Commentary: New Sports JV Is Too Small
By Ted Hearn, Editor of Policyband
Washington, D.C., Feb. 9, 2024 – A new sports-centric streaming service is coming to America later this year.
The joint venture (JV) formed this week by Disney, Fox and Warner Bros. Discovery promises a massive slate of sports programming ripped from the traditional cable bundle yet deeply discounted from the roughly $200 or so that many pay each month to cable TV giants like Comcast Corp. and Charter Communications.
With consumers looking to save serious cash to watch their favorite programming – yes, local ABC and Fox stations will also be in the mix – what’s not to like about this new app without a name?
Some are saying this Disney-driven streaming service can never work – as in, when have three scorpions in a bottle ever gotten along?
Others are darting to the Department of Justice (DOJ), as if some crabbed reading of the Sherman Act of 1890 can resuscitate a cable TV operator industry on the verge of collapse.
In reality, the Disney-Fox-WBD venture has a clear defect: It is too small.
The market capitalization of the three JV partners is $388 billion combined. Netflix alone is worth $432 billion.
Toss in Amazon/Prime at $1.8 trillion, Google/YouTube at $1.85 trillion, and Apple/Apple TV at $2.9 trillion and it seems obvious that the streaming world eventually belongs to Big Tech absent a massive rival.
That some in the cable operator sector have let fear and panic rule in response to a novel and highly experimental streaming venture is hard to take seriously. Would DOJ anti-trust officials file a complaint about a 14-channel app with no executives and zero market share? What about that Disney is going direct-to-consumer with the full ESPN app as soon as August 2025? What do the frenzied cable lawyers say then, “More choice is bad”?
Unlike Fubo and a few others with sweaty palms, some have remained calm. Both Gray Television and E W Scripps issued supportive statements, seeing value in reaching TV station viewers in new ways with the proposed JV.
Broadband is cable’s future. Cable One in Phoenix can’t wait to disconnect its final cable TV customer and go broadband-only. The same for Comcast, which is aiming to build the fastest and most reliable network capable of flawless performance during something like a live NFL game on Amazon Prime Video that occupies 25% of all U.S. Internet traffic while in progress on Thursday nights.
Listen to Comcast CEO Brian Roberts and what he said about the company’s strategic direction last October on a call with Wall Street analysts.
“I just wanted to add that one of the great things about sports that we're very excited about is streaming sports and what that means for our broadband network strategy … A big part of that is a commitment and a belief that we see all sports finding a way over the next many years or maybe not so many years to be more and more streamed, and that's going to require more bandwidth and that's going to require and create an opportunity for us to have the superior product in the market. So that's our strategy, and so sports really is at the heart and soul of a lot of what we do.”
It was reported somewhere that Comcast declined to join the new sports JV out of anti-trust concerns. It’s more likely that Comcast’s real reaction was “bring it on” and “check back with us in six months.”
Comcast’s hunger for a broadband-centric business is shared by many fiber Internet builders, especially a company like Frontier Communications that has households consuming at least one terabyte (TB) of data a month.
Because consumers are feasting on data, Comcast, Charter, and Frontier refuse to believe that capacity-constrained fixed wireless access service (FWA) from T-Mobile, Verizon, and AT&T is anything more than a short-term irritant – “another form of DSL,” as Charter CEO Christopher Winfrey put it derisively.
More proof of surging bandwidth consumption came the other day in a new report from analytics firm OpenVault, which found that U.S. consumers have doubled monthly bandwidth usage since right before the start of the pandemic in 2020.
And things will only get better for cable broadband ISPs that will vie for some of $42.45 billion in broadband riches flowing from the Commerce Department’s Broadband Equity, Access, and Deployment (BEAD) Program. Note that not a penny of BEAD money will go to Elon Musk’s Starlink satellite Internet service to help him poach cable broadband customers.
Consolidation amid disruption is normal. Cable’s history is filled with examples but here are just a few.
▪ In the early days of broadband, cable companies Tele-Communications Inc. (TCI), Comcast, and Cox Communications created the @Home JV that included more than a dozen cable operator affiliates. The venture failed as the companies finally realized that they could go it alone as individual broadband ISPs.
▪ In the early 1990s, five of the six largest cable system operators in the country – TCI, Time Warner, Comcast, Cox, and MediaOne – formed Primestar Partners, a medium-power satellite TV service created to rival DirecTV and Dish Network. Under DOJ pressure, the venture fizzled and sold its assets to DirectTV in 1999.
▪ And in 2007, Hulu was born via a joint venture among Disney, News Corp., and NBCUniversal. Now Disney is in full control, having bought out Comcast late last year for $8.6 billion in cash.
So, the new sports JV app aborning is a continuation of the cable industry's long tradition of struggle and experimentation on both the network and programming sides.
But to stand a chance against Big Tech trillionaires, Comcast’s NBCUniversal and CBS parent Paramount Global need to join Disney, Fox, and WBD. That will ensure an almost near-lock on marquee sports programming like the NFL that likely determines their fate as ongoing media concerns.
In other words, the Disney, Fox and WBD effort as currently configured is too small.
It needs to get bigger.
It needs a bigger bottle and at least two more scorpions.