Could FIFA build their own live game streaming service?
If you are like me you could just watch soccer games all day long and be totally happy. However, if you live in the United States doing so requires multiple streaming services. I currently have FuboTV, SlingTV, Paramount+, Peacock and ESPN+ just to be able to watch all the soccer games I am interested in. I don’t pay for every single one of them, but still. And I’m sure the thought of having all FIFA soccer games under one streaming service has also crossed your mind just like me. So this article creates a theoretical construct of what a FIFA live soccer game streaming service would look like. This streaming service would encompass all soccer games under the FIFA banner at the club and international level.
Some of the questions that need to be answered are:
- How many people will buy the streaming service?
2. What will be the price of the streaming service?
3. How much would the infrastructure cost?
4. How would the clubs be paid for the right to their games?
5. How much would the clubs be paid for the right to their games?
6. What are the challenges with implementing this service?
7. What are the benefits of FIFA live streaming all the soccer games?
8. What are the negative effects of FIFA live streaming all the soccer games?
In order to answer the first three questions, we can use published Netflix financials from which we can base the projections for price, subscribers and costs. The Netflix financials can be found here: https://ir.netflix.net/financials/financial-statements/default.aspx I am using the published financials from Quarter 3 2022.
On the Regional Information tab Netflix publishes the total membership and the average revenue per member by regions. Netflix has four regions which are defined as UCAN(United States and Canada), EMEA (Europe, Middle East and Africa), LATAM (Latin America) and Asia-Pacific(APAC).
QUESTION #1: Using the Netflix financials we can estimate the number of people that will buy the streaming service. The UCAN and EMEA regions are the largest with ~73 million subscribers each while LATAM and APAC are at ~40 million subscribers each. Therefore, we can estimate that at a basis the FIFA streaming service could have ~222 million subscribers just like Netflix. Realistically it would be difficult to fully estimate how many people would buy the FIFA streaming service however at this point Netflix can be used solely as a proxy.
QUESTION #2: The Average Revenue Per Membership (ARM) can be used as the price that each subscriber would pay per month for the service given that Netflix has different price points based on the plan a subscriber chooses and location a subscriber is from. As of September 2022 the ARM for USA/Canada is ~$16, ~$11 for Europe Middle East and Africa while Latin America and Asia-Pacific stand at ~$9.
Therefore these inputs can be used for the number of subscribers and price per month.
· UCAN (United States and Canada) 73 million subscribers at $16 per month
· EMEA (Europe, Middle East and Africa) 73 million subscribers at $11 per month
· LATAM (Latin America) 40 million subscribers at $9 per month
· APAC (Asia-Pacific) 40 million subscribers at $9 per month
QUESTION #3: For the infrastructure cost of the FIFA streaming service we can use inputs from the Income Statement tab of the published Netflix financials. The Income Statement tab contains numbers for Netflix’s total revenue as well as the cost they incur in running their streaming service. Through September of 2022 Netflix had received $23.7 billion in total revenue while incurring $2 billion in Technology and Development, $1.18 billion in General and Administrative and $1.69 billion in Marketing expenses. The other expense is $13.7 billion in Cost of Revenue which is the cost that Netflix pays to license the content they stream on their platform.
The costs that are applicable to the FIFA streaming service are:
1. $2 billion in Technology and Development — This expense would entail FIFA purchasing the hardware/software required to stream live soccer games worldwide as well as the servers required.
2. $1.18 billion in General and Administrative expenses would be the staff required to run the daily operations of maintaining the streaming service.
3. $1.69 billion in Marketing expenses would need to be incurred because as you might infer with FIFA creating their own streaming service this would result in broadcasting companies around the world removing any coverage or publicity for soccer games. This is a result of broadcasting companies not having the rights to broadcast any games hence they would have no incentive to create any coverage for games. Therefore, FIFA would need to incur marketing expenses to promote upcoming games or tournaments.
Additionally, as you might also infer FIFA would need to create “atmosphere” around a game. There would need to be live commentators in different languages for games, as well as a pre and post-game show to talk about a given game. This “atmosphere” and expenses to promote upcoming games or tournaments would need to be included in the marketing expenses.
To calculate these costs however I am going to create them as a percentage of the total revenue. So these operating cost would be 1.18 + 2 + 1.69 = 4.9/23.7 = 20.7%.
As a result, with all these inputs the Total Revenue would stand at $32.2 billion and Operating Cost would be $6.68 billion which leaves $25.6 billion in Net Revenue.
QUESTION #4: The $25.6 billion Net Revenue would then be the remaining balance which would be divided amongst the clubs that would stream their games on the FIFA streaming service. However, we would need to device a mechanism to fairly allocate the money for the rights to live stream soccer games for each club. The mechanism could potentially look as follows and be based on the total number of minutes streamed by people in a game.
For example, imagine there are five games played with ten different clubs. And the same 10,000 people watch all 90 minutes of every game (just ignore extra time for now). Therefore, each game has a total viewership of 900,000 streamed minutes.
And since each game had 900,000 streamed minutes then each club also had 900,000 streamed minutes which equates to 9 million minutes (900,000 x 10) This calculation then allows us to allocate the number of streamed minutes to every club which in this concept is 900,000/9,000,000 = 10% meaning each clubs has an equal 10% share of the streamed minutes.
From there an arbitrary subscription price of $10 with 10,000 subscribers would yield $100,000 in Total Revenue. With an arbitrary $10,000 in Operating Costs this would result in a Net Revenue of $90,000. This $90,000 would then be distributed to the clubs based on their Total Streamed Minutes % which at 10% yields $9,000 for each club.
Below is another example using different inputs for the number of people watching each game. In this example the price, subscribers and operating cost remain the same therefore Net Revenue is still $90,000. The difference becomes that different clubs receive different payouts based on the number of streamed minutes.
The mechanism illustrated here has the positive aspect that it bypasses the need for FIFA or any given league to decide how to distribute broadcasting rights revenue themselves. Currently various leagues around the world distribute the broadcasting revenue evenly between all clubs or they base it on the league position for the club or how many people watch their games or a combination of all three methods.
QUESTION #5: This mechanism would then be used to allocate the Net Revenue of $25.6 billion to each club but figuring out how much each club would be paid is virtually impossible without having viewership data for all soccer games played within a year.
One idea was to use soccer game attendance data and then multiply attendance data by a scalar to get at home viewership. This idea however runs into a problem given that game attendance and at home viewership might not have a linear relationship. For example, Chelsea’s Stamford Bridge and Sheffield Wednesday’s Hillsborough Stadium both hold roughly 40,000 people but we can safely assume that on average more people are watching Chelsea games than Sheffield Wednesday’s. Additionally, this idea would entail obtaining attendance data for soccer games all over the world within a given year which isn’t impossible but a daunting task none the less.
To start answering the question of how much each club could possibly be paid we can look at how many clubs would be receiving payments and the video game FIFA 2022 is a great place to start. They provide a list of the 700+ clubs available in the game for their 2022 release. https://www.ea.com/games/fifa/fifa-22/news/fifa-22-all-leagues-clubs-teams-list#:~:text=THE%20WORLD'S%20GAME&text=With%2017%2C000%2B%20players%20across%20700%2B%20teams%20in%20100%20stadiums
Furthermore, FIFA has a list of their 211 member countries which would also need to be included in the FIFA streaming service given each member country would receive payments for their streamed games. https://www.fifa.com/about-fifa/associations
This results in approximately 900 clubs/countries that would receive payments from the streaming service. From here determining how much each club/country would receive is still all guesstimating. If we were to assume each club/country would receive an equal share, then the calculation would be 1/900 = 0.11% and then an 0.11% share of $25,607,556,000 would be $28,452,840 meaning that each club/country would receive ~$28 million in payments.
For reference below is the payment distribution for any given club/country at certain levels of streamed minutes share.
QUESTION #6: This FIFA streaming service however does come with some challenges in the effort to implement. Below are various listed in no particular order.
1. One hurdle would be the software and hardware requirements to be able to stand up a worldwide streaming service. Given I personally don’t have any expertise in such endeavor I will simply say it’s hard but obviously not impossible given that there are many streaming services available worldwide.
2. Internet Access Requirement — Given that the FIFA streaming service would require access to the internet to function people without access to the internet would be excluded from watching. This generally isn’t a problem for countries such as the United States, Canada, Australia or those that encompass Europe given they have a high percentage of their population already using the internet as shown in the map below.
The potential concern is that South America, the Middle East, Asia and Africa have low to medium internet usage while being a larger soccer viewership market than the United States, Canada or Australia.
Internet users in 2015 as a percentage of a country’s population Source: https://en.wikipedia.org/wiki/List_of_countries_by_number_of_Internet_users
1. Broadcasting companies could lobby their government to ban the FIFA streaming service.
Broadcasting companies are one group of participants in the live soccer game market that would stand to be negatively impacted. They would no longer be able to broadcast games and therefore would lose subscribers to their service if FIFA decided to go straight to consumers. This would certainly prompt many broadcasting companies to fight back against FIFA and would lobby their country to ban the streaming service through any means necessary.
2. Countries might ban the use of a streaming service for other non-broadcasting reasons. At this point of time China, Crimea, North Korea, Russia and Syria have banned Netflix https://help.netflix.com/en/node/14164. This of course can be seen as a political decision by these countries given that Netflix is an American company. However, the risk still stands for any given country to ban the use of the FIFA streaming service for any given reason which would hinder the adoption of the service.
3. Adoption of the streaming service by clubs would be hindered by the uncertainty of the revenue that each club would be able to obtain. As mentioned before without getting viewership data for every single game it would be very difficult to obtain even ballpark guesstimates for the number of people that would watch each game and the potential revenue for each club. This could potentially be alleviated by having broadcasting companies provide viewership data for soccer games from which projections could be made. However, as already mentioned broadcasting companies wouldn’t be too eager to help in this endeavor.
QUESTION #7 Once the streaming service is able to overcome these hurdles what are benefits that would be achieved.
1. Ability for all subscribers to watch any soccer game in the world that they desire within one platform. As mentioned in the intro I currently use FuboTV, SlingTV, Paramount+, Peacock and ESPN+ to be able to watch all the soccer games that I want.
2. This streaming service would allow clubs to truly compete on a global scale for viewership given that each minute of viewership is worth the same amount of money. This benefit stems from the net revenue allocation mechanism because it is implicitly created so that each club is paid based on the number of streamed minutes independent of what country the people watching the game are from. For example, a Boca Juniors vs River Plate game that is streamed 1 million minutes would receive the same amount of payout as a Real Madrid vs Barcelona game that is also streamed 1 million minutes. This occurs because the entire Net Revenue is divided based on the number of minutes streamed by each club so every minute is weighted the same no matter what club the game is for or what country the people watching the game are from.
3. More transparency in FIFA. Given that every club under FIFA would be competing for broadcasting revenue there would have to be full disclosure on how money is allocated to each club. There would have to be full documentation of the minutes that each game is watched as well as the operating costs that FIFA incurs to run the streaming service. This would allow each club to fully understand how their broadcasting revenue is calculated.
4. Furthermore, the net revenue allocation mechanism based solely on streamed minutes would eliminate any “arbitrary” choices that FIFA could take on how to allocate money to each club. As you can infer by the quotes, allowing FIFA to choose how each club would be paid can become a slippery subject given their history of bribery and corruption. So allocating money based solely on streamed minutes with each minute being weighted the same would decrease the possibility of bribery and corruption in the streaming service.
QUESTION #8: As with any choice in life there are also negative effects that the FIFA streaming service could potentially have.
1. Cause clubs/countries to play more games so that they can increase their payout given the only way to increase payout is to have more streamed minutes. This could potentially cause clubs/countries to start playing more friendlies in the off season which would add to the already grueling schedule that players have between playing games in their own league, international club tournaments and games for their country.
2. Additionally, given that clubs would want to increase the number of streamed minutes then this could cause countries around the world to increase the number of clubs within their league which increases the number of games that each club plays within a season. For example, the English Premier League contains 20 clubs therefore each club plays 38 games per season. In comparison the German Bundesliga only has 18 clubs playing 34 games each per season. This gives English clubs a total of 3,420 minutes of playing time (excluding extra time) whereas German clubs only play 3,060 minutes which is an 11% difference. This could then provide an incentive to the German Bundesliga to increase the number of clubs in their league to 20 as well to increase the total playing time of their clubs in an attempt to increase streamed minutes.
