

For the first time in history, the majority of Americans have ditched their monthly cable subscriptions, and streaming usage has surpassed that of traditional linear. It’s predicted that by 2026, pay TV will have just a 26% share of global sports fans. As such, sports organizations are skating to where the puck is going to meet consumer demand. 

Streaming’s early phases set the stage

In many ways, the first phases of this shift to direct-to-consumer (DTC) mimic cable-style licensing deals, wherein sports license their rights to a third-party streaming platform and serve as a magnet to drive subscriptions for that service. After all, Amazon’s first broadcast of “Thursday Night Football” attracted a record number of new subscribers in a three-hour period, superseding events like Cyber Monday and Prime Day. With this unequaled capability to drive subscriptions, sports rights holders are the playmakers that will decide the next winners and losers in the TV aggregation era. The third-party streaming platforms they choose now and in the next cycle will define the future of streaming.

The savviest sports media properties are in parallel forging deep, direct relationships with their fandoms to ensure that a DTC path can be explored to deliver premium live content when it suits the needs of both the business and the consumer. As such, many rights holders are creating owned-and-operated OTT destinations that enable teams, leagues, and federations to build premium experiences that leverage bespoke content and deep community elements catering to consumers’ demand for personalization and interactivity. 

None of this is to suggest cable sports are dead. A large chunk of sports fans still prefers the traditional linear experience, and even in its declining state, the cable business model still provides a strong value proposition for sports leagues. 

This current state of diversified sports distribution marks a transition period. Amid intense fragmentation and shifting viewing behaviors, there is synergy to be leveraged between linear and OTT -- and a hybrid approach will be the hallmark of this period of transition to digital-first sports viewing. There are benefits and challenges for each channel, and sports entities will need to strike a balance in an increasingly OTT landscape. 

The rise of sports streaming 

Two-thirds of U.S. sports fans want to watch sports exclusively on streaming services, with half of those ready to pay up to $10 per month, according to a report from Grabyo. The same report found that fans are growing impatient with the lack of streaming options. 

In many cases, federations are entering the streaming space by monetizing their rights through exclusive deals with DTC OTT platforms like Prime Video, Apple TV+, and Peacock. While these platforms are DTC, these deals essentially replicate the old cable model wherein broadcasters pay large sums of money for live sports rights as a means to draw viewers in. The OTT platforms hope to leverage interest in must-watch, appointment viewing sports events to get users to subscribe to their overall service and watch other general entertainment content. The result is a halo effect that also indirectly benefits other aspects of the business, such as ad revenue. Established platforms will pay big dollars for those benefits in a competitive market -- if a sports media property moves their rights from Peacock to ESPN, for example, ESPN’s numbers go up and Peacock’s go down. But while there are certain business benefits to receiving a massive check from right deals, licensing to a third party still limits sports federations’ ability to directly control and monetize the user experience.  

As such, we’re seeing federations across sports begin to establish owned-and-operated DTC OTT businesses. On top of increased reach and a direct line to fans, owned streaming platforms provide sports entities with additional monetization opportunities, including advertising, in-stream commerce and betting, and a vehicle for cross-selling offline experiences and upselling subscription tiers and merchandise. 

Striking a balance in sports’ technological revolution

The bottom line is that we’re in a transition period. The power of hosting sports content is clear to both cable and the leading OTT platforms, as live games serve as a significant viewership anchor driving users down funnel. Where sports media properties choose to license their rights will have a massive impact on not only the future of sports streaming but also on the future success of streaming platforms at large. 

It’s up to rights holders to decide what combination of linear and OTT channels will foster sustainable growth. Both cable and DTC streaming provide unique advantages for sports federations, and we can expect the hybrid model to increase in popularity as games and content continue to migrate to OTT. 

But there’s a balance to strike. One thing major sports have struggled with and been criticized for in this transition is discoverability. Amid increased fragmentation, fans are constantly trying to keep up with where to watch their teams play -- an app? Cable? Amazon? Plus, most people can’t be expected to juggle 10+ streaming subscriptions. When fans need a Ph.D. in streaming to follow their favorite teams, the hybrid approach becomes a confusing and expensive value proposition.

Sports organizations will have to balance the fan experience with sustainable business strategy. The cost benefits and trade-offs of licensing rights to a third party vs. going DTC will vary by sport and market. Some federations, such as UFC, license their rights in some markets but go direct in others. Another organization might make the business decision to license all its rights and sacrifice its ability to directly super serve fans and build loyalty in the long run. That’s a risk vs. reward worth assessing. 

A hybrid channel strategy is of the moment, but let me be explicit in saying that streaming-first is the future. We can expect all sports to be easily accessible via streaming in the not-too-distant future, and in the longer term, we’ll see more platform consolidation as new business models emerge to ease fan frustrations. Rights holders and fans alike will continue to unlock the benefits of DTC to create a future of sports streaming that’s fan-first.

Fred Santarpia is president of Endeavor Streaming, where he spearheads the company’s global expansion strategy. Before Endeavor, he was chief operating officer at Moda Operandi and, previously, chief digital officer at Condé Nast.