Background and Challenge
A major professional sports league was looking to optimize the opportunity for a direct-to-consumer (DTC) digital offering, as the digital rights to flagship video assets were coming back to the league. The avidity level of the fans guided viewing behavior and added complexity to addressing how content best fits together. The league needed to address a few key strategic issues:
- Was the potential opportunity of a DTC offering sufficiently sizable to warrant the investment?
- What would the impact of a DTC offering be on traditional distribution?
- What are the pros and cons of going direct to fans vis-à-vis current distribution partners?
Underpinning the various detailed key questions was how fans — specifically the younger generations, who exhibit a higher propensity for cord cutting or not connecting in the first place — would react. Would this service ultimately represent incremental viewership, or would it cannibalize viewership across traditional platforms?
L.E.K. Consulting was engaged to help the league predict the impact; understand how to position and price a DTC offering, and how to fit it with the current portfolio; and gain insight on how to enter negotiations with current partners.
Approach and Recommendations
We developed a multipronged consumer research program centered on choice-based simulation of the purchasing path for all fan segments, to evaluate the following:
- Highest utility content types and high-yield content combinations
- Optimized price levels for both revenue maximization and highest penetration levels
- Level of risk for the traditional distribution ecosystem based on fan behavior
- Quantification of overall opportunity
We employed a range of tools to map stated behavior to real expected outcomes, and to validate the impact on the business. We calibrated our findings by evaluating existing products in the market to help refine consumer expectations for pricing, subscription products and market alternatives.
Ultimately, we articulated:
- The offering that would resonate most with the target audience
- How this offering would change consumption habits for different fans
- The total steady-state potential for the proposed service
Where we did find risk of cannibalization, we provided a detailed benefits analysis (e.g., revenue from the new offering would outweigh loss in rights fees) as well as opportunities to minimize the impact.
L.E.K. helped the client co-create a DTC strategy for the product. Armed with supplemental insights on the ecosystem impact, the league was able to determine this was an initiative it wanted to move forward with, and gained an unambiguous, objective view of the impact to facilitate decision-making at all levels.