Tuesday, January 12, 2010

Pay more than the other guy ? Online rights valuation

In conversation with a seller of sports rights for one of the big agencies I asked him what his approach to rights valuation was and his reply was "Pay more than the other guy". This conversation was a few years back and one can only assume he passed on this wisdom to Setanta and their backers.

Another more rational approach is to look at the level of revenue the rights will generate over the term, deduct implementation costs and a margin and bid the balance.

In the online space this presents a problem - the revenues are still uncertain.

Ad funded models whilst looking good on paper do not seem to be generating high levels of income (outside of adwords) and PPV and subscription models are in the early stages.

Rights owners, and their representatives, therefore conclude that they must wait until a "Pay more than the other guy" person comes into view and get a deal done ASAP.

However - the Pirates step in at that point and fill the gap - devaluing the rights further and creating a vicious circle.

In much the same way that the Banks urgently needed / need to write down the value of their assets to reflect true value rights holders need to do the same before a generation of consumers become used to watching free live premium content on an illegal basis.