The streaming revolution entered a new chapter to start off 2024 with a giant partnership of otherwise competitive media companies. It was announced on February 6 that Disney, Fox, and Warner Brothers Discovery would strike a joint venture by launching a new platform that will house one of the largest portfolios of sports networks – ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, ABC, FOX, FS1, FS2, BTN, TNT, TBS, truTV, as well as ESPN+.
No release of name or cost. The partnering brands currently control ~85% of sports rights giving this new partnership a tremendous advantage in terms of share of sports viewing over Paramount (CBS, Paramount+) and NBCU (NBC, Peacock). Historically, the broadcast networks have focused on acquiring rights to the biggest sports leagues while ESPN, FOX, and WBD have scooped up the rest. All of the streaming platforms, including Prime and Peacock, have been aggressively promoting their live sports offerings in the past year. Peacock leveraged their exclusive streaming NFL Wild Card game between the Kansas City Chiefs and the Miami Dolphins to drive sign-ups for the service. The game netted 23 million viewers, setting the record for the most streamed live event in U.S. history. This was a 6% increase over the viewership of last year’s NFL Wild Card Game on NBC. Streaming of the game accounted for 30% of all internet traffic in the U.S., contributing to the highest level of internet usage ever. Clearly, demand is high for live sports on streaming platforms.
BIG SCORE FOR THE CONSUMER?
Today’s streaming options are anything but limited with AVOD (Tubi, Roku, Crackle, etc.) and SVOD (Netflix, Hulu, MAX, etc.) services along with live TV services (YouTubeTV, DirecTV Stream, Philo, etc.). Let’s not forget that most SVOD providers are venturing into being AVOD providers with varied tiers of monthly cost (E.g. Netflix) to give consumers options. Where does the consumer net out in all of this? On one hand, the consumer has a plethora of options and the ability to watch what they want, when they want and not be tethered to appointment viewing or cords. But, on the other hand, we’re yet to determine where the stress point lies with the proliferation of subscription services that has the potential to cost consumer more than their linear cable subscription. Until recently, live sports was playing a critical role in slowing “cord cutting.” To watch most high-profile sporting events, consumers depended on broadcast and cable networks, delivered via their cable subscriptions. With this new joint venture, along with the offerings on other streaming services, consumers have less of an incentive to maintain their cable subscriptions. We predict this new platform will further accelerate the demise of broadcast and cable. It has been reported that consumers will be able to bundle this new product with existing services like Disney+, Hulu, and/or MAX, but for an additional expense. Given the escalating cost of maintaining multiple streaming services to have access to their favorite entertainment and sports programming, we expect these bundles will be attractive to consumers.
THIRD AND LONG FOR ADVERTISERS?
Live sports has consistently commanded a premium in recent years due to high demand, based on the belief that it attracts unique audiences and garners higher attentiveness than other programming. We believe the strength of this new offering will be a “mixed bag” for advertisers and marketers. While advertisers will benefit in some ways from consolidated, (almost) one stop shopping to reach broad audiences, throughout the year, across a wide variety of top tier sporting event, it will come with a price. As we have seen with ESPN in the linear world, having a dominant position in live sports programming allows a platform to command a CPM premium over other platforms with fewer comparable offerings. No doubt this new venture will look to command a premium from the outset. Other streamers will have to price advantageously to capture their “fair share” of media budgets. On the positive side, advertisers will be able to have more control overreach and frequency by having some much scale in a single platform. This will allow savvy marketers to reduce “waste” in their viewing schedules.
This new powerhouse platform will be a challenge for other streamers, particularly Paramount+ and Peacock. As we have seen in the linear world, scale, both in terms of viewership and revenue, is key to acquiring and maintaining the rights to top tier sporting event. In recent years, as viewership and advertising revenue declined for the broadcast networks, they lost their stranglehold on the most high-profile sports properties. Prime has deep pockets due to their diversified revenue streams. Peacock and Paramount+ will struggle to hold on to top tier sports while also funding a steady stream of exclusive entertainment offerings for their platforms. Without a steady stream of strong entertainment offerings and enough premier live sports to maintain consumer demand for their services, we may see consumers start to prune their subscriptions, letting go of the ones they see as secondary. This won’t be a positive for advertisers. The media marketplace benefits from healthy competition between a variety of strong choices.
BETTING PREDICTIONS:
- Acceleration of the demise of linear video.
- Additional aggregation/bundling of streaming services.
- Further consolidation of streaming services.
- More original/unique content made for streaming services to attract subscribers.
– As of Q4’23, Hulu has 48.5M paid subscribers,
– ESPN+ has 26M subscribers,
– Disney+ has 113M subscribers5 – down 1.3M
– MAX (formerly HBO Max) has 95.1M subscribers6 – down over 2M in 2023.
