Market Insight

Discovery takes Bundesliga to Amazon in Germany and Austria, as online sports distribution gains traction

August 17, 2017

Ted Hall Ted Hall Director – Research and Analysis, Service Providers & Platforms

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Discovery Communications, the major factual and sports channels group, has agreed a partnership with Amazon to distribute Discovery’s Eurosport Player via the Amazon Channels online subscription video service in Germany and Austria.

The deal opens up a new distribution opportunity for Discovery’s live sports content, the most premium of which is 45 Bundesliga football matches each season, featured alongside Grand Slam tennis, Moto GP and – from next year – the Olympics Games. Eurosport Player is available on a standalone basis, but carriage on Amazon Channels, which is available to customers of the Amazon Prime free shipping and digital-services bundle, puts Discovery’s sports content alongside other curated subscription video services, in what is a fledging a-la-carte alternative to traditional pay TV.

Via Eurosport Player (either standalone or through Amazon Channels), until the end of August a Bundesliga Season Pass costs €4.99 ($5.80) a month or €29.99 a year, with a Tennis Season Pass priced at €39.99.

Discovery’s live Bundesliga coverage will also be available via satellite – but not through largest platform Sky, instead SES Astra’s HD Plus, which had 2.1 million customers at the end of 2016. The two parties announced a distribution agreement in early August, making the Eurosport package – including a new Eurosport 2 HD Xtra channel that will be the home of Discovery’s Bundesliga coverage – available via HD Plus for an annual subscription of €55 and €5 per month after the first year. The new channel will not be available on Sky, where Eurosport 1 and 2 (and Discovery’s other channels) will continue to be carried.

Our analysis

Digital transformation in full swing at Discovery

Discovery continues to ramp up its digital strategy, increasing the availability of its content online and outside the traditional pay TV ecosystem. Eurosport Player, which came under Discovery ownership with the acquisition of Eurosport in 2012, is a central part of this, with Discovery making significant investments in sports content – including Bundesliga and the Olympic Games – and, more recently, boosting the service’s distribution through Amazon’s new virtual pay TV service in the UK and now Germany and Austria. A more concerted digital sports push was signalled in November last year, when Discovery announced a joint-venture with digital technology vendor BAMTech, a move made to combine and strengthen the two parties’ sports rights and streaming capabilities as part of European expansion plan.

Outside of sport, Discovery has unbundled a wider range of its content online via DPlay, a subscription video service launched in 2015, available in Italy, Denmark, Sweden and Norway. And it has made a series of other digital investments, among them a $100 million partnership with Group Nine Media and distribution partnerships with Snapchat, Chinese multichannel network VS Media and Japanese digital media company Tabilabo. Discovery’s recently announced $14.6 billion merger agreement with fellow factual channel provider Scripps is set to further strengthen the company’s position as a significant digital video player.

Prioritisation of digital platforms indicates shift away from pay TV

The path Discovery is following with its latest distribution agreements is set against a backdrop of apparent discontent with the terms of its carriage deals with long-time pay TV partner Sky, with whom it had a public dispute in January this year, before eventually renewing UK carriage with the operator. The decision to ultimately partner with HD Plus in Germany instead of Sky provides further evidence of a breakdown in Discovery’s relationship with Sky, after carriage negotiations failed to result in a deal. A legal dispute, in which Discovery successfully had a court injunction imposed on Sky to halt misleading advertising claiming that all Bundesliga matches would be available to Sky customers in the 2017/18 season, served to highlight a degree of acrimony between the two parties.

Discovery is clearly still willing to work with traditional pay TV providers where it can agree terms it considerable favourable – in Switzerland, for instance, it secured an agreement with Teleclub for distribution of its live Bundesliga coverage. But its partnerships with HD Plus and Amazon Channels in Germany show that it is prepared to eschew the major players if necessary and work with alternative partners, including digital-first players.

This mix of factors – Discovery’s increased investment in sports content, its distribution via Amazon Channels, and its recent history with Sky – raises the prospect of Discovery seeking to pull off a similar premium football move in the UK, through a bid for a Premier League package when the rights next come up for auction. It was rumoured to have been interested in making such a bid in the 2015 cycle, though the rights were ultimately shared between incumbents Sky and BT in a bumper £5.1 billion deal. As this figure highlights, the level of investment required to enter the premium football fray in the UK is significantly higher than in Germany. Discovery could bid for the cheapest package that the main rights holder (currently Sky) cannot bid for under the ‘no single buyer’ rule – but this was far from cheap for secondary rights holder BT, which paid £960 million to take it.

New frontiers for sports distribution

For Amazon, the addition of Eurosport Player, and specifically premium football, to its offering legitimises Amazon Prime and Amazon Channels as services that could become genuinely appealing alternatives to traditional pay TV – though there some way to go. Live sport is an important area of differentiation for Amazon in terms of competing with chief streaming rival Netflix. Amazon became the leading esports platform when it acquired Twitch in 2014 and has also been investing in significant mainstream sports rights. These include 10 Thursday-night NFL games each season, acquired for streaming in the US for $50 million, and, in the UK, ATP World Tour tennis events outside the grand slams, for which it outbid Sky.

Discovery and Amazon’s strategic moves represent a broader trend of sports streaming services gaining notable traction. Digital rights specialist Perform is another subscription video provider building a streaming business around sport, operating the DAZN service – which it hopes will become the ‘Netflix of sports’ – in Germany, Austria, Switzerland, Japan and Canada. And Discovery is not the only major content owner exploring sports distribution opportunities outside pay TV, with Disney last week confirming plans to launch ESPN direct-to-consumer in the US, a move that could well offset the decline in the traditional pay TV business by appealing to a wider pool of non-pay TV customers. Like Discovery, Disney also has the support of BAMTech, with the studio announcing that it would be taking a controlling stake in the streaming technology company via a $1.6 billion investment.

Meanwhile, outside of pay services, a growing online audience for sport is being nurtured on a free-to-view basis by other major digital players, including YouTube and the big social networks. Facebook, through content including Major League Baseball games and Major League Soccer matches, and Twitter, through US PGA Championship golf, Wimbledon tennis clips and a range of more niche sports programming, have started building up their sports offerings – though primarily on a non-exclusive basis. Sports fans are very much a target of these companies – which continue to ramp up their video-centric strategies – particularly in the younger demographics that advertisers value highly and are finding increasingly difficult to reach via traditional TV. With global scale, huge and typically highly-engaged audiences, and growing spending power, the major social networks are well-positioned to become serious contenders in a sports broadcasting sector that is fast expanding online.

Research by Market
Media & Advertising
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