Software is the solution: Why Diversified believes 2025 is the year of the cloud for sports production companies

By Leo Smeding, sales director of broadcast media at Diversified.

Football fans in the Netherlands have the cloud to thank when they watch the Premier League on Ziggo. Most don’t know this, of course. They just want excellent broadcast quality – and for their team to win. But Ziggo’s move to the cloud embodies something much bigger. It is a turning point for European sports production.

Cloud has arrived in sports production

In an industry grounded in hardware solutions, software- and cloud-based solutions are now a reality for tier one sports production companies. These solutions are no longer theoretical concepts confined to R&D labs or that can only meet the production needs of tier two and three players.

Sports production companies have known this advancement was coming. But over the past year, the transition to cloud- and software-based solutions has happened faster than expected. While traditional production companies have the advantage of large customer bases, they still need scalable, cloud-based production solutions to keep pace. Making this shift is a profound departure that will require companies to reinvent their business models to remain competitive.

Given the waves of change in the industry and the crowd of cloud-first competitors, I predict that in 2025, a flurry of large European sports production companies will make significant investments in modular, cloud-integrated production units to future-proof their operations.

A convergence of pressure on capex investments

How did we get here? There has been a convergence of forces this year making it more difficult for traditional sports production companies to stick with business-as-usual, capex-intensive models.

Interest rates have risen significantly since 2019, making capital market financing more expensive than pre-pandemic levels. While the European Central Bank’s fixed rates peaked at 4.5% in September 2023 [Statistica], risk premiums make the cost of borrowing from financial institutions much higher, which makes accessing affordable capital a challenge for industry players.

In this high interest rate environment, sports production companies have struggled to secure capex funding for new hardware. This, plus the fact that traditional capex investments have not been fully depreciated, is putting pressure on companies to pursue strategies focused on efficiency and higher returns, and transition to flexible infrastructure that doesn’t require massive upfront investment.

Consider too what’s happening around OB van fleets, which are critical for sports production companies to produce and broadcast live sporting events. A high-end OB van can cost upwards of €6 million today, and a medium to large production company typically owns around six vans.

Beginning in 2025, sports production companies will need to invest in zero-emission OB vans to comply with city regulations. The low return on investment associated with adding new OB vans to  existing fleets creates clear financial pressure. Even so, some see it as a strong case to move to a cloud infrastructure, which would mean that OB vans are smaller, less expensive, and have lower emissions.

Agile competitors and the urgency to act

Although sports production companies across Europe feel the squeeze of high interest rates and zero-emission mandates, there is complexity surrounding the shift to cloud-based production solutions. Moving to the cloud while old hardware investments are still depreciating creates yet another financial challenge. Companies either have to write off the remaining value of these assets or simultaneously carry the costs of both old and new infrastructure. Neither scenario is ideal.

But the status quo is not an option given the competitive market environment. We are seeing established production companies attempting to bolster their bottom lines by increasing their margins. This is a stopgap measure at best.

The reason why is simple. Competitors with agile, greenfield setups are in the market. These newcomers don’t have the burden of legacy systems; there aren’t undepreciated infrastructure costs sitting on their books. By design, they can quickly adapt to evolving market demands with cloud-based and OPEX-friendly models.

Big changes ahead for 2025

The competitive dynamics of Europe’s sports production market are a clear driver for established production companies to move to a cloud-based infrastructure with urgency.

This sense of urgency is a sharp departure from the industry’s years of hesitancy to lose the control of owning the hardware and move to the cloud. After all, there is no room for error in sports production, no tolerance for downtime, and no allowance for missing key moments – the goal scored, the finish line crossed, or the championship won.

The good news is that cloud- and software-based infrastructure offer the capability, reliability, and responsiveness that are essential in sports production. Decisionmakers at tier one companies can let go of their fear of giving up control. In fact, they must. Traditional revenue models are losing relevance. Companies can’t expect to endlessly profit by purchasing hardware, renting it out and depreciating it over the years.

Production companies’ future revenue depends on moving to the cloud, and while developing opex-focused business models. During this transition, their human expertise – the years of engineering skill that has been honed and tested in countless no-fail moments – will be a critical asset to build on. In fact, these companies’ most powerful competitive differentiator is the skills of their people. The newcomers can’t match this deep experience.

There are big changes ahead for traditional sports production companies. They will be making decisions that shape the future of the business. For those that need guidance, global solution providers have been through the process before and can be excellent resources. Instead of seeing the move to cloud as a risky loss of control, it’s time that traditional sports production companies embrace it as a way to control their own destiny.