Streaming Media
In Super Bowl week when interest in sports in the U.S
couldn’t be higher – and when the clash between the Chiefs and the 49ers is
likely the biggest single-game betting
event in US history, old media
titans are having one last throw of the dice.
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News that Disney was prepping a DTC version of ESPN were
baked into analyst predications before Christmas. Bob Iger had other ideas. He
has ringfenced ESPN’s marquee sports coverage in a digital play with erstwhile
rivals at Fox Sports and WarnerBros.Discovery into a mega sports streamer, due
to launch this year, though with no app or brand name in sight.
That Disney hasn’t announced it has ditched plans for a
standalone EPSN digital service is just one of a hundred questions thrown up by
the move.
Nathan McAlone
of Business Insider said it “truly represents an existential
threat to cable TV” and “an acceleration of cord-cutting into a real death
spiral.”
The union is judged “a
major disruptive play” by PP Insight analyst Pablo Pescatore who thinks
timing of the announcement may be in part to put pressure on other sports
rights holders not party to the pact: Paramount and NBCU.
Each company will
own one-third of the new joint venture, have equal board representation, and
license their sports content to the joint venture on a non-exclusive basis. The
service will also have a new brand with an independent management team. There are
no details as yet on revenue share although Wells Fargo analyst Steven
Cahall thinks this likely to be split along lines of the rights contributed. He
estimates this as around $20 billion total, including Fox/Disney/WBD at 30
percent/50 percent/20 percent.”
Pricing is a hotly debated topic and one that the owners of
the mega-app have to get right, or risk pricing consumers out of the game. Variety
has a lot of speculation on this although there’s general agreement that $50 a
month is not unreasonable. Subscribers would also have the ability to
bundle the product with other services such as Disney+, Hulu and/or Max.
And doubling down on the bundle is what this is. As
Pescatore points out, “For many,
aggregation is the holy grail, and it is evident that we are returning to [cable
TV’s] big bundle being offered via the
Internet. This has the noted benefit of being a far simpler model for the
consumer to understand. Consumers have had enough of signing up for multiple
services, paying for different subscriptions, and downloading a slew of apps.
This is especially
true in sports, Pescatore adds, which
is one of the few genres driving sign-ups. “While competition seems to be healthy, the battle for rights and
subscribers is leading to a hugely fragmented landscape. Many companies have
made huge gambles, which will take many years to come to fruition, let alone
think about making a profit.”
MoffettNathanson analyst Michael Nathanson called
the venture “the skinny sports bundle we’ve been waiting for,” adding, “It
seems to us this is a long overdue repackaging of linear’s core content that
strips out the bloat of non-exclusive content found cheaper elsewhere.”
His major caveat was that
this bundle also excludes each of the company’s news and general entertainment
networks, pointing out again that pricing will be key.
Pescatore thinks
it all feels “a slightly defensive
move” that reflects the massive
shift towards streaming. Unless Disney or WBD swoop to acquire AppleTV
then rights to the MLS are tied up for the next decade. Netflix also shelled
out $5bn to own WWE rights as it seeks to build its own live sports subs base.
Huddling together to form economies of scale and share the
burden of increasingly expensive sports rights may be the last resort for
legacy media which simply do not have the deep pockets nor non-media revenue
generation of Big Tech like Amazon, Google or Apple.
“Deals such as this
represent one of the key routes available to providers to reduce fragmentation,
reduce risk, and take greater control,” he says. “There is a huge focus in the US industry on
cutting costs and driving greater efficiencies to improve margins for the year
ahead. We can expect more bumps ahead. We can also expect other companies and
markets to follow developments closely with a view of replicating it in other
territories should it prove to be successful.”
Dubbing the venture “the Hulu of the sports world” George
Salazai of The
Hollywood Reporter noted that how such A list marriages rarely end well.
All the partners need to be aligned on
on
strategic and financial goals, and then there are the technical mechanics of
rights management, data analysis and customer
management to resolve.
“So will the sports vehicle end up working much differently
than Hulu which started as a streaming venture only to end up with a deal for
Disney to become the sole owner?” Salazai speculates.
The American Gaming Association (AGA) expects 26% of US adults will bet on the Super Bowl this Sunday for a combined total of $23bn.
Rights holders as well as sports federations view sportbooks
as the keys to the kingdom. As UK paper The
Guardian noted, ESPN just published
a lengthy feature about the NFL’s less hostile outlook
on sports betting. EPSN surrounded the story with links to analysis and advice articles for
gamblers. A link to the ESPN
BET sportsbook is “prominently” placed just below the latest scores on ESPN.com. Last year ESPN agreed a $2bn deal with a
gaming company, Penn Entertainment, to launch the branded sportsbook.
While the Chiefs and 49ers face off at the Allegiant
Stadium, the Vegas-ization of live sports streaming has barely touched down.
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