Rebundling Sports in the US

Rebundling Sports in the US

Interesting news in the US, where Disney, Warner Bros Discovery and Fox have announced a new as-yet-unnamed streaming service that will combine all their sports offerings into a single subscription.

Combining the resources of ESPN, ESPN2, ESPNU, SEC Network, ACC Network, ESPNews, ABC, Fox, FS1, FS2, BTN, TNT, TBS, truTV and ESPN+ into a single streaming place, the idea is that they can reach “cable-nevers” – those generally younger viewers who have never taken out a cable subscription. But this would also allow a way to reach “cord-cutters” – those who’ve cancelled cable because they get all their TV via the internet.

All these channels are of course available on cable, and most regular cable packages would include them. But many of them do not currently have pure streaming outlets. For example, if you love to watch the NFL which has its rights packages shared between CBS, Fox, NBC and ESPN (as well as Prime Video), only CBS with Paramount+ and NBC with Peacock, have streaming options for those who cannot or don’t want to watch broadcast television.

If you want to watch the Sunday Fox NFL games via streaming, you’re basically out of luck (with one key proviso that I’ll come to). The same is true of ESPN which does offer ESPN+ as a streaming product, but that excludes the main ESPN channel where most of the major sports are broadcast including the NFL and NBA.

The reason for the lack of streaming options to date has been a combination of propping up the very profitable cable TV model, and the fact that the contracts with cable operators are designed in such a way as to protect the most valuable programming from being offered via non-cable alternatives.

But both of these elements are breaking down.

The number of cable subscribers continues to drop year-on-year, and shows no sign of return. Meanwhile, TV providers have begun offering their premium programming via their streaming services because they have to, searching for loopholes in their agreements with cable operators. Hence, CBS and NBC have big NFL games on their streaming platforms regardless of what the cable companies think. And recently we’ve seen Warner Media Discovery begin to put news programming from CNN and sports programming from TNT and TBS into its Max streaming platform.

The operators basically have to put up with this, because if they completely fall out with a supplier, then they’re forced to remove big chunks of their overall offer. Last autumn, Disney and Charter had a stand-off just as the NFL season was getting underway, which saw ABC and ESPN come off Charter for a period. In the end, a deal was done that included Charter providing the ad-supported version of Disney+ to its customers.

For a US sports fan – particularly a younger fan who might not subscribe to cable TV – following sport on TV has got complicated. Some games are available to stream, but as we’ve seen Fox and ESPN games aren’t. Sports carried via Warner Bros Discovery channels like TNT and TBS have just begun to become available on Max, for which at some point, an upcharge will be introduced (it’s introduction has been delayed). Peacock has NBC’s sports including its Olympic offering and Premier League Football, while Paramount+ has CBS’s sports including UEFA Champions’ League.

In the cable world, a subscriber would have got most of these with a $75-$100 a month bundle. OK – not the deeper sports offerings that the likes of Peacock, Paramount+ and ESPN+ offer, but most big games that the average US sports viewer wants to see.

By some accounts this new Disney-WBD-Fox offering will deliver 50% of all US televised sport and around 75% of the “big” fixtures.

There’s also the piracy issue, which is perhaps growing in a world where streaming has gotten harder.

At the moment in the UK, sunset is around 5.00pm where I live. If you go for a walk in a suburban area just after sunset this Sunday when Aston Villa is playing Manchester United in the 4:30pm kick off, have a brief non-invasive look through some front windows. With 65″ TVs it’s not hard. If the household is watching the football, then try to see the on-screen graphics which can help identify what source of football the household is watching.

In the UK, the two main rights holders, ignoring Amazon, are Sky Sports and TNT Sports, and they each have their own distinctive on-screen graphics packages that you will recognise if you’re a regular viewer. But the “world feed” tends to use generic “Premier League” branding which looks and feels different. And because it’s not available in the UK legally, if you see someone watching a game with Premier League’s own graphics, it more than likely means they’re watching a pirated feed from somewhere else in the world. The feed may or may not include English language commentary.

Dubious Android TV boxes are widely available and come preloaded with illegal services and streams to watch these fixtures. And these are much cheaper than legal subscription services.

It’s hard not to imagine that the same isn’t true in the US with younger, more tech-savvy viewers finding feeds to watch streams if it’s too hard (and too expensive) to seek a legal recourse. So piracy must be on these operators minds too.

But there are lots of other outstanding questions.

At the top of this is the price. There’s a tricky balance to strike here.

Too cheap, and existing cable customers might just start cancelling. $30 for a sports streaming package might be quite appealing versus a $75 cable bundle.

Too expensive, and you price out younger consumers. Sports leagues do want to reach them to future-proof their sports and the value of their sports rights (cf. cricket in the UK who for years seemed not to care about their future viewers and players by just taking the biggest cheque on offer).

There are also basic economics you have to look at. Sports rights are expensive and not going down any time soon. With Apple and Amazon in the mix, the even Netflix recently striking a deal with the “sports-adjacent” WWE, there are other parties at the table. Indeed ESPN and WBD are both in the mix for the next round of US NBA rights which are going to see a decent jump in their overall valuation.

So the price set has to be economic. In a world where there were 100 million cable subscribers each paying, in effect, $7 a month for ESPN, regardless of whether they actually watched it, that was an amazing deal for ESPN and its owner Disney. They have advertising revenue on top don’t forget. And ESPN wasn’t optional – the deals that Disney and WBD’s predecessors did ensured that everyone got their premium sports offerings. Cable companies weren’t allowed to offer, so-called “skinny bundles” that excluded some of the pricier channels. That’s in complete contrast to a market like the UK where sports has always been a bolt-on sold on top of a general entertainment offering. Of course, when a channel like ESPN is optional, plenty opt not to take it, and that means that the price needs to go up for those who do if the same margins are to be maintained. After all, sports rights are not charged on a per-subscriber level. You pay the same price for a package whether you 100,000 subscribers or 100 million!

But while that $7 monthly ESPN cable carriage fee may have crept up to $10 a month, the number of cable homes is dwindling and is probably below 70 million now. So cable is now in the managed decline era. You can try to eke out bigger fees of the ever-decreasing number of subscribers, but that’s not enough.

Hence the reality of a streaming future.

The question then with regards to this is whether offering the bundle hastens that along. Because until now, cable’s big advantage over stream was live. Live news. Live sport. Live entertainment.

And as streaming becomes capable of handling live, and contracts include it more, then that final advantage goes. You end up with a customer base that is aging (or lives in rural areas where IP offers aren’t attractive) and therefore dying – literally and figuratively.

But the one other thing to add to this mix has been the emergence of the “vMPVD.”

In the world of television, cable and satellite companies that offer bundles of channels through their systems are known as Multichannel Video Programme Distributors or MPVDs. In recent years we’ve seen the rise of Virtual MPVDs (vMPVD). These distribute bundles of channels via IP rather than directly via cable or satellite. The consumer just gets a small puck or stick to plug into their TV and they connect it to their WiFi or ethernet and they’re off to the races. In the US, the big two of these are Hulu TV and YouTube TV. But there are others like fuboTV who leant into sports particularly, but still basically is just a vMPVD.

You pay a monthly fee – now around $72.99 for the cheapest YouTube TV offering – and you get access to basically the same set of channels that your cable operator might have sold you: ESPN, CNN, Fox Sports, and so on, as well as all the network TV channels.

In this context it means that a viewer who pays $72.99 to YouTube TV today, already gets nearly all the major sport that this Disney/WBD/Fox streaming service would offer. There are some differences since ESPN+ would not be included, but most of the major sports are carried on the broadcast ESPN channels. And a YouTube TV subscriber also gets access to the broadcast NBC and CBS sports that are not included in this new offering. Again, Peacock and Paramount+ both have exclusive streaming-only sports offerings.

In terms of pricing, that means the new package can’t really cost as much as $73 since there’s a better deal out there to be had at that price.

In truth, it was going to be lower than that. But again, it’s finding that balance between charging enough that it make financial sense with the rights, not going to cheap that you cause lots of people to cancel their pricey cable bundles, but not charging so much that you price out younger viewers entirely.

My gut feel was that $49.99 would be the price. But I think that might still be a bit steep, and they could start lower. However, if they do, they’ll have to ramp it up quickly after they get their initial sign ups. Because sub-$40 doesn’t seem to make economic sense. Not in a world of escalating sports rights.

And of course there will be bundles: Max, Disney+/Hulu, whatever. You can expect upsells that I’ve no doubt will get consumers fairly close to that $75 mark in fairly short order. Who said the cable bundle was dead?

One other curio here is that prior to this week’s announcement, Disney had already said that they’d be offering an ESPN as a standalone streaming offering. And seemingly, that’s still the case, with it due to launch in late 2025. But this new combined offer is due to arrive this autumn which is quite punchy since small things like the tech platform have yet to be determined.

The US TV sports market is very messy at the moment, with the demise of cable. There are also the regional sports networks that have tended to own local-market rights to teams within that marketplace. Some of those companies have been collapsing because they too rely on hefty cable fees to support the cost of their rights. And then the leagues themselves have various local blackout rules to support local teams. If I live in New York, and support Dallas, I might find that a Dallas game is not available locally because it’s in opposition to a game featuring a New York team, and the league would prefer that the local team is supported. But this whole area is complex, and the rules do change. Plus offerings like the NFL Sunday Ticket skirt some of these rules allowing those with deep enough pockets access to games otherwise not available to watch locally.

Some of the commentary I’ve seen and read surrounding this new launch seems to have been a little confused. This offering is basically a slightly slimmed down version of the kind of vMPVD services like YouTube TV that already exist. Except with all the non-sport stripped out.

It might have been smart of those involved to mention it bit more in advance to the leagues whose rights they’re bundling up. But

Image at the top generated by Adobe Sensei Generative AI with the text prompt: “a room full of televisions each showing sports in the style of anime