ESPN, FOX, WBD Product Just Another Virtual in Crowded Entertainment Marketplace

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ESPN, FOX, WBD Product Just Another Virtual in Crowded Entertainment Marketplace

ESPN, FOX, and Warner Bros. Discovery (NASDAQ: WBD) recently announced the formation of a joint venture and plans to roll out a new sports streaming service comprised of the content on their respective linear networks, and ESPN+, this fall. Some observers have suggested the move will have “significant ramifications on the future of TV sports” and “upend an already rapidly shifting media landscape.”

Don’t count on it.

“I’m not sure why there’s been this incredible overreaction [to the announcement],” Adam Symson (president and CEO, The E.W. Scripps Company) said. “As long as these networks follow rules around antitrust and collusion, which I’m sure they will, it’s [just] another virtual MVPD in an already very crowded entertainment marketplace.”

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News of a new sports-centric virtual is less a cataclysmic moment and more like another step in the fragmentation of the TV landscape.

Despite speculation to the contrary, the widely discussed partnership is unlikely to have any impact on future rights negotiations or the amount of revenue sports teams/leagues take in.

“This joint venture is not going to be bidding for rights,” Symson said. “Nor does [it] materially change the amount that the [three] networks can afford to [each individually] bid against big tech for the rights.”

Of course, the tech companies have not yet shown a propensity to compete for live rights that the linear networks have wanted.

That’s because “without broadcast and local affiliates to actually underwrite the acquisition of sports rights, D2C [streaming doesn’t] make sense at all,” Symson said. “That's why you've seen Netflix be smart about moving into sports.”

The emergence of new virtual that includes many of the linear networks that carry sports, including ABC and FOX, might appear threatening to station groups. But Scripps welcomes it.

The real battle being wagered amongst consumers is not between linear and streaming, but between “live versus on demand and asynchronous,” Symson said.

The latter is much less profitable for broadcasters.

So, “any product that comes to the market, that supports [live] linear television [and the bundle], whether it's delivered over coax [or cable], fiber, [or] satellite, is a welcome development,” Symson said.

Especially one that targets those currently outside of the ecosystem, as The Walt Disney Company press release stated the new platform would.

Scripps’ president and CEO has been assured by “a top Disney executive” that local broadcast affiliates will get carried along with the service, and that the station groups will be compensated, as they are with existing vMVPD partners, for that carriage.

“The intention is for the exact same arrangement,” Symson said. “Each company [will maintain] an arm's length negotiation with this product for the distribution of its signals, and for the local station to be the [affiliate] that [the subscriber] would receive [OTA] locally.”

That means subscribers to the yet-to-be-named service will get all the programming and content that airs on those FOX and ABC stations, not just sports (think: local news, network primetime).

It’s far too early to know how successful this new offering will grow to be. But one can look around the industry and get an idea for how large the potential market might be today.

“Almost all of the virtual MVPDs initially recognized the value of live sports and led with [it] as the consumer proposition to try to drive their business,” Symson said. “Fubo TV has essentially stuck with that premise.”

The service reported having less than two million subscribers in November ’23.

“While the economics that this joint venture may be able to operate with, because of the ownership of the content, will be better than that [of] Fubo, and maybe therefore the price point will be lower, [the offering] will also be decidedly less complete than Fubo or YouTube TV, which has north of 8 million subs,” Symson said.

Of course, it has taken the Alphabet subsidiary seven years to develop that following.

The JV has yet to announce the price point for the service. Speculation exists that it will be between $35-$45 with Pay TV distributor cooperation. Without Pay TV on board, the unbundled price would almost certainly have to be north of $50.

Some sell-side analysts have questioned why FOX would participate in an offering that could, in theory, contribute to the erosion of a pay-TV ecosystem.

“They are concerned [the offering may] negatively impact the network affiliate model or linear television through traditional Pay TV, [and accelerating its decline would be] like a self-inflicted gunshot wound because they need the money to pay the bills,” Symson said.

But the plan looks to be focused on preserving linear, and it’s hard to imagine the new streamer having enough sports, regardless of cost, to significantly alter consumer behavior, anyway.

NFL fans without CBS and NBC would have missed nearly half of leagues’ most-watched games during the ’23 season. They would have had to bolt on Peacock and Paramount+ (or plug in a digital antenna) to see the balance of those matchups.

A similar issue will occur during March Madness. While the JV will carry games on TBS, TNT, and TruTV, those on CBS will be excluded.

The Scripps executive hopes the new sports streaming service might consider adding ION (think: Fri. night WNBA, Sat. night NWSL), and/or some of its independent stations in select markets where they control local big four broadcast rights, as it builds out its content library.

In addition to the retransmission fees gained, more eyeballs would equate to more advertising revenue.

That’s not to say there isn’t value in the offering, that it will fail to gain traction, or that it isn’t a positive development for the linear networks. It should be additive, especially since it can be bundled together with Disney+, Hulu, and/or Max.

It just seems misguided to refer to any of linear establishment as a ‘big winners’ at this point. Most are just trying not to lose.

Strategically, this JV looks like a necessary step in a process that eventually leads to a solution.

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