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Is the U.S. the right market for EPL to go D2C?

Avid US soccer fans prefer EPL

The English Premier League is considering launching direct-to-consumer (D2C) services in some markets. If the league were to charge the same as NFL Sunday Ticket, it could make more money in the U.S. going D2C than licensing to TV providers. However, it probably won’t happen.

EPL consider direct-to-consumer services

Richard Masters, CEO of the English Premier League (EPL), says he is open to launching a direct-to-consumer (D2C) service in some markets. He claims the league has already considered the idea:

“During the last process, we spent quite a lot of time and invested a lot of recourse in building out our expertise and capacity in ‘direct consumer.’ We considered whether it would be the right time to test a few markets and decided not to. But we are going to continue for the planning phase in the next commercial term to build out those capabilities. We were ready last time, and we will be ready next time should the opportunity arise.”

Mr. Masters is willing to consider D2C services if they generate more revenue without jeopardizing existing earnings.

EPL TV rights worth $4 billion a year

Television delivers a great deal of value to the EPL. The league earns £3.1 billion ($4 billion) a year in TV license fees, including £1.4 billion ($1.8B) from international markets. The best way to protect such an enormous amount of money is to launch a D2C service in markets where EPL doesn’t currently have a broadcast distribution deal in place. Unfortunately, the league has deals already with all the major markets. Releasing a service in a minor market may provide an interesting test case but isn’t liable to contribute much revenue.

Could the league consider forgoing TV license revenue in a major market like the U.S. and instead go D2C and make more money?

The value of EPL in the U.S.

NBCU paid the EPL $1 billion in 2015 for the live broadcast rights to the games in the U.S., double what it paid previously. The six-year deal expires at the end of the 2020-2021 season. NBC Sports has grown the audience for EPL soccer over the last five years. For example, the audience for the average match window last season was 457,000, a 2% increase over the previous season. Since the sport has become more popular in the U.S., the league likely will be able to negotiate an extension to the deal at a substantial increase in cost.

It’s no surprise the games are attracting such a large audience. According to the Global Consult, 34.6 million TV viewers have tuned in to a premier league game during each of the past six seasons. The audience is twice the size attracted during the 2012-2013 season when ESPN and Fox carried the games.

Today, 6% of Americans describe themselves as avid soccer fans. What’s more, about half of those said they preferred EPL.

A large and growing audience suggests EPL can get another substantial increase in license fees next year. Can the league forgo the inflated TV license fees and do better going D2C?

How much EPL D2C might cost

Let us assume EPL can get a 50% increase in license fees for the U.S. rights. In other words, it will receive $375 million per year. Further, let’s assume the league can sign-up all the avid EPL fans in the U.S. In other words, about 2.5 million homes will buy a subscription.[1] To cover the expected value of a TV license deal, EPL would need to charge around $150.

However, EPL will need to charge much more than $150. It must cover costs for streaming bandwidth, technology platforms, marketing, and employees. Perhaps a reasonable estimate would be more like $300 per season, with advertising built in to boost revenue further.

As a reference, NFL Sunday ticket costs between $294 and $395 per season. In other words, $300 a season for EPL is not an outrageous ask for the avid EPL fan.

Does that mean EPL is likely to give it a try? I doubt it. It will take a while to grow subscribers to a profitable number. As well, NBC has done a great job using its TV channels to promote and grow interest in the game. EPL will not have the same advantage. Finally, soccer fans are liable to be angry that their favorite league is no longer included with their pay TV subscription.

Why it matters

EPL is considering launching direct-to-consumer online services to deliver its matches in some markets.

If it could capture the avid EPL fans with a $300-per-season service, it could make more money than licensing the games to TV.

It probably won’t do it because there are too many negatives in the move.

[1] There are 2.5 people per home in the U.S. I have assumed about 30% of avid soccer homes have 2 avid soccer fans.


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