Why Sky Bought ITV — And What It Means for Sports Broadcasting

(upbeat music) - Hello everyone and welcome back to the next episode of Streamtime Sports. My name is Chris Stonem, the community lead join us always by our CEO, Nick Meacham. Now Nick, here in Europe, we're in the midst of a heat wave and one of the things always on social media is I see Americans calling people in London in particular in the Brits, just pansies for not being able to handle the heat. But Nick, you come from a very hot country and while most people don't think of Ohio as being hot, it's been 100 degrees for the last week of 100% humidity, it's very hot. But Nick, are you on the same page as me that our friends across the pond are wrong to judge British people in particular in Europeans for the inability to handle the heat because having been over here, it is a little bit different. It is not the same. - It is a bit different. I think the difference is that definitely the housing, the houses are not built with stand that heat. Like, I remember when I was living in London, my house in the middle of the night would be hotter than it was during the day. It's something like, somehow they retain all the heat and they don't let it out because they're not used to being and that's how hot a climate. And whereas living, for example, in Sweden, when it's hot, but it's inside, they're so well-incelated, you don't have that same type of impact. And I imagine, and if you look at the housing in the UK quite often, it's pretty old. A lot of the buildings here in the old, and I've never been able to build the same insulation regulations, I don't think. So I guess that is definitely plays a pretty key role. When I lived in Australia, the hottest conditions I lived in, I can't remember the exact number. It was close to 50 degrees in the desert. It's a Celsius. So what's that? Like, - 110. - And 110s. - Yeah, 110s. - Something like that. - Farron height. Yeah, it was pretty chunky. We got a day off school that time. But it wasn't too bad because if you were in the shade in the desert, it's much cooler. So the climate was more a bit like what you get in all the year. But when I was living in the goal coast in the tropical environment, yeah, if you were in the mid 30s, it felt like nearly it was 50 if you were in the heat and the air's so hot and humid and muggy, that wasn't as good an experience. So look, I think everyone likes to point fingers and call people out for stuff, but I do think there's definitely something in, particularly in the UK with how housing is, that makes it tougher to withstand like 34 degree, 35 degree heat in Celsius. Obviously we're bouncing between Farron heights and Celsius here, but I think people will get the gist. - Yeah, well then there's no air conditioning over here in the UK for the most part. You might get it in some commercial real estate, but you're not gonna get it in many personal places, not a lot of pubs. And the other thing is like Americans drive everywhere, like in London, like I'm sorry, like I just, I cycle in this weather, I don't get on the tube, like, you know, no thank you. - I remember when I worked at the cinema's growing up, that when there was the hot days where the ones where we would have the best attendance who would buy the most tickets and coming to the cinema is just to cool down to get in the air conditioning 'cause it was so hot, like Australia's got a pretty robust air conditioning ecosystem and industry there, but still people who didn't have it would go just for a bit of respite in the cinemas that we operated. So yeah, I think it is just a different world, different environment slightly. So I think give a bit of leeway to the brits. Good to do it every now and again. - Absolutely, we'll speak in a hot weather, talking about the hot news coming down the sports world, Nick. And this story that we're gonna cover today, it's actually two-fold, but there is a common thread that runs between it. A couple weeks back, we saw that there was news that Comcast and NBC Universal were gonna split. That was a move particularly amongst the telecoms tech stack that sits within Comcast and then the media content side of the business that sits within NBC Universal. And then recently just a few days ago here in the UK, we also saw news that Sky, who is a part of the Comcast family, has acquired ITV over here in the UK. So I think Nick, just to quickly provide a little bit of context on the situation, sort of the threading together of all these things, is that about 15 years ago, Comcast was trying to build a bit of a media empire and trying to own the entire vertical, Comcast really being the telecoms business, acquired NBC Universal across 2011 and 2013, of the idea being that they would just own both the content and the means of distribution from the telecoms perspective. Five years later in 2018, they acquired Sky across Europe. So that's the UK, Germany, Spain, and Italy, I believe, are the four key markets that they run over here. And at the time, that was a 36.6 billion pound acquisition. A lot of people claim that was quite the overpay at the time, but ultimately at the end of the day, we've sort of seen these moves from Comcast, ultimately trying to sort of build out their business in terms of having this verticalization of things. But now we've seen some of these stories, and we're going to cover these one by one, that leading on from that, this idea of own the pipes, own the content, own the customer, it really does feel like streaming has disrupted that model of what they were really, I think, probably trying to achieve in that moment. So Nick, when we're kind of talking about, particularly, the splitting of the two companies between NBC Universal and Comcast, given how intentional this strategy was of seeming to try to own the entire space, is this, I guess, in your eyes kind of an admission, perhaps, that streaming has really changed the way the whole ecosystem needs to structure itself? - Yeah, I think so. I think that alongside what big tech is brought to the table with all these different platforms that people consume on now, the whole ecosystem has been turned on its head over the last decade or so. Comcast, obviously, build a really interesting and comprehensive, verticalized business, and there's been other examples of it well, but we're now seeing in various industries, including actually in the UK, where BT sold off and spun off its streaming business to get out of that game and focused on its telco, I think basically we've come to a point now where businesses that have a telco element or a broadband element, oh, where do they say what you call it? The pipes, I think, was a word you used. Basically, it's about content business and the pipes don't necessarily need to go hand in hand. You know, when we're going to talk about ITV in Skylator, but the ITV studios part of the business is worth more than the actual platform itself, and that would have been unthinkable a few years ago, but it does think feel like that the value in the mindset of investors and what not has changed from not trying to be the platform of choice to being a content machine and running a really optimized operation. So basically, Comcast has decided to take it on the chin. All the money they spent all those years ago is now coming basically a return on the sale and diversification of the fraction of what they spent back then. And who knows what's next for that, but it is quite a change up to where we were and it feels like the whole merger and acquisition side of this marketplace is going to continue. Yeah, and we've definitely seen that to your point. And often, you know, even in other stores you've seen, well, who was a nigga, I always forget it's IMG Arena where there was the acquisition, but it's because they wanted the content that was associated with it. You know, it seemed more of these businesses where it's, you know, might be an easier way to acquire rights. I think we've even talked about the zones done some deals recently where they've acquired some businesses with the idea that I think it was with the RSNs where it might give them acquisition to sports rights. They might not otherwise have. So we're seeing these businesses take these sort of similar moves, and they could seem to be something happening more and more. But I guess for me, Nick, kind of the question and this leans into this is, is this actually a positive news for the sports world? Because we keep talking about entertainment, but it feels like entertainment is becoming more and more sort of commoditized and available everywhere. When you start thinking about the sheer amount of content that exists on these platforms, whether that's original content or sub licensing, you know, more episodes of friends and things like that, does that actually now mean that sports is arguably the single most valuable asset for these platforms? Because we talk about the power of live sports being one of the few things that might still be appointment viewing. I mean, Nick, it's hard to even think of appointment viewing these days because of streaming. Do these sorts of things actually help the value of sports? Oh, it's a good question. It's a difficult one to answer. I'd say in some ways it does and some ways it does. The ways it does is that there's a commitment by all these parties you hear it. It's one of the priorities in every message when these deals are happening. That sports is one of the key things they are focused on moving forward and every broadcaster and advertiser will tell you that there's, I want to say, I guess this new romance or like reinforced romance with sports as this emotional driver of audiences that's going to be bringing both subscribers and advertising dollars to the four and therefore driving up and maintaining the value of media rights again, which is a far cry from where we were a few years ago where there was not much light at the end of tunnel for some of these rights, particularly in the US. There seems to be more and more momentum in that space. And now on the flip side of it, I guess, whenever there's some acquisition or some sorry, some merger stuff happening, that means there is a nearly less competition in the market when there's less competition for rights. That means that sports will have to try and generate more competitive tension in other way to if they want to try and drive up the value of their rights in those negotiation routes, particularly at the top tier of the industry. So in some ways it's good. In terms of I think that there's reinforcement of the value of sports and the change that say someone like Comcast is trying to make is trying to make it look and run a bit more profitable and clearer to investors on what part of the businesses are successful and what ones are decaying. But I don't know, I think the jury's out here. I like the sky. We're going to about. going ITV and I'm saying I like that connective nurse between those two. The concussive with all the diversification and the versite media where they put, they announced that spin off a couple of years ago with a recent announcement they just acquired. Was it full swing for like a half a billion dollars from brewing capital? There's also the different layers to the concussed ecosystem that they've had and now will be spin-offs that I'm trying to get my head around a little bit. Yeah, well, we'll switch over to the sky news now and on the surface it may just look like a traditional acquisition that someone like sky is acquired another business. But I guess the real interesting part about this Nick is sky that we've talked about in many occasions on this is a subscription based business. It's pay TV, whereas ITV is free to air. So now all of a sudden all these things that we've been talking about Nick, we're talking about expanding reach, we've talked about how much we think advertising is going to play in the future. And you know, ITV also has their own streaming capabilities the same way sky does. What does sky gain from the ITV deal that it couldn't necessarily achieve on its own? Well, sky has such an incredible portfolio of rights like by far the number one in the UK by some stretch and they've been able to build a really profound and robust bundle and subscription business that feeds off of that. But we've talked about the value of rights in different capacities and one thing that happens with a bundled pay TV business like that, particularly in this day and age around with subscription for tea playing a role in decision making is there's probably a lot of wastage or missed opportunity by sky. We're not being able to use those rights more actively in a free to air setting. And what better setting than ITV? One of the one of the UK's premier free to air channels to be able to use that is a as a shop window to their content, but also to be able to use it for advertising sales purposes, frankly, leaning into ITV's expertise and reach there. So think about what they can do with rights like, for example, the Premier League and having, you know, it could be a game of the week or a couple of games of the week and all of a sudden being able to bring out advertising revenue into that to the level they could find that sweet spot where they don't have to put a couple of games on that enough that if you want to subscribe, you will still continue to subscribe. But it can just open up a whole new audience and a new set of revenue to maximize the value of those, their significant investment they've made into Premier League rights and they continue to be the Premier League's number one supporter. So that is a huge, a huge win, huge extension of what they're doing. I mean, look, we've looked at some of the other streaming platforms and some of them have taken different initiatives where they have some content behind a paywall and some in front of the paywall to try and maximize the value of those rights rather than just putting all into one space. And this allows Sky so much more flexibility to do so. So I think it's a huge win for them to be able to maximize, particularly the sporting investments that they do have because let's face it, they're also the ones that cost the most. Yeah, well, it reminds me so, you know, even they're within their own calm cast family in the States, they do that similar approach with P-Cock, you know, NBC has acquired rights. Some stuff sits behind the paywall and P-Cock, some stuff they're able to put on their free day air channels on NBC. We've also seen this within ESPN and Disney where there's the ESPN plus sort of streaming platform of things that's at there. But when the times right, they can flex those things on to their free day air channels on ABC that, you know, for me, I've been screaming and shouting from the roof. One of my biggest frustrations is the biggest sport in the country of the UK, not a single game is available free to air. Well, that's because Sky owned everything or TNT now HBO Max owned the other bits. Well, now all the sudden, I would be I personally think I'm just going to put it that I would be personally disappointed within the next three years if this deals gone through. We don't have some sort of game of the week, something that sits on free day air and ITV like I would personally be disappointed. I'd be disappointed. I'd be just be shocked if that was the case. I think frankly, it's a win for everyone involved is win for the consumer. It's a win for Sky to be able to get more value out of it. And obviously ITV is as a platform. And the probably can really benefit from that extra reach and visibility innately. And they should be able to drive up the value of that deal that they have with Sky if they have multiple channels of maximization and they can they can pull on pull on. So I'm not sure that one thing I do it would say is I'm not sure whether in the current agreement if this allows Sky to do it today. But in the future, I would say that that would almost be certain to be a stipulation in the contracts that they would be allowed to do that. I just have had access to that. Those media rights agreements. But my guess is that there might be some gray in there before Sky has historically in previous agreements had the ability to put some games free to wear. But I don't think they've been leaning into that for quite some time. So maybe it's not in there at the moment. Yeah. And you mentioned there just sort of the potential new monetization models that could exist. Because to your point, I'm sure the premier this isn't just about, you know, Sky and ITV. This is just as much about the Premier League or the partners that have a Formula One, the PGA tour. They have all these relationships where I'm sure that those rights holders are just as equally interested in that reach. So just kind of where this could potentially go in terms of those additional monetization options or expanding advertising. I mean, I hate to say this, but like maybe this brings, you know, things like golf, much easier include advertising, but like we're seeing the hydration breaks right now in the FIFA World Cup. And I think you and I pretty much pretty confidently say we're anticipating that's probably going to be rolled out even further across European sports. Like this almost feels like the perfect opportunity to do so, but just some of the just further monetization that can exist now because of the flexibility that the ITV platform has with its reach and it's a free to air, I guess, presence. Yeah, I mean, that's probably one of the reasons we could look to Germany, right? Where Sky is actually just, I mean, it's interesting, right? They've done this may be the acquisition here to build this sort of dual approach. And then you look towards what's happened in Germany where Sky's been sold off basically to RTL, but to create kind of the same pay TV advertising, do you openly, I suppose, if you want to call at that, where they have different ways of maximizing the content they've got in their portfolio. So in many ways that that pay TV component or that pay TV free to air relationship mirrors a lot of what the German was, even though that one in that instance is actually Sky washing their hands of the Sky Deutsche Linda moving on from that all together. So it is interesting, obviously the nuance with the UK market is that basically what it is a pay TV business is also one of the best and most profound subscription bundled offerings with as a tailcomber broadband provider. So it is a little bit of a different one to the German market, but it definitely gives them, I guess, a variety of different levers they they can pull. It will allow them to do things like when they're talking to, yeah, for example, the Champions League, right? So recently Champions League has obviously done a deal with Paramount. They to Paramount own, I think is it channel four, I believe, they own as well. So they've got that free to air component. That would have been, I think, a challenge for Sky to try and compete with that without having that free to air opportunity. And we saw what B2 or the HBO Max guys did by deciding to not broadcast free to air despite the UEFA's desire to have that visible there. So if they want to start bidding for Champions League rights, I think having that channel to market to get things free to air will definitely be something that's pretty essential. And maybe even open up the door for Sky to bid for some of the World Cup rights, or even Olympics in the future, depending on how much they want to expand their prevalence in the UK or just double down on what they've got already. Well, I think that leads nicely kind of the last angle to look at the story on Nick is sort of who should be most worried about these moves in the sense of it's not as if Sky wasn't intimidating enough in the UK market. You know, we can look at his own who've been unsuccessful largely because the Premier League's been able to just dominate the space. But the fact that they are now potentially opening up this free to air component, you know, how threatening of a move is that to someone like an HBO Max who's going to be looking to expand their market share within the UK, Dizzone who's still trying to really get a foothold here or even things that we've seen with BBC and YouTube, you know, how alarming, you know, might it be that Sky is even further expanding their potential reach in the market? Well, yeah, as you're saying, basically, Sky's already been the dominant player in this market. And I think who's the who's the major competitors in the UK realistically for them? Dizzone's not not a competitor in the market yet. And they frankly aren't. You aren't if you don't have Premier League rights and they're not going to be ready to bid for those anytime soon, you wouldn't think the BBC is a public service broadcast so they can't really be competing with ITV and Sky in the same way despite what people might often do as compare BBC and I to be together and it's understandable. But I don't think you can really say they're competing with each other. Paramount is probably the only one I would say with that channel four relationship that is now seems to be leaning into that competitive space and we don't know how much Paramount's going to lean into the competitive landscape more. But otherwise, it's the big tech companies and the big tech companies will probably be a little bit disappointed that there's a bit more muscle behind one of their competitors. But I think they're so global and scale that it wouldn't probably be a huge thing on their radar at the same time as well. The only reason they might be more important to them is if they are in the future considering to do some acquisitions themselves as some of these companies but I can't see them doing it anytime soon. Yeah, well Nick, I guess the next interesting part about the store and it's the one that we can't answer today but we will keep an eye on is how quickly some of this stuff comes because you know, is it to your point, do the current deals not offer the flexibility for the primarily to be a part of this where we have to wait until the next cycle or is it something that can be immediately implemented, you know, as early as a season or what that means. means for things like Formula One or PGA Tour, the hell, even the NFL, do they start putting that on there 'cause they've got their indesignated channels? So I think that's the one that we'll need to keep an eye on and obviously we will cover that as we always do. But that I guess is really the question is how quickly some of this stuff can get turned around. And then just for us, just see the interest of how well that can perform because I would certainly be really keen to see some of the results on that. Finally, seeing some sports that have long been behind a paywall potentially starting to be dripped that into a free-day air perspective here in the UK. - Well, I mean, it's still going to be interesting what happens from here. There's, you know, this room is that ITV and BBC have been talking also about creating a dual localized service basically to try and compete with the major big tech companies and whether that still would be on their radars. So I think there's plenty of things still up in the air and how quickly they can get a deal done to this in speculation as to whether this deal would get approved because of Andy competitive laws I can't see why that would be an issue given and all the other stuff we've been seeing in the market, frankly. But yeah, there's a lot of layers to this. You know, there's the ITV studios that have been pulled out of the ITV business that, I think they value something like a couple of billion dollars that business is alone. And it just shows how the value of, basically the value of content is so profound these days. They also have, they end up with a 20% stake in ITN, which is basically producing content for a whole bunch of broadcasters right across the globe and across the UK. So there's a lot of layers and facets to this deal. And frankly, I was quite surprised at how little sky had to pay for ITV given its proponents and prevalence. I would have thought they would be worth a little bit more than that, but hey, I don't have a few billion line around to outbid sky. So that was fair play to them for a bit out to get the deal done. Absolutely. Well, there's like I said, this is a story that we will keep an eye on and we'll keep you updated as we get more news on it. But thank you once again, everybody for joining us for this episode of Streamtimes Sports. [MUSIC PLAYING]