TV giants are lining up for a fight over a $10 TV bundle without sports

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 $US8-$US20 a month.

Last month, Bloomberg broke the news that several cable networks were trying to put together a sports-free package for under $US20, cutting out high-cost channels like ESPN, which cost
$US6.10 in carriage fees per subscriber in 2016 by itself.

And on Discovery’s earnings call this week, 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 $US40 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 $US60 or $US70. 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 is that there’s room in the market for a sports-free package that costs $US8-$US12 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.

That means the bundle will have to be constructed of companies like Discovery, Viacom, AMC, Turner, and Scripps. But honestly, those five put together could make a pretty compelling cheap bundle. You’d get a spread of programming from CNN’s news, to AMC’s quality dramas, to Comedy Central or the Food Network. There would be holes, but if you kept the price down, 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.

“Someone was out there today talking about a $US10 bundle that didn’t include sports,” Iger said. “I don’t know how many channels you could fit into a $US10 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 sees it 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 will be a much bigger part of the business going forward.” Disney sees this bundles as a way to stave off the decline in subscribers that has plagued ESPN for years.

ESPN is losing subscribers, and certainly doesn’t want to be left out of any new packages that come into 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, Disney-owned ESPN sued Verizon over a sports-free bundle.

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.

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