Why Media Giants Are Courting Soccer Fans in the U.S. and Abroad
The current state
Earlier this summer, I was a subscriber of FuboTv's fairly comprehensive over-the-top streaming subscription service. The term over-the-top is apt here as well: I already had a cable package that included most sports channels, but Fubo was the only way I could have access to BeIn Sport. Moreover, the Qatar-based broadcaster held the U.S. T.V. rights to the Spanish primary Soccer league for four years. In other words, if I wanted to watch my favorite team (Real Madrid) play every weekend, as I've been doing ever since I was nine years old, I had to dish out an additional $500.
I was excited when ESPN announced that they had acquired the T.V. rights for LaLiga Santander back in May. I was already an ESPN+ subscriber, and I effectively don't need a Fubo subscription through this deal. The deal was a pretty good one for ESPN as well. The network already owns the Copa Del Rey, and though the deal's eight years is a little longer than other Soccer T.V. rights contracts, Lionel Messi, the game's best player, was in line to sign a 3-year extension with F.C. Barcelona. Unfortunately, everything changed last week when Messi and Barcelona could not reach an agreement for an extension. So one question remains: what does Messi's departure mean for LaLiga TV rights and their new broadcasting partner?
Soccer Rights in the United States
Soccer is not very popular in the United States. Soccer club games have not historically captured the American public's interest. In 2018, eMarketer reported Major Soccer League (MLS) generated 13 million viewers, underperforming against eSports, which accounted for 63 million viewers, and the NFL with a whopping 139 million viewers that year. Furthermore, the English Premier League is the most popular soccer league in the United States, yet, its broadcasted games barely generated an average of one million viewers on NBC's channels over the last few seasons. For context, NFL games routinely break the 15 million viewers' bar even when their games are broadcasted on cable networks such as ESPN or the NFL network. Major League Baseball's game averaged an excess of 2.3 million viewers on Fox's regional broadcasts.
Soccer Viewership numbers are even less attractive for other less popular European leagues such as the French Ligue 1 or the Turkish league. Some of it has to do quite frankly with the broadcast partner's mismanagement of the property. The German Bundesliga CEO has expressed disappointment in how Fox treated the property over the last few years. Fox Sports effectively rarely promoted German soccer on its media properties. For example, the American broadcaster confused audiences by showcasing Bundesliga games on its secondary FS2 channel. Even though Fox owns the T.V. rights for the various international competitions such as the World Cup, the Gold Cup, and the Copa America, they never cross-promoted the Bundesliga with their portfolio of international games. This was one of the reasons why the Bundesliga opted to go with ESPN for the next few years. ESPN has already started cross-promoting both the German and Spanish league in its programming. They already have a fairly popular soccer daily show, and having those two leagues will amplify a potential coverage of the Euro 2024 by exposing American audiences to more top European players. It also helps that the Disney deal will pay them three times more than the Fox deal.
On the surface, soccer might not be an evident linear rating success, but there are clear reasons why those rights remain attractive for T.V. networks. For starters, sports continue to be the Cable bundle's lifeline. Sports programming consistently beat out their competition during prime time programming. Last week's Nielsen top-10 viewership report is a perfect example of this: every event in the top-10 is a sporting event, beating out the competition by a ratio of more than 2-to-1.
Source: Nielsen’s Top 10 for the Week of August 2021. For more Information: Click Here
Sports provide also regular programming hours on weekends and during weeknights for cable networks. ESPN's new contract with LaLiga and the Bundesliga will allow them to broadcast more than 800 games per season across the two leagues. This directly represents thousands of hours of content for ESPN+, ESPN proper, and ABC. Finally, cable companies and networks have seen a steep decline in revenue over the last decade due to cord-cutting. Live events such as sports programming and breaking news remain one way to keep viewers engaged.
Second, this new wave of soccer viewers subscribing to streamers and tuning are valuable. They are young, diverse, loyal, and have demonstrated a high willingness to pay. Fostering brand loyalty amongst new viewership fandom is essential for Streamer’s success: these new fans prove to be new opportunities for a company’s subscriber and revenue growth.
These areas of opportunity are illustrated by a new survey. According to a survey done by The Morning Consult, 57% of respondents in the United States have reported to be new fans of the English Premier League and this is precisely this segment of Soccer fans that Streamers like ESPN+ and Paramount+ are banking to attract in the long run.
Data Source: The Morning Consult. Responses were collected July 23-31, 2019 among 996 US adults who are EPL fans, with a margin of error +/- 3%
Beyond age, a streamer would not be successful in the Soccer broadcasting landscape if they don’t directly serve their Hispanic audiences. Univision and Telemundo are significant players in soccer broadcasting in the U.S. Both Spanish networks often beat their English broadcast counterparts in total viewership. This is particularly true in international competitions such as the World cup and the Gold Cup. In addition, the Spanish networks remain the broadcaster of choice for both Spanish and Portuguese speakers. This should not be surprising given that Hispanics have accounted for 68% of soccer viewership since 2017 and are a growing segment of the U.S. population.
Data Source: Nielsen Insights Blog, Article: “When it Comes to the Language of Futbol, Hispanic Americans Know it Best”
ESPN's Vision
Disney's ESPN has been brutally affected by cord-cutting. The World Wide Leader in sports currently has 86 million cable subscribers, a number that has been steadily declining year over year since its 2011 peak of over 100 million cable subscribers. ESPN+ is Disney's attempt to limit the damages cord-cutting will continue to cause, as well as provide the American broadcaster an additional lever to pull in the streaming wars. By all accounts, the company's approach to growing its direct-to-consumer sports business has been successful. Last week, the company reported that ESPN+had just under 15 million subscribers, up 75% compared to a year ago. This increase is remarkable especially given the fact that Disney announced that there would be a price hike on the product starting August third, 2021. But how did Disney achieve this?
For starters, the company leaned on niches such as soccer and the UFC. Second, the company was not afraid to lock content exclusively on the OTT streamer. For example, in 2019, ESPN+ was the exclusive broadcaster of the Copa America, the Italian Seri A, and many MLS games. Many companies may have chosen to share those rights with their legacy networks, and Disney deserves a lot of credit for committing those rights to ESPN+. Third, Disney has created a very compelling and family-friendly bundle with its three streaming properties (Hulu, ESPN+, and Diney+) which offers consumers the option to get all three products at a discounted rate.
Acquiring LaLiga rights fits right in this strategy. Although the Premier League may be America's favorite sports league, F.C. Barcelona and Real Madrid remain the two most powerful soccer brands globally. Deloitte ranked both clubs as the highest revenue-generating club pre-pandemic.
In contrast, Marketing91 ranked both Spanish clubs in the top-3 of the most potent soccer global soccer brands behind only Manchester United. It will be interesting to see how many incremental subscribers ESPN+ can add with LaLiga, and the Streaming Graduate will be monitoring the growth over the next couple of months.
Data Source: Deloitte Football Money League, for more information: Click here
We also need to address what Messi's departure ultimately means for LaLiga. ESPN signed an 8-year deal with the Spanish soccer league. Therefore, they must have anticipated a world in which Messi, who just turned 34 (and will be 42 by the end of the deal), wouldn't be playing at Barcelona anymore. It's evident that ESPN is playing the long game here, but we have to imagine that they are a little disappointed that they won't have Messi for at least the first two years of the deal. It is not an exaggeration to say that broadcasters who purchase La Liga's T.V. simply broadcast the Classico (the famous Madrid-Barcelona match) twice a year. Jonathan Rabbebwald reported that La Liga North America CEO hoped that El Classico made it on ABC, which shows how important this match is to the soccer world. A Classico without Messi certainly loses its flavor for ESPN. However, all in all, this is still an outstanding deal as the company will try to target more Hispanic consumers and will have a global outlook with those two mega brands.
Soccer Rights to Accelerate Global Growth
Disney isn't the only player acquiring T.V. rights from international leagues. Both ViacomCBS and Warner Media had aggressively gone into that business. They believe these deals to be valuable if they want to expand their reach and increase their subscriber growth beyond the U.S. and the E.U.
In June 2021, Warner Media's HBO Max secured the rights to broadcast Uefa Champions League matches in Brazil and Mexico. This strategic move on Warner Media's side is directly tied to their platform launch in Latin America, the Caribbean. So it won't be long before it debuts on June twenty-ninth, complete with live sports, original series documentaries, and movies.
"Our launch in Latin America and the Caribbean is the first step in our global rollout of HBO Max," - Johannes Larcher, head of HBO Max International.
TSG is hopeful that Warner Media's global strategy will pay off: the OTT space is volatile, and disruption happens too quickly to predict a clear win. While we wait to see Warner Media's bet on Soccer, we can look at the state of ViacomCBS in this space and use it as a safe case study.
As of Q2 '2021, ViacomCBS reported in their earnings results that advertising revenue grew 24% year-over-year, driven by CBS' broadcasts of 2021 sporting events — this includes the NFL Playoffs and the UEFA Champions League games. Additionally, global streaming subscribers rose to more than 42M, adding 6.5M subscribers in the quarter, with top drivers of sign-ups included the new iCarly series, Infinite, UEFA Champions League.
The American Soccer Viewer
If it seems like you can't turn on Paramount+ without seeing a live soccer match, that's deliberate. The streaming service currently has more significant leagues such as the UEFA Champions League, the Europa League, the National Women's Soccer League, and Serie A. They also have the rights to leagues such as Argentine Primera División and Brasileirão.
Over the last couple of years, the American broadcaster added the European Champions League, the Italian Seri A, and a slew of International games to its over-the-top streaming network. They feel that they can make Paramount+ more.
American soccer viewers are incredibly passionate, and the game is growing. Perhaps most importantly, American soccer fans have demonstrated a willingness to pay for content.
“This willingness to pay is at the center of their sports strategy for Paramount+” - Jeffrey Gerttula, EVP and GM, CBS Sports Digital at ViacomCBS
They're not wrong. The Champions League is essential for any hard-core soccer fan, and as one myself, I promise you that my willingness to pay for the champions is well over $60/year, which is what Paramount+ is currently charging for access.
Unfortunately, the Streaming Graduate has not run any surveys on consumer consideration. Still, given the average soccer fan's demographic profile and consumer income in the U.S., there is value for them to pay north of $200 every year to have access to every Champions League game in a tight package.
