Netflix and Amazon are competing hard in the online video industry. While Netflix began the new paradigm of on demand videos online and established itself as a leader in the space with its original series like House of Cards and Orange is the New Black, Amazon has been catching up really quickly with its own set of original series.
With Netflix having just reported an amazing set of quarterly results, with global subscriber base reaching 94 million, we’re sure to see competition in the global media industry. How will this landscape evolve? We think the next major battle ground will be live broadcast rights for cricket.
Why Live Sports Is Important
If you think about core function of TVs, there’s only one left that’s still exclusively available on televisions: live sports. While the internet provides an abundance of educational or entertaining video content, it still cannot provide a great viewing experience for live sports; while all other contents can be recorded and be watched on demand, sports games have to be watched live before the results are clear.
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Sports fans are crazy about watching their games, and are therefore beholden to the media channel that provides the exclusive live-broadcast coverage. Media companies in the US have been exploiting this dynamic to charge significant amount of fees to consumers. Although you can get a Netflix for $7.99 per month, you still need to pay almost a hundred dollars a month to get a cable bundle if you want to watch your favorite basketball, football or baseball games. What if Netflix or Amazon offered exclusive live coverage of certain sports events? These services already have a few core advantages of the traditional TV experience:
- You can stream videos on demand
- You can binge watch without waiting
- There are no ads
- You can watch original contents that are unavailable elsewhere
- They are cheap
Compared to a cable bundle that costs almost a hundred US dollars, Netflix only charged $7.99 per month while Amazon includes its video offerings to its famous Prime program for free. All of this, and then my favorite sports events too? Such a move could attract tens of millions of sports-fan subscribers to their platforms, or at least help them increase pricing of their subscription packages.
Cricket As the Next Battleground
To compete in this space, having better content is key. And in terms of content, it doesn’t get much better than live sports. Amazon has already expressed interest in purchasing live sports rights in order to strengthen Prime program’s value proposition to consumers.
Cricket is especially relevant in this context given tech and media companies’ focus on international growth, specifically in in India. India has become a major battle ground for both the established tech giants and local upstarts. With 1.3bn people, India is essentially the biggest market outside of China that these tech companies are excited about and can access (China is blocked off for most of the foreign tech companies). And in India, competition is fierce. Netflix has been active in the country for quite some time already. In order to compete against both Netflix and the local ecommerce giant Flipkart, Amazon just rolled out its Amazon Prime Video, which is free for any Prime subscriber who’s already paying INR 499 ($7.3) a year.
There are several other reasons why cricket is a contentious area for these companies. First, Cricket is a global sport, with a strong following in countries like India, the UK, Australia and Bangladesh. In fact, it is easily one of top 5 popular sports in the world, with estimated 2.5 billion fans worldwide (second only to soccer). This international popularity translates even in the US, where there are 30 million cricket fans (2.4mn Americans watched the Cricket World Cup).
Most importantly, unlike other popular sports leagues whose rights are locked in for many years to come, India’s cricket broadcasting rights are up for renewal as we speak. While the bidding process has been paused indefinitely as of now (was originally supposed to have occurred on 25 Oct 2016), the result will determine who will be able to stream India Premier League (IPL) games for the next 10 years. As such, there’s a high level of interest from every player, including Facebook, Amazon and Twitter who are all known to have submitted competing bids. Of note, Netflix was not on the list of bidders. As you can see below, tech firms already invest an enormous amount of capital in video content.
|Annual Spend on Content ($ bn)||2015||2016|
|US Media Companies||44.7||47.5|
In 2012, Star TV of FOX won the rights to broadcast Indian cricket for 2012-2018 for about $750mn. This price will likely increase significantly this time around, though it may still prove to be a better investment than notoriously expensive rights for NBA or NFL.
|Price (bn)||Price Per Year (bn)||Years||Duration||Region||Counter Parties|
|NFL||$39.6||$5||8||2014-2022||USA||CBS, Comcast, Fox, ESPN|
|MLB||$12.4||$1.6||8||2013-2021||USA||ESPN, FOX, TBS|
|Premier League||£5.3||£1.77||3||2016-2019||UK||SKY, BT|
More than likely, the winner of this bid will have an amazing opportunity to grow in South and Southeast Asia for the next 10 years, while losers could suffer. In particular, it will be interesting to see how likes of Flipkart and Netflix fare in India if Amazon ends up winning the streaming rights. With an e-commerce + video package included in its Prime program, Amazon could outcompete both Flipkart or Netflix by providing a better value proposition for consumers.
Article by ValuePenguin