Sport Broadcasting Analysis Report

This report delves into the intricacies of sport broadcasting, focusing on the value chain, vertical integration, and the impact of digital media on audience engagement. It analyzes the Australian Football League's broadcasting strategies, advertising revenue models, and the role of social media in e...Read More

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Contents
PART A: Sport Broadcasting Value Chain and Vertical Integration..............................................3
PART B: Broadcast Analysis and Valuation Task..........................................................................7
PART C: Sport consumption.........................................................................................................10
References......................................................................................................................................14
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PART A: Sport Broadcasting Value Chain and Vertical Integration
The sports industry in Australia is huge. Australians are avid followers of sports and the most
viewed television programs in the Australian television are all sporting events. The variety of
content that has flooded the media market in the past few years is enormous. The latest
technologies have dramatically changed the way people are receiving the audiovisual content.
The barriers to enter and exit the media market are at an all time low. Vertical integration id
defined as the expansion of business operations into different levels of the supply chain for the
same process. In the broadcasting and media industry, vertical integration can be explained as the
ownership of the broadcaster and the distributor by the same entity. Broadcasting company is a
company providing content broadcasting services and the distributor in the media industry is the
provider of content to the consumers. When a business organization is in control of the
broadcasting and distribution of content, it is known as vertical integration in the media industry.
The sports broadcasting value chain is demonstrated in the image below:
(Suhendra, 2013)
Figure 1: Value chain for media industry
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The above value chain is the entire path that a sports program has to cover in order to reach the
customer. The technologies like Cable, DTH, HITS, IPTV, Live streaming over the internet, etc.
have considerably shortened the value chain. With simultaneous production and consumption of
the programs and sports events, it has also reduced the value chain to just a few levels. Vertical
integration is generally promoted and appreciated as it lowers the cost of broadcasting. It results
in higher productivity for the media industry and improves the coordination between the levels of
the value chain. In this section, the impact of vertical integration in the context of sports
broadcasting has been assessed (Suard, 2017). There are both advantages and disadvantages of
vertical integration. The traditional sports broadcasting methods have observed a sharp decline in
the audience. People have greater choices available and have multiple ways in which the sports
content reaches them. The cable, broadband, satellite Tv and mobile internet have influenced the
media industry. With the content available free of cost over the internet, people are not willing to
pay for it. The Australians are enormous consumers of sports events and event broadcasting. The
1956 Olympics had introduced the television in a majority of Australian homes and the sporting
events continue to be the most watched content on the Australian Television. The convergence
caused by vertical integration has caused some dramatic changes in the industry. This has
impacted the quality of services being provided, the costs associated with broadcasting, the ease
of entry in the market, the barriers to exit, the switching costs that a customer has to bear etc. It
majorly reduces the barriers an organization has to overcome to enter a market. It has added
uncertainty in the market and made the broadcasting an even more coordinated process (Hume,
2017).
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The television industry was divided into three eras by Tordeas, namely the broadcast era, cable
era and the digital era. The Broadcasting Services Act 1992 by the Australian Parliament
contributed to the management and handling of all regulation and ownership issues of the media
in Australia. It still governs most of these issues and there are several amendments that have
been brought about in this act. The pre integration era of television broadcasting was more
complex. The Sport-television relationship model by Shilbury simplifies the explanation of this
relationship with the sports agencies being the producers of the service and the program reaches
the consumer by various ways as per their accessibility (Hanssen, 2009).
The vertical integration is a result of merger of organizations. It provides the organizations with
better control and access to the delivery of services in the media industry. To study the case of
the Warner Bros which is a media house owned by Time Warner, is carried out vertical
integration by purchasing the companies at all levels of the media supply chain. This has enabled
them to tap into the unexplored global markets and maximize their profits. They single-handedly
produce, distribute, market and exhibit the audiovisual content (Rodrigues et al., 2006). The
vertical integration helps the organizations to have complete autonomy and control over the
entire media value chain. They have greater reach and brand value as compared to smaller
independent organization performing the same tasks. They are perceived better by both the
audience and the organizations that they perform business with. The biggest example for this is
that Warner Bros. gets the maximum airtime on the premium channels like HBO, ABC, NBC,
etc. Since a vertically coordinated organization is better off financially, they have a greater
ability to experiment and take risks which further improves their performance. The cost of the
activities to be conducted by the media houses tend to get consolidated as they get vertically
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aligned. When the activities across the value chain are carried out by multiple organizations,
multiple marginalization takes place. Multiple marginzalization is when each involved party
quotes a price that helps them make a profit above the marginal cost. In a vertically integrated
organization, multiple marginalization is done away with and this helps in providing the end
users with the product or service at a lower cost. This is a win win situation for all. In the
television industry, the organizations have to bear multiple costs at multiple levels of the value
chain. These costs include licensing costs, marketing costs, intellectual property rights payments,
advertising costs, etc. Since a single organization is taking care of everything, it will prevent
multiple charging. The vertical integration also results in economies of scale (Hwang, 2013). The
above points suggest how the organization can save costs. The organizations are increasing the
production by decreasing the input of resources. The example for this in the media industry can
be the satellite television. The organizations incur huge operational costs while establishing the
set up for it, but this cost reduces in the long run as the output increases and eventually causes
economies of scale of the producers. Although it is mainly advantageous for the organizations to
vertically integrate the business in the television industry, there are certain disadvantages that
come with it for the industry. The monopoly in the market at times leads to closures, increased
barriers for small businesses, reduce the variety of content available in the market, price squeeze
and deteriorate the quality of content. Therefore vertical integration comes with a price for the
media industry and should be carried out keeping in mind these shortcomings as well (Smith,
2016).
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PART B: Broadcast Analysis and Valuation Task
The game that I chose to watch was the Australian Football League (ALF) match of Melbourne
vs. Sydney. The one hour viewing of the match helped me understand the different aspects of
Free to Air TV and the sports broadcasting. The pie chart below shows a breakdown of the
content of one hour of match viewing (Carney, 2015).
Figure 2: Contents of one hour of FTA AFL match
As can be understood from the figure above, 80 percent of the air time was of the match or the
sports tournament and 20 percent was the advertisement air time. The rights deal of Australian
Football League is the highest in the history of Australian sports. The average value of ALF is a
whopping $4.249 billion per season. It is a one year deal with Seven West Media and Telstra
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Match
87%
Advertise
ment
13%
Content of the viewed AFL match

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securing vital pay-TV rights for Foxtel. There were in total 8 minutes of advertisement in all
forms in the 60 minute match that I watched. These include pre video advertisements, banners
and pop ups. Arthur J Gallaghers is the Official Insurance Partner of the Football Federation of
Australia (FFA). The other partners of FFA include SABA, Donate Life, Hyundai, Foxtel,
Westfield, Tag Heuer, NAB, Bet 365 and Qantas. There was a one minute advertisement of
Arthur J Gallaghers at the very beginning of the match and there were shorter advertisements
placed at various points in the one hour of match that I viewed (Free TV Australia Limited,
2013).
A minute of support for a prime AFL match can cost an organization anywhere close to $ 80,000
as per the calculations based on their latest deal. In the grand finale, these costs go up to $
350,000. The networks airing AFL have advertising packages designed for the changing times,
which are a combination of digital marketing and the commercial advertising. There are
numerous challenges that the free to air broadcasters have to face and overcome. These include
movement of advertisers, changing advertising techniques, illegal downloads etc. The biggest
challenge that they face however is about driving a live audience by keeping the fans engaged.,
but on the upside, these also attract a larger group of audience due to accessibility, improvement
in technology and access to faster internet. There are a number of ways through which the
advertisers and sponsors of the events can be incorporated into the broadcasts. The broadcasters
can make use of the Pay Per Click advertising for the partners that promote online shopping like
Nike, Tag Heuer, etc. In the Pay Per Click advertising, the cost of the advert is calculated by the
number of times a viewer clicks on it (McIntyre, 2016). The sponsors pay only when the viewers
click on the ad and visit their website. Another form of advertising that is commonly used for
digital marketing is Cost Per Mile or CPM. In this form of advertising, rather than paying the
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sponsors for a fixed period of time for which the advertisement is displayed, they pay for a fixed
number of times the advert is displayed on the screen. E-mail advertising can be used by the
broadcasters by notifying the subscribers of the latest matches available over the channel. They
can also make use of social media marketing like Facebook and YouTube ads, sponsored tweets,
etc. The broadcasters need to ensure that the adverts being displayed are not obtrusive and are
justified. They must not spoil the experience of the viewers and must at the same time be able to
communicate the brand value and fulfil the purpose of advertisement (Free TV, 2011). Outside
of the advertisement, the sponsors are incorporated in the broadcast in the form of promotional
merchandise, drinks, events checkpoints, social media partners, banking partners, airline
partners, etc. The broadcasters earn revenues for every time a brand is aired or displayed on the
screen. The advertising in FTA content is a complex task. Although the content is made available
to the people, the broadcasters charge for the advertisers for the promotions and advertising.
Advertising and sponsorship is the only source of revenue for the Free To Air broadcasters
(ALRC, 2015). The broadcasters need to commercialize and promote the events to attract
viewers and advertisers in order to continue with the operations. A larger audience indicates a
sharp increase in the advertising revenues. The events like the Australian Football League, which
have a mass following do not have any problem in generating revenues through the advertising.
Sports in Australia has a mass following and there are a large number of people interested in
investing and advertising in the sports events and tournaments. It is only the programs and events
catering to niche audiences that struggle to survive in the free to air broadcasting market
(Venture Consulting, 2013).
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PART C: Sport consumption
Now-a-days, Social media are considered as a complementary technology that aims to stimulate
additional engagement with users. Social media has a great impact on business as well as
industries. To maintain a branding of the business or a company one has to improve the social
media presence so that they can attract more visitors. Social media like Facebook and Twitter
have a large audience who likes to view the spots on these platforms. During a survey, it was
counted that the users have been rapidly increasing from 15% to 25% by 2018. In order to attract
the audience to watch their sports channel every team, sports association and league have created
their profile on these social media platforms (Accenture, 2014).
The emergence of the new technologies has had a great effect on how the sports channel brings
in more customers and viewers, so that they can watch their favorite players, match, teams
wherever they want irrespective of the time.
Sports are broadcasted on various tools/technologies such as television, Internet protocol
television (IPTV), Over The Top (OTT) platforms, social media to attract the audience within the
real time. But people’s emotions are directly attached to watching live sports. However, Senior
citizens prefer to watch TV rather than watching clips afterwards. Further, youth prefer to watch
it online or through the broadcasting done via the social media like Facebook, twitter etc. In this
technological era, people have moved from broadcast to the social media and this has been
clearly noticeable in the past few years (Sanli, 2011).
It has been figured out that 48% of youths like to watch the live streaming of the sports to the
social media websites such as Facebook or twitter so that they see the match of their favorites
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using their portable devices. But to increase the touch base of the viewers the company have to
stream more matches, taking care of the games people are interested with.
Social media is very effective when it comes to broadcasting the sports. Social media website,
twitter partnered with the NFL for the first time in April 2017 the make the live sports streaming.
As per the survey, approx 1000 million people can view the sports online. This will potentially
increase the viewers and the turnaround of the channel. NFL and NBA have also signed the deals
to bring the live streaming of sports programs to the social media platforms (OECD, 2013). This
has been done considering the ratings of the audience where they want the live streaming and
mostly hang out to view the sports. To reach the higher client base and maintain the branding,
channel holders should hire a professional social media manager who can apply social media
strategies to increase the fan base and collect the feedback and scores from the audience. This
will help in promoting the sports channel using the social media strategies. To try the best social
media platform and to maintain the target audience, the sports channel partner has to check the
competition of all the other social media platforms. This will help the sports broadcasting
company to invest in the right and the best way. Whilst drafting the overall target audience,
investments and the turnaround, the sports channel partner should check the demographics of all
the social media websites. That is, from which country they are getting more client base from
that particular social media website, such as Facebook, Twitter, Instagram, Pinterest, or
Snapchat. Otherwise, the company would lead to an undesired targeted audience and this may
also create an intangible value (Chia, 2014).
Consumers have the option to view the live sports and share them with their friends to view the
clips online. Also, they can view them wherever they want or whenever they want. This brings a
great challenge to the sports companies or channel holders to maintain their branding and
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customer base. Some of the available options which can be followed by the channel holders
includes:
 Providing alternative media strategies like Table Tennis England in a right way. Social
media website, Facebook has paid approx $5 million for creating the live video content
on the Facebook page. Also, Facebook has streamed approx. 15 live sporting events,
which includes USA Basketball men’s and women’s national team exhibition games and
two competitive women's football matches. Further, following Twitter and Facebook
social media website, Instagram has increased the 15 second video upload time to 1
minute, which helps the channel partners to upload videos of larger size (Cognizant
Team, 2013).
 Free OTT digital streaming on social media websites like Facebook and Twitter- The
traditional broadcasters provide the programming schedule at a fixed time which reduces
the customer interested and fan base. So, the customers would like to have a service
which is flexible in time, so that they can watch their favorite sports anywhere, anytime.
Companies like Amazon and Netflix provided the customers the facility to purchase the
DVD’s of sports games which can be seen later. But now, they are providing the
customers the options to download the videos to their mobile phones.
 Reducing the charges for paid OTT digital streaming (University, 2016).
 Giving priority to the right social media platform for the particular sport
 Collecting and using feedback from the potential audience.
 Including the advertisements in live coverage of an event (Boyle & Haynes, 2012).
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 Maintaining the balance between personal interaction with the fans and the social media
websites.
Also, to improve the client base, the channel partners can create the profiles of the various sports
players with the correct data, which can be read and shared by the audience on the social media
platforms. This will also help in creating an excitement for sports person and may help him bring
more fans online. Another way in which social media websites like Facebook and Twitter is
helping the sports channel is increasing the loyalty of fans which allows more fans to be created
by bringing up more chained connections (Lim et al., 2015). Sports person can also connect with
their fans through social media websites, by following them or adding them into their
connections which was not possible in the past few years. For example, the fan can view the
latest update or live video updated by the sports person on Instagram or Facebook.
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References
Accenture, 2014. The Future of Broadcasting V: The Search for Fundamental Growth, Available
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Accenture_Future_of_Broadcast_V_POV.pdf
ALRC, 2015. Retransmission of Free-to-air Broadcasts, Available at:
https://www.alrc.gov.au/sites/default/files/pdfs/publications/15._retransmission_of_free-to-
air_broadcasts.pdf
Boyle, R. & Haynes, R., 2012. Sport, Public Relations and Social Media, Available at:
http://eprints.gla.ac.uk/92902/1/92902.pdf
Carney, B., 2015. Reforming free-to-air broadcasting in Australia. Monash Business School,
Available at: http://www.buseco.monash.edu.au/assets/documents/reforming-freetoair-
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Chia, M., 2014. Demystifying Digital Digital Marketing, Available at:
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Available at: https://www.cognizant.com/InsightsWhitepapers/Embracing-the-Power-of-Social-
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Free TV Australia Limited, 2013. Australian Digital Terrestrial Television Broadcasting Service
Information Register, Available at:
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http://www.freetv.com.au/media/Engineering/Australian_Digital_Terrestrial_Television_Broadc
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Free TV, 2011. Free and fair: the future of commercial television in a converged media world,
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Hanssen, F., 2009. Vertical Integration During The Hollywood Studio Era. Colby College,
Available at: http://economics.clemson.edu/files/hanssen-studios.pdf
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https://www.clearinghouseforsport.gov.au/knowledge_base/organised_sport/
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Hwang, Y., 2013. Vertical Integration and Market Foreclosure in the Korean Movie Industry,
Available at: https://dornsife.usc.edu/assets/sites/672/docs/JMP_Yusun.pdf
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McIntyre, P., 2016. Advertising boss says this year a breaking point for free-to-air television,
Available at: http://www.abc.net.au/mediawatch/transcripts/1512_afr.pdf
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0370.pdf
Sanli, O., 2011. Social Media Marketing, Available at:
https://www.g-casa.com/conferences/zagreb/papers/sanli-Social-Media.pdf
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http://www.globalmediasports.com/docs/GMS-OTT-presentation-24Jun16.pdf
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