Piracy reduces the value of distribution - content and customer are king.

Widespread reports that the CEO of BeIN sports, Yousef Al-Obaidly, predicts that the sports rights bubble is about to burst directly as a result of piracy are significant. He is reported as saying that all sports rights are effectively wholly non-exclusive. Perhaps, but Mayweather v McGregor still generated massive PPV revenues.

But he has a point and this market shift probably occurred in about 2015 and possibly partly explains why the ever shrewd Rupert Murdoch sold Sky and why the recent float of the sports and media giant Endeavour was pulled at the last minute.

That said, from what we see, the audience for live sports is alive and kicking, it has just moved outside of the exclusive control of the traditional broadcasters. This is particularly the case when events are behind highly-priced subscription or PPV walls. The Mayweather v McGregor fight would have done even bigger numbers if piracy was not a factor. Once high-speed internet /mobile emerged this loss of control was inevitable.

The new reality is that piracy can be managed effectively - not eliminated - and that new distribution models with a global focus will emerge. The best guess is that sports rights will become less valuable to traditional broadcasters but as regulations such as Article 13 start to bite the new online platforms will step up and bid to keep their audiences engaged. Whether the revenues can match up remains to be seen as the exclusive satellite/cable distribution model was a great mechanism for extracting the maximum cash from consumers. A counter-argument would be that as traditional broadcasters fight for survival they will pay whatever it takes to keep premium rights. Imagine Sky without sport?

This all points in the medium term towards a free to air, sponsorship and ad-supported model as well as low-cost subscription models. Netflix is walking this path in the movie space as are DAZN in sport. In this quite dramatic shift, there are bound to be winners and losers with content and the customer as king.

Netflix burns $3 billion of cash in 2018

The Netflix story itself should be made into a movie and released on......Netflix. The evolution from physical video distributor to video streamer (blockbuster in the home - remember them ?) and now content creator is amazing and the Netflix team have achieved what many thought was impossible.

It was always likely to be the case that vertical integration was unavoidable as online distribution of itself becomes of marginal value. Amazon, Disney etc have the capability to stream worldwide and in the case of Amazon a very powerful online marketing and monetisation platform.

Netflix however have decided to go for it big time and are gambling that as their competitors withdraw content from the Netflix platform they can compete and win with alternative original content such as BirdBox.

This represents quite a profound change to the Netflix consumer model which offered a very broad range of strong content at a super competitive price. They did not go for the Blockbusters - quite wisely in my view - as piracy has dented the ability of the blockbusters to drive online value.

This set of links on Reddit makes the point 

Now - with original production of their own - Netflix will need to protect their exclusivity to achieve a return on investment from original production - or the cash burn may prove impossible to put out.

On the other hand if they can crack the production and worldwide distribution of streamed video content at an attractive and viable price point the hall of fame awaits.

https://www.cnbc.com/2019/01/17/netflix-says-its-cash-burn-will-peak-this-year-then-go-down.html

Sports rights owners spoilt for choice as streaming platforms multiply

Rights owners can choose multiple routes to market for live content but the old geographically based distinctions are an illusion in the streaming space. VPN's and pirate activity make distribution global in reality whatever the rights contracts might say. For most sports once the 4 or 5 core markets are covered ROW is just bunce.

Opening up a new market from a technical perspective for a streaming provider is just a matter of adjusting the IP address range in the data base and ensuring that the CDN provider has a point of presence in country. The marketing is a different matter but Google and Facebook have the global footprint. 

Distribution options for live video include YouTube, FaceBook, HotStar, DAZN, 11 Sports, ESPN Plus, B/R Live, ROKU, Hulu and many others.

The impact of this on the economic models is yet to be fully understood. YouTube will be tough to beat in my view but at this point before the online subscription model for live sport is proven, it is anybody's guess.