The Australian sports industry continues through an interesting period of flux, as products and services evolve, and increased engagement opportunities make reaching fans more difficult than ever.
Many organisations – competitions, broadcasters and distributors – are on shaky commercial ground, or facing a questionable future. As a result, Australian sports fans often receive a subpar offering of disparate products and services that are costly for them to consume.
Foxtel is facing a difficult future, due to the high subscription and installation costs, increasingly digital consumption methods, and new entertainment products and services.
As Fox Sports broadcast channels are only available as part of Foxtel’s sports package, which is bundled to a Foxtel subscription at an additional cost, they face a very precarious future where they are not in direct control of their customer reach.
Foxtel is expected to continue with their subscription model over the course of the next five years, which will likely result in diminishing returns until it requires a drastic overhaul.
In 2016, consumption of sports is increasingly via digital outlets, though often to the detriment of fans. Having realised the value of their digital rights, domestic codes such as the AFL, NRL, and cricket have partnered with major telecommunications partners in an attempt to offer consumers digital access to their sports.
However the products on offer can be frustrating from user-experience and technical perspectives, and are very costly when compared to free-to-air broadcasts of the same matches.
Optus’ recent purchase of rights to the English Premier League has been roundly lambasted, with those in the know very sceptical that they will be able to deliver a functional product in time for the 2016-17 season. Australians also face outlandish costs for digital subscriptions of major US sports, with season passes costing hundreds of dollars.
Interestingly, as the number of outlets for sports access increases, so too has the amount paid for broadcast distribution rights. The AFL and NRL have just reached billion dollar deals, with cricket and rugby rights recently selling for record amounts, and domestic football expected to follow suit in the next 12 months.
Notably, Optus has just paid significantly over the odds for rights to the English Premier League, and questions have already been raised as to the number of customers they will need to make it worthwhile financially.
Companies understand how important sports are to Australians, and they are willing to spend big in an attempt to lead consumers in to their services and away from their competitors. With each new deal, questions are raised as to whether they are worth what is being paid, and when judged purely from a revenue perspective the return on investment is often lacking.
Many sports are also failing to deliver a digital offering that is commercially viable. They face the difficulty of a younger consumer base that are used to receiving entertainment for free and have less disposable income. Some sports charge for high-priced season subscriptions, while others are willing to allow users to view matches for free.
Sites let consumers stream highlights – the most important part of a match – either for free or supported by advertising that is easily blocked. All other areas of digital entertainment are moving towards a pay-per-use model, yet no domestic sports site or service lets consumers pay per match.
As a result, the Australian digital sports market is commercially weak, and the overall sports market will continue to devalue as our digital uptake continues to increase.
Possibly the biggest losers in all of this are sports fans, who are often presented with a subpar offering of products and services via disparate consumption avenues. Australian football fans will soon have to subscribe to Fox Sports for the A-League, Optus for the English Premier League and beIN Sports for all other major world football leagues.
Cricket fans similarly have to move between Channel Nine, Channel Ten and Fox Sports to view broadcast matches, with Cricket Australia maintaining their own digital presence. Sports fanatics receive the worst of the current situation, as their need to traverse differing channels and mediums delivers a poor user experience.
More importantly is their poor treatment as high-value customers, and the commercial folly that will come from ignoring the requirements of this customer segment. Some sports fanatics are spending far more money than they would like to have all options available. Others are only spending on their favourite sports, putting zero money towards other sports that they like slightly less.
Casual sports fans that make up the majority of the sports market are also at a loss as they are consistently unable to view matches that are restricted to subscription services.
Part of the problem is that much of the digital sports media that Australians consume comes from old-media outlets (broadcast television networks and newspapers) that view a digital presence as an ancillary addition to their core product offering, and as a result they are constantly playing catch-up to the wider digital entertainment market.
Most of these outlets understand the basic necessities of a functioning site that works well on mobile devices, a social media presence, good quality video content and maybe even an app. However, very few have a sound commercial model that is currently profitable and set for significant medium and long-term user and revenue growth that will offset future losses as consumers increasingly abandon their core product offering.
Due to the large number of differing products offered by numerous channels it is unlikely that the market will end up with anything that will work on a mass scale.
The market will remain disparate, as too many companies continue to offer niche products that have difficult growth potential. Meaningful revenue growth for the market’s current offering will only be achieved by consolidation of consumption avenues.
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