There Is A New Sports Bundle In Town

For legacy media, it will make things worse.

February 09, 2024

ESPN + Warner + Fox announced a streaming sports bundle that aggregates professional and college sports rights. 

Think of this as a one-stop sports shop.

Paramount (CBS Sports) and Comcast (NBC Sports) were left out.

For some, this is a rational strategic move.  Less so, for the rest.

Please read Media - From A Franchise To A Business for background on how Media economics have deteriorated over the years.

The problem for most standalone streaming services is high churn.  The economics are even worse for standalone sports streaming services due to inflated Sports rights. Think about it this way. NFL game rights bring subscribers from September – January but what is the incentive to stick around year around?  NBA rights are split between TNT and ESPN/ABC and do not have the subscriber stickiness of the NFL.  Baseball only has regional allure.

Source: Business Insider

In comparison, the Cable bundle, in its glory days, had a monthly churn between 1-2%.

Despite Paramount and Peacock’s efforts to add NFL games to the streaming service to boost subscriber counts, the stand-alone economics of both Peacock and Paramount streaming are decisively negative.

However, a joint venture that pools sports content from the NFL, College Football, NBA, March Madness, NBA Playoffs, MLB, NASCAR, and other college sports, through a combination of sheer volume and seasonal diversity can minimize churn.

Assuming a reasonable pricing plan, this sports bundle will find a big following from sports households.

However, what remains to be seen is how will this sports streaming service affect the Cable bundle.  Will it accelerate chord cutting?

Lachlan Murdoch, the CEO of Fox, when asked, said the following:

The key market, the market that we will be driving towards is, is the market that sits

outside the sports fan, who sits currently outside of the traditional pay TV bundle

today, and there's tens of millions of them. So, we are very confident that this is a

large market and a large opportunity that we can address without undermining the

traditional bundle.

Source: Fox 2Q24 Earnings Call

Lachlan answered the question to placate his distribution (cable) partners. The reality is quite the opposite. 

The Cable bundle has been disintegrating for the past decade.  The inflation in sports rights increased the overall price of the bundle and made it unaffordable for non-sports households.  Most chord-cutters have been non-sports households who replaced Cable with a combination of Netflix, other streaming, and social media entertainment. 

A majority of remaining Cable subscribers are sports-fans. 

Chart: No.Of.Annual U.S. Pay TV Households

Source: Statista

The new sports streaming bundle will result in accelerated chord cutting.

Bob Iger, CEO of Disney, when asked gave a straightforward and honest answer. 

Source: Disney 1Q24 Earnings Call

There is a new sports bundle in town. For legacy media, it will make things worse.