TV giants are lining up for a fight over a potential $10 TV bundle without sports – Business Insider

Maddie Meyer/Getty Images

Big TV companies like Disney and Discovery are lining up for a
fight over a sports-free online TV package that could cost a mere
$8 to $20 a month.

Last month,
Bloomberg broke the news that several cable networks were
trying to put together a sports-free package for under $20,
cutting out high-cost channels like ESPN, which alone
cost $6.10 in carriage fees per subscriber in 2016.

And on Discovery’s earnings Tuesday, CEO David Zaslav laid out a
bit of the case for such a bundle.

“Skinny bundle in the US is a fiction,”
he said. “The idea that you have a $40 offering filled with
regional sports, sports and all these — an incomplete package,
really, and then you have to buy broadband on top of it, so the
skinny bundle is $60 or $70. So it’s really not a skinny bundle.
It’s a bundle. It’s a bundle that may be attractive to a small
group of people. But, in the end, I think the market will be
rationalized.”

His central point was that there’s room in the market for a
sports-free package that costs $8 to $12 a month.

Broadcaster wrath

The main problem here is that the parent companies of the major
broadcast networks — NBC, ABC, CBS, and Fox — have paid a lot for
sports rights, so they want no part of a bundle that makes sports
seem less vital. The cable networks they own are also out. So no
FX, USA, or Fox News.

That means the bundle will have to be constructed of companies
like Discovery, Viacom, AMC, Turner (though it does have some
sports rights), and Scripps. Those five put together could indeed
make a pretty compelling cheap bundle at $20 or less. You could
potentially get a spread of programming from CNN’s news, to AMC’s
dramas, to Comedy Central or the Food Network. There would be
holes, but at the right price people might be willing to overlook
it.

The notion of this type of package, however, rankles media
executives whose companies rely on sports.

On ESPN parent company Disney’s earnings call Tuesday, CEO Bob
Iger scoffed at the idea of such a bundle.

Disney CEO Bob
Iger.
AP

“Someone was out there today talking about a $10 bundle that
didn’t include sports,”
Iger said. “I don’t know how many channels you could fit into
a $10 bundle, but I would imagine there wouldn’t be any channels
that were particularly attractive. Maybe someone will go out with
a very-low-cost set of channels that can’t drive the kind of fees
that [the more popular ones do] … But I don’t see how that’s
practical in terms of gaining much penetration.”

You should take that position with a big grain of salt.

Disney has been very proud of how many of the new online TV
bundles ESPN is on, and it sees the medium as a major way to grow
in the future. In fact, on the same call, Iger listed them:
“Sling TV, Hulu, PlayStation Vue, DirecTV and YouTube TV.”

“The substantial growth we’re already seeing makes us bullish on
the future of these nascent offerings,” Iger continued. “Right
now, they are a small part of the pay TV universe, but we believe
they’ll be a much bigger part of the business going forward.”
Disney sees these bundles as a way to stave off the decline in
subscribers that has plagued ESPN for years.

ESPN is losing subscribers, and it certainly doesn’t want to be
left out of any new packages that enter the market. And its wrath
could spell problems for distributors that might want to sell a
no-sports bundle.

Why? Some of the
contracts cable and satellite providers have signed with
heavyweights like Disney and Fox are loaded with fine print
designed to stop new bundles like these. And in 2015,
ESPN sued Verizon over a sports-free bundle, saying it
violated distribution deals.

So even if Iger is publicly poo-pooing the very idea that anyone
would want a sports-free bundle, that doesn’t mean ESPN won’t
come out swinging if someone tries to bring one to market.