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“Could there be any more questions about this new sports streaming service?” – Chandler Bing, interpreted by the late Matthew Perry
There's nothing that takes over the media world faster than the latest shiny object, and nothing has been shinier in recent weeks than the newly announced sports streaming package from Warner Bros. DiscoveryWBD, Fox and Disney. I totally get it – sports is the dominant media property between record Super Bowl ratings, AmazonAMZN paying $120 million to stream an NFL playoff game next year, and the upcoming March Madness. Rational rebundling certainly makes sense for many consumers in our crowded streaming market (I've been writing about this for three years). On the other hand, if I may, I have a few questions about this particular offer.
Who is running the show?
One word – governance – has been a major obstacle for many joint ventures in the media world, from the broadcast network's unrealized Nielsen competitor to Excite@Home to Canoe Ventures and Hulu before Disney took control. What does the board look like? How much power will the CEO have here to make decisions in the best interests of the partnership that might conflict with those of all individual partners? Will “Sports Hulu” have an entirely new and independent staff? Will it rely on delegations from the three owners? Who negotiates with the professional and college leagues, distribution platforms, and advertising and marketing sponsors? And oh yeah, what's it called?
Who gets what?
ESPN now has a far more dominant presence in sports than TNT, TBS or Fox's FS1 or FS2, with subscriber fees and advertising revenue commensurate with that status. And not all sports rights are created equal. How do you distribute ownership and revenue share, taking into account the different brands, different investments in sports rights, viewership and brand loyalty? When a new subscriber joins, do you need to “allocate” fees based on where the subscriber is from and why they signed up? Break down the algorithms.
What's in here?
We don't yet know what specific sports offerings will be included in this package and what the mix between live streaming networks and non-live sports programming might look like. WBD CEO David Zaslav said it will include 14 partner-owned linear networks aimed at cable-free households. But will cord-cutters and cable “nevers” jump at the chance to get in or out of a large group of streamed 24×7 channels? Will subscribers also have access to the library of classic ESPN and HBO sports documentaries? Do they get gymnast classics with sports themes (similar to this idea)? How about Bleacher Report content? Which sporting events (the Super Bowl? All NFL?) are off limits for this package? Will the partners produce new content together or leave this entirely to the partners' studio and on-site production teams? How will it work with (or compete with) its owners' individual streaming services, including the highly anticipated new ESPN streaming app?
What will it cost?
Underneath any wording, there will be a lot of content and a lot of revenue expectations from the owners of this new service. How much will it cost the consumer? NESN360, the streaming app from the owners of the Boston Red Sox and Bruins, charges $30 per month, and we don't know how many subscribers they have (have you watched the Red Sox in recent years?). Early indications are that “Sports Hulu” will cost between $40 and $50 per month. Will even serious sports fans pay that much for a service? What if you already have a small video package like YouTube TV or traditional cable – can you get this for free or at a discount? The streaming business is already struggling with the increasing problem of “series churners”: people who sign up and cancel their subscription within a few months. The share of series churns among all streaming subscribers increased from 6% to 22% from 2020 to 2023. At a super-premium price point, how do you prevent churn when the calendar focuses on sports with diverse fan bases?
Are you ready to rumble?
There are too many challenges here to take on one-on-one – you have to play a lot of zone defense. How well are the partners vaccinated before an antitrust investigation? Given the size and importance of these media partners and the centrality of sports to the future of free over-the-air broadcasting, one has to assume that the Biden administration will have something to say about the creation of this venture. And if there were another Trump presidency, would you want to rely on that administration for support? There is already one lawsuit from skinny bundler FuboTV and more may follow. How will outside media companies react to ParamountPARA and NBCUniversal, not to mention NBCU parent ComcastCMCSA? How prepared are you for Amazon and AppleAAPL to move forward with their acquisition of sports rights? And perhaps most importantly, how will the NFL, reportedly caught off guard here, react? WWRD? What will Roger do?
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Howard Homonoff is an expert in driving growth in traditional and digital media companies. Howard has worked with global clients such as Comcast/NBCU, Fox Cable Networks, Warner Bros. and Procter & Gamble, innovative, progressive TV companies such as Cadent, and advertising industry clients such as the Association of National Advertisers and the 4As. In addition to his work at Forbes.com, Howard is an adjunct professor of media management at The New School and a senior fellow at Columbia Business School's Institute on Tele-Information (CITI). His background also includes: * Building and expanding PwC's global entertainment, media and communications advisory practice. * As General Counsel and VP of NBCU Cable Networks, CNBC Strategic Ventures, Howard was responsible for profit and loss management of early-stage businesses including web-based streaming media, broadcast syndication, interactive television and video, and helped launch digital cable service CNBC World. * Counsel to the U.S. House of Representatives subcommittee that oversees the communications and securities industries. Howard is a graduate of Cornell University and New York University School of Law. You can follow him on LinkedIn and Twitter (@howardhomonoff).
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