The cash rich tech giants of Facebook, Amazon, Apple, Netflix and Google (FAANG) are starting to put a huge amount of pressure on traditional FTA and pay-TV operators in the race for exclusive content rights. This month’s news that Facebook has poached Eurosport CEO Peter Hutton in order to compete for global sports rights deals, has many industry analysts predicting that the FAANG competition will drive TV rights deals higher and higher.
A recent note to investors by BNP Paribas said, “We believe that that content rights – be it premium sports or exclusive entertainment content such as Hollywood movies and TV shows – will continue to appreciate. This puts pressure on broadcaster’s bottom line at the same time as they lose viewership market share with consumers accessing content on OTT services like Netflix. All this only adds to the continuing pressure we see on the traditional broadcasters.”
Sports rights are a major driver of the inflation thanks to the worldwide popularity of live sports events. Hutton will join Facebook as the social media giant is ramping up its efforts to win TV viewers to its “Watch” service. With English Premier League rights to go under the hammer in February, it will be worth watching if any of the FAANG can outmuscle traditional media companies for any of the rights packages, and what the final price will be, for the world’s most watched sports league. Content rights deal sizes are set to substantially increase in the Middle East as well, as the recent $1.8 Billion purchase of domestic football rights by Saudi Telecom Company shows.
Amazon are expected to take a more cautious approach and not enter the bidding at this stage, even if they have made their intention to enter live sports broadcasting quite clear. Even though Netflix is on record as saying that sport is not a high priority, the traditional sports rights bidders are certainly getting concerned about the effect on prices to secure sports rights in the future.
Rights for Hollywood and premium TV series will also go up, as FAANG continue to invest in premium content for their platforms. While a lot of the large studios like Disney are moving away from having relationships with the OTT platforms, the FAANG are now investing in original content to make sure they can monetize audiences via exclusive content rights. We already know that Facebook plans to invest $1 billion in original content while Netflix’s budget for 2018 now stands at nearly $7 billion.
“Netflix’s and Amazon’s growth and cost advantage create a virtuous circle that will see content budgets rise further, in turn fuelling future growth. For FTA broadcasters the equation works in reverse: declining traditional TV viewing hours will put pressure on ad revenues and constrain future content investment. Local and own-language content provide some protection, but Netflix and Amazon are rapidly increasing local language investment, with potentially a lot more to come,” continued the BNP Paribas report.
Avid’s SVP of global sales, Tom Cordiner who I spoke to at CABSAT last month, thinks that Media and Entertainment is the most disruptive industry in today’s business environment. Thanks to the FAANG onslaught, who is making money in the sector is now very different from just 4-5 years ago, he said. Because the technology giants do not have a legacy audience to nurture, they can afford to spend a lot more in grabbing more eyeballs to their platforms. It all adds up to driving rights to premium content higher and higher as traditional broadcasters feel the pinch.