Cable Companies are Disrupting the Cable Bundle – In a Way Their Streaming Counterparts Aren’t

A little over a year ago, Verizon did something that flew under the radar, and considering how much their deployment of Fios services has slowed, wasn’t really as important as it should have been. Following ESPN’s lawsuit over its “Custom TV” service, Verizon effectively defanged the service and switched to offering two base packages, one with sports channels and one without, to comply with contracts prohibiting the biggest sports channels from being on an add-on tier. A year later, however, Verizon went to a hybrid of the old and new Custom TV packages. Today’s Custom TV service consists of seven different base packages, only three of which (Sports and News, News and Variety, and Home and Family) contain ESPN and other sports networks. It’s not quite a la carte TV, and the Verizon site gives a list price for Custom TV of $64.99/mo, but that’s for bundles containing it; if you order the slowest Internet speed that can be bundled with Custom TV, the quoted price is exactly the same as the same speed without Custom TV. The fine print indicates that you would take on only $20.88 in set-top-box rental, broadcast, and RSN fees, on par with Sling TV, and presumably the non-sports packages without RSNs would cost nearly $6 less than that. That’s pushing less than half of what streaming cable services like YouTube TV and PlayStation Vue charge.

For that price, you could get most of the most popular cable networks other than sports, news, and Discovery networks on the Action and Entertainment package, or you could regain the mainstream news and Discovery networks while losing more reality-oriented channels on the Infotainment and Drama package. Both of those packages include Disney Channel and other channels owned by the four major companies with investments in sports, so you aren’t limited to channels from a small selection of companies. A truly comprehensive lineup would require upgrading to a more expensive package with sports networks, and some combinations of networks (like both Discovery and History) would require going that route, but Verizon seems to have largely recreated the comprehensive, watch-whatever-you-want feeling cable and satellite companies tried to create in the 80s, 90s, and early 2000s without the downward spiral that created.

What has attracted more attention is Charter’s soft-launch last week of Spectrum Choice, currently being offered only to 100,000 “hand-selected” customers, presumably primarily people who have threatened to cancel their existing Spectrum service and/or as a way to upsell current Internet-only customers. Programming appears to only be available by streaming to Roku or other connected devices (and thus, at least potentially subject to all the delays and problems of streaming), DVR service costs extra and is loaded with restrictions, and there is a confusing maze of restrictions to your ability to watch shows on other devices or outside the home. But once you get past all that, what it offers is remarkable: true a la carte TV. You get all the broadcast networks and Music Choice channels, and then you add any ten channels of your choice. Not all channels are available (and RSNs are among the channels that aren’t), but a sports fan could add ESPN, ESPN2, FS1, NBCSN, NFL Network, and all three channels showing March Madness, and still have two channels left over, having picked up every network showing the most popular national sports events.

But of course, what’s really attractive about this is the ability to stitch together groups of channels with no sports networks whatsoever. Nick Jr. is the most popular primetime network not to be offered, and Disney Junior is still available for families with young children. You could stitch together the most popular general entertainment or reality-oriented channels – USA, HGTV, TBS, TNT, Nickelodeon, Discovery, History, and maybe a handful of others to round it out. Perhaps more to the point, you could join Spectrum Choice with the Philo service, and then use your ten channels on channels not offered by Philo: USA, TBS, TNT, Hallmark, FX, Bravo, Cartoon Network, Freeform, Hallmark Movies and Mysteries, and Syfy, mixing up what channels you order based on what channels have the shows you want and maybe throwing in a news network or two if you want. You’d have access to an incredibly wide variety of entertainment – without any sports-specific networks.

The potential of this is such that to me, the biggest problem with Spectrum Choice is that there is no price feedback to your choices: you pay the same whether you include ESPN or not. This may explain why it costs $25/mo for the first two years and $30/mo thereafter, which makes combining it with Philo non-economical and arguably doesn’t even compete well with other streaming cable providers as is. It smacks of saying “we tried to offer an a la carte offering but no one took it”. Of course, if it did offer ESPN at a different price than other networks, that would smack of offering ESPN separately, as a premium service, which ESPN would probably never stand for, and the other restrictions and constraints might be necessary to appease programmers as well; Verizon may be closer to a more viable approach to shaking up the cable bundle (it’s worth noting that both Verizon’s Action & Entertainment and Lifestyle & Reality packages each contain all but one of the non-Philo networks I listed above, if you’re willing to go without major news networks). The fact that Spectrum Choice is so close to being a true game-changer, however, should not go unnoticed. They may be halting steps, but Charter and Verizon are moving closer and closer to allowing you to watch the programming you want without having to pay the sports tax.

For all the brouhaha over streaming TV services, for the most part they haven’t offered anything that truly sets them apart from the traditional cable bundle. In the name of trying to get enough programming people want to attract customers, they’ve almost all hitched their wagon to all of the Big Nine cable programmers, throwing away the one thing that could truly set them apart from the cable bundle. Even Sling, with a lower base price point and multiple smaller base packages, doesn’t offer a base package without sports networks. Philo has taken the best available approach to building a truly sports-free package and thus a package with the most potential to strike fear in the heart of ESPN. The question surrounding Philo has been whether it has enough valuable programming to attract customers without networks associated with the sports-heavy companies – without USA, TBS, TNT, FX, or Disney Channel. If the programming you want to watch is associated with those companies, you might be stuck paying the sports tax; if there aren’t enough people satisfied with what Philo offers, sports networks, especially ESPN and regional sports networks, will continue to rule the cable bundle for the foreseeable future, even as people increasingly chafe under their power. That is, assuming Disney’s pending acquisition of a large chunk of Fox, including its regional sports networks, doesn’t end up backfiring on them, as I suspect it might, by centralizing enough of the most expensive cable networks in one place that either cable operators or streaming providers decide it’s finally worth it to go without them.

But if the merger does go the way Disney thinks, then if the likes of Charter and Verizon continue to be allowed to be more flexible with their offerings – allowing people to get FX but not FS1 or Fox News, USA but not NBCSN or MSNBC, Disney Channel but not ESPN – that could finally break the stranglehold sports has on the cable bundle anyway. And in turn, that could ironically result in the collapse of the entire cable bundle if the most high-profile sports decide it’s not worth it to continue to hitch their wagon to the smaller audiences of cable networks and focus more attention on broadcast with a side of streaming, potentially starting a downward spiral of cable subscribers touched off by the departure of those that feel they need cable to watch the College Football Playoff, Final Four, or NBA playoffs, leaving the very cable networks that made it possible to either change their business models or die.

Could ESPN Kill Thursday Night Football?

In 1987, ESPN achieved something of a holy grail for the cable industry, picking up a half-season package of Sunday night NFL games, paid for with the imposition of a surcharge on the fees cable operators paid them. In 1998, ESPN picked up the full season of Sunday night games, paid for by the negotiation of clauses with distributors ramping up the fees paid to ESPN every year. This was the start of the process that resulted in ESPN charging every cable subscriber over $7 a month, far more than any other national cable network, and a key component in ESPN’s ability to acquire top-of-the-line sports rights such as the biggest college football bowl games.

In 2005, Disney was outmaneuvered in its efforts to renew both ESPN’s Sunday night package and ABC’s Monday night package, as the NFL struck a deal with NBC to move the league’s marquee primetime package to Sunday night in order to institute flexible scheduling that would ensure good, competitive games late into the season. Disney was left paying as much as it had for both of its previous packages for a single package for airing on ESPN. Ever since, ESPN has paid nearly twice as much as the broadcast networks for a package not much better, if at all, than the marginally-attractive matchups it had been getting on Sunday night. ESPN executives have chafed at this, claiming that for the amount it pays it should be getting matchups at least on par with the broadcast networks; to be sure, part of the fee pays for ESPN’s ability to use highlights across its myriad of programs, but that’s only a fraction of it, maybe no more than a fifth. But when the time came to renew the deal, after nearly a decade of knowing what Monday Night Football had become with the move to cable, ESPN ponied up nearly two billion dollars a year, once again close to double what each of the broadcast networks were paying. ESPN’s package of NFL games may be weak, but they’re a big part of what makes ESPN so valuable to cable operators, what makes it such a must-have for sports fans, and without it ESPN not only becomes a lot less valuable, but that same package of games becomes a tool an FS1 or NBCSN can use to instantly establish near-parity with ESPN.

At the same time it was shaking up its existing primetime packages in 2005, the NFL carved out a package of late-season Thursday night games to air on its own network, hoping to turn NFL Network into a cash cow that could collect hefty subscriber fees directly for the league. The package grew until it eventually took up the whole season, both to coerce holdouts to carry NFL Network and to establish the worth of a package to sell to other parties. Initially, the league was thought to be selling part of the Thursday night package to another cable outlet like FS1, NBCSN, or TNT, any of which would be salivating over the prospect of using NFL games to increase their own worth to cable operators, but instead it ultimately sold the right to simulcast and produce half a season of games to broadcast networks while also selling the right to stream games to Twitter and later Amazon. Sure, Thursday night games meant teams would be playing on a short week, increasing the risk of injury and potentially resulting in sloppy games, and the league’s policy of making each team play on a short week exactly once during the season limited the package’s ability to show marquee matchups. But Thursday night was a place to collect another pound of flesh from TV partners and air the games that made NFL Network worth paying for for cable operators, as well as a place to experiment with new formats and partners. It wasn’t like there were any other places for them to do this. Sundays and Mondays were taken.

Things have changed quite rapidly over the past few years. Cord-cutting has taken off like a rocket as people increasingly turn to on-demand streaming services for their entertainment, undercutting the primacy of linear television. In the short term, this only increases the value of live sports as one of the few types of programming people will willingly watch live, without skipping commercials, and are willing to pay for cable packages to watch, but it also changes the very nature of linear television, as it’s becoming increasingly apparent that anything your network airs that isn’t live events is just filler between live events (as much as ESPN and Fox sometimes don’t seem to recognize this). In that context, highlight rights are considerably less valuable than they used to be.

ESPN and the NFL are also looking at a future where the cable bundle collapses and the NFL can’t simply sell whatever it offers for a billion dollars to whatever cable network pays for it, which is no doubt part of the reason why it sold TNF to broadcast networks and streaming services rather than cable networks. In this context, ESPN’s future is no longer in collecting as much money as it can off the back of every cable subscriber, but in converting itself into a service offering its wares direct to the consumer, and it has less to worry about from FS1 and NBCSN – who have benefitted ESPN more by keeping the cable bundle propped up than hurt it in any way, and which now become more untenable propositions both in general and for the league specifically – than it does from Amazon and its ability to synergize sports rights with its Prime service. A package of mediocre NFL games may be valuable to cable operators that can pass on the cost to all their subscribers and that NFL fans can watch at anytime after paying for the entire cable bundle, but a subscription service offered directly to consumers can best attract subscribers by covering certain sports comprehensively, or else a broad array of important sports events that can combine to make it a must-have service for sports fans, and that single mediocre NFL game each week isn’t going to fit the bill and certainly isn’t going to be worth two billion dollars.

In that context, it’s easy to see why, as James Andrew Miller, the man who literally wrote the book on ESPN, suggested in a guest column for the Hollywood Reporter, ESPN might be thinking about going without NFL rights when they next come up for renewal, for the first time since 1987. ESPN has been removing clauses conditioning its high subscription fees on its continued carriage of NFL games from its contracts with cable operators, which makes sense when you consider the gap in fees between ESPN and NFL Network (and the fact that TNT charges more than NFLN without football or really much of anything other than NBA basketball and select NCAA Tournament games), and freeing up two billion dollars a year of spending money allows them to pay for events that offer a larger tonnage of content and may be more likely to entice more people to sign up for an ESPN subscription service.

Meanwhile, faced with a second year of headlines of declining NFL ratings, networks have begun complaining to the NFL about oversaturation of games and games being taken out of the Sunday afternoon packages. They want to move all London games back to 1 PM ET and end the “breakfast football” games that kick off at 9:30 AM ET. And they want the league to cut the Thursday night package back to eight games. That latter point would be difficult for the league to acquiesce to; all eight games would need to be exclusive to NFL Network to meet the network’s own contractural agreements with TV partners, preventing them from selling the games to another partner or a streaming service and once again forcing them to produce the games themselves, and potentially irking cable operators seeing NFLN’s tonnage being reduced to what it used to be when it was having trouble finding partners. And there’s nowhere else for it to go; again, Sundays and Mondays are all tied up. Or are they?

If ESPN decides NFL games are no longer vital to their business, if they decide to go without the NFL in the next TV contract, because of market forces that mean the NFL can’t prop up the cable bundle or any particular cable network anymore, that opens up a package of games that the NFL likely can’t sell to ESPN or any outlet looking to imitate it, but can use for whatever other purpose the league wants. They can put half the games on NFL Network, at least as long as it remains a tenable proposition within the cable bundle, and sell the remaining half to broadcast networks as they do with TNF now, or to a streaming service like Amazon, potentially selling the full season once the cable bundle completely collapses. Without ESPN preventing the NFL from doing whatever they want with MNF, the league could turn Mondays into the experimental night Thursdays are now, potentially doing away with Thursday games entirely except for opening night, Thanksgiving, and the week after Thanksgiving when both teams can be taken from the Thanksgiving games and play on a full week’s rest, curbing concerns about the league wearing players into the ground to collect a pound of flesh it’s becoming increasingly difficult to collect.

The competitive concerns motivating ESPN to keep paying up for MNF haven’t completely eased; ESPN wouldn’t want to walk away from the NFL only to pave the path for Amazon to become a competitor for sports rights. But I continue to believe that no entity that doesn’t at least control a linear television platform can truly be a player for major sports rights, and while Amazon has a lot more going for it than most Internet outlets, it’s not immune to those fundamental forces. At the very least, if ESPN continues to control a linear outlet it has a major asset to offer to sports entities, and if Amazon were to find its way onto one, and spend as prodigiously on sports rights as media companies have over the past decade, it would risk losing some of the advantages Prime has over cable networks if not recreate the worst excesses of the cable bundle. ESPN can handle creating a new competitor in Amazon while freeing up funds to maintain its supremacy in other ways, the NFL gets to continue raking in money from whatever revenue streams are available even if they aren’t as big, and players and fans could potentially find themselves in a world without Thursday Night Football and all the excesses and problems it represents and perpetuates. Everyone wins.

What Happens If Disney Gets Blacked Out On Altice?

If it weren’t for the crappy state of everything else going on in the country (including Ajit Pai seemingly being about to dismantle net neutrality) it would be an exciting time for the evolution of the TV industry, as the cable bundle looks like it’s about to be on its last legs. Earlier this month, reports came out that Viacom, Discovery, Scripps, AMC, and A&E were joining forces to form their own, relatively cheap, skinny bundle called “Philo” – the inclusion of the last of which was very surprising to me, as A&E is co-owned by Disney and Hearst, which also (separately) co-own ESPN, and just the other four companies forming their own skinny bundle is the last thing ESPN wants. But Disney and ESPN have a bigger fight on their hands. Altice, the French conglomerate that now controls Cablevision and Suddenlink, hass Cablevision’s old carriage agreement with Disney expiring after this weekend. Disney has faced contentious carriage agreements with the likes of DirecTV and Dish in recent years, which have gotten certain elements of the media worked up over the possibility of showdowns with companies that had ramped up their rhetoric about the high price of sports and stood up to regional and college sports networks, but in the end the power of ESPN was too much to resist and the companies sucked up and signed up for another round of fee increases and adding the Longhorn and SEC networks. But just days before the expiration of the agreement, there seems to be no end in sight to the Altice standoff, and plenty of signs that Disney’s luck and indispensability has run out, not just with Altice but with other cable operators as well.

Were it not for these two stories, I wouldn’t normally think the decline of the cable bundle has reached a tipping point. Large majorities of people still subscribe to the cable bundle… but they’ve now fallen below the 80% mark, and it’s clear that things have reached a critical moment. Disney trying to add yet another high-priced regional ESPN spinoff, one with significantly less value than the SEC Network, certainly looks like an ill-timed misstep that sent things spiraling down further (and Disney wants Altice to add not only ACC Network to a fairly basic package in New York City, but SEC Network as well). On the other side, Disney has announced the launch of OTT Disney and ESPN services, with the latter being limited to events that won’t hurt the value of ESPN to cable providers too much to lose but the former being stocked by Disney pulling its movies off Netflix a relatively short time after signing a big deal to put them on. Continuing the return of sports to broadcast, Fox will air the majority of next year’s World Cup matches on its broadcast network, meaning if the United States makes it, matches that gave ESPN gerbonkers ratings in the last two World Cups will air on broadcast where they belong, possibly even on weekdays. And while I’m still, in general, skeptical of streaming services’ ability to win major sports rights while also justifying their cost, in the wake of their Thursday Night Football deal, it’s hard for me to argue against the notion that Amazon at least has the potential to overcome most, though not all, of the obstacles I worry about (the fundamental problem of streaming being inferior to deliver live events than real linear channels, which bedeviled Amazon this past Thursday, is in my view ultimately insurmountable) to become a real player for mid- to lower-tier sports events.

There’s also the recent history of carriage standoffs to consider. Before its acquisition by Altice, Suddenlink kept Viacom channels off its systems for nearly three years, with Cable One possibly still leaving those channels off their lineups, and both companies made clear that they were just fine without Viacom’s networks. Viacom is on the expensive end of the non-sports four and, at least at the time, didn’t have as many shows with serious buzz as the others, so it could have been considered more expendable than most other Big Nine members. By dropping Disney channels, Altice would be risking a significantly larger backlash, not only from sports fans but from fans of Disney Channel’s kids shows, especially with the Yankees playing their wild-card game on ESPN Tuesday. But if it coupled dropping the Disney channels with a significant drop in customers’ bills, it could gain more than that in goodwill from non-sports fans.

Meanwhile, sports and Disney fans aren’t as out of luck as in the carriage disputes of the past, thanks to online cable providers like Sling TV. No service carrying ESPN would cost less than the $10-15 that’s likely to be the most Altice would refund customers; Altice’s moves wouldn’t totally break up the cable bundle unless they dropped multiple companies’ programming. But what would hurt Altice, but is likely to hurt Disney more in the long term, is if customers dropped Altice’s TV service entirely in favor of Sling or a more comprehensive service like PlayStation Vue, DirecTV Now, YouTube, or Hulu. Based on listed prices, dropping down from a TV+Internet bundle to just Internet should save $20/month with Optimum for New York customers; throw in fees charged only to TV customers, and that could be enough to justify getting one of the online bundles for $35/month (and that’s assuming they don’t drop Optimum entirely for Verizon FiOS). Sports and Disney fans that drop Altice’s TV services entirely are no longer directly putting pressure on Altice to add them back to the lineup. If that gives Altice enough backbone to leave Disney off the lineup entirely, especially if people with no investment in those networks start telling them not to restore them and threatening to quit if they do (especially once Philo launches), it puts Disney, and ESPN more specifically, in a very tight spot financially, as well as in terms of standing up to other providers, with deals with Verizon, AT&T/DirecTV, and the old Time Warner Cable deals now controlled by Charter looming over the next two years.

In 2011, Dish chairman Charlie Ergen suggested there was room for a cable or satellite operator to position themselves as a cheaper non-sports alternative; today he thinks Altice can survive without ESPN, and he certainly must be rooting for it. If Altice is successful at saying no to Disney and ESPN, it gives other providers, as well as potential future online providers, more confidence to say the same. Altice is not one of the larger providers, but if they manage to weather the storm and spend two years or more without ESPN on their lineup, Disney will suddenly look like an emperor with no clothes, and will find it hard for their demands to be met when they enter negotiations with AT&T, Charter, and further down the line, Comcast and Dish, and will find it especially difficult to get the ACC Network off the ground. Couple that with the pending launch of Philo representing the one thing Disney hoped to avoid by staying shackled to the cable bundle, and suddenly there’s a very real possibility that ESPN goes full-on direct-to-consumer with all of their content before the end of the decade (and indeed A&E’s inclusion in Philo starts to look more understandable if Disney thinks the cable bundle is already collapsing). Sports fans would probably still need Fox, NBC, and Turner’s networks to get all the sports they want and need, at least in the short term, but a successful standoff with ESPN would also allow cable operators to show down with those companies for lower fees and lower penetration for expensive regional sports networks. It’s possible the sports four-and-a-half will start to find that clinging to the old cable bundle model will bring down their smaller and non-sports networks more than prop them up, making a sports-specific bundle an increasingly viable proposition. At that point, Disney might just bail on cable operators and even their would-be competitors and seek to salvage whatever revenue (and data) they can for themselves.

Even if Disney and Altice reach a deal, it could still be bad news for Disney, ESPN, and sports leagues. Disney wants to ratchet up its fees and restore some of the coverage lost when they gave providers flexibility to offer skinny bundles. If Disney takes lower fee increases than they’re hoping for and keeps ESPN at present levels of penetration to avoid the catastrophe of being outright dropped, they’re going to have to budget less money for production and rights fees. Look for more layoffs to come down the pike and ESPN to scale back on what they’re willing to bid for rights as they come up early in the next decade. And the ads Altice has been running have arguably already increased awareness of just how much of their cable bill is being passed on to ESPN regardless of how much or little customers watch it, meaning if a deal is reached without ESPN being dropped, there could be a deluge of customers dropping service.

Keep an eye on how this situation develops over the next couple days, because no matter what happens, it could well mark the point of no return for the sports cable boom, as well as the beginning of the end for the cable bundle as we know it, and the start of shaping whatever comes next.

For Fans of Lesser Sports Properties, the Party is Over

Back when I was posting more regularly about the sports TV wars – in part because the wars themselves were burning brighter and the stakes seemed higher – a point I routinely made was that, as good as the wars would be for the largest, most popular entities with content that could attract large audiences to sports networks, they would be an absolute boon to lesser entities that might not otherwise attract much of an audience at all, or even enough to justify their existence, as the glut of sports networks looked for properties to fill out the rest of their time. Truly tiny leagues and conferences didn’t see much of a bump from the wars (a TV deal with CBS Sports Network only kept the UFL afloat for an additional half season) but lower-mid-tier leagues, the sort that could attract audiences approaching a million on broadcast and regularly top several hundred thousand on networks the size of FS1 and NBCSN, saw their visibility vastly increased. As I explained in my book The Game to Show the Games (and as expanded upon here previously) no sport benefited from the glut of sports networks more than soccer, even before the sports TV wars properly became a thing, as a veritable soccer boom enveloped English-speaking America driven in large measure by coverage of the English Premier League on Fox Soccer Channel and its predecessor Fox Sports World, driving NBC to not only break the bank for Premier League rights but to make it as much of a tentpole for NBCSN as the NHL.

If no sport benefited more than soccer from the sports TV boom, no single deal demonstrated the power of TV to elevate a sport more than the Premier League’s deal with NBC. NBC’s high-quality coverage, semi-regular games on broadcast television, and dizzying array of games on NBCSN only scratched the surface of what NBC would do for the Premier League in America. Perhaps more remarkable was NBC’s decision to place all the games it couldn’t fit on its linear networks on an array of “Extra Time” channels and available for streaming for any subscriber to a cable package that included NBCSN. American viewers could watch every single Premier League game live, something people in England itself couldn’t say, if only because the Premier League contracts there were arranged to protect gate revenues, especially at lower-tier clubs.

This week, NBC announced that those games not airing on NBC’s linear services would now be available on a “Premier League Pass” subscription service, no longer free with NBCSN. The headline on Re/code touting this deal focused on the “no cable subscription required” aspect of the service, which is a bit disingenuous considering games on NBC’s cable networks aren’t part of the deal, but not really any different from people who get ESPN3 from their Internet provider (or who sign up for ESPN’s long-delayed direct-to-consumer offering) and get to watch mid-major college sports and less popular events without access to ESPN’s actual linear networks. Despite its uselessness to cord-cutters, though, I was surprised to see headlines on more soccer-focused sites bemoaning what a big step backward this was for NBC’s coverage of the Premier League, with Vice Sports going so far as to claim that the move of what it admits is “the crappiest third” of Premier League games to a premium service amounts to NBC “kill[ing] America’s EPL Golden Age“.

Certainly for Premier League fans used to signing up for the cable bundle, this is a huge step backwards. $50 is a relatively steep price, though for an entire season of Premier League games it compares favorably to American sports leagues’ pay-per-view/out-of-market/streaming services, which often top $100. And it’s not like Premier League fans can save money by just signing up for Premier League Pass, since again, it doesn’t include games on NBC’s linear networks. But it’s hard to declare the loss of the least interesting, most perfunctory matchups, that were already consigned to streaming and overflow channels, as completely undermining the visibility and value of the Premier League on American television, especially since given the ongoing shifts in the media landscape, a move like this may have been inevitable. Even if Extra Time wasn’t really “too good to be true” even at the time, setting aside specialized channels and propping up the cable bundle even more was becoming difficult to justify. With Premier League Pass, NBC is pivoting towards the sports distribution system of the future, one that more specifically targets fans of various sports, that sports networks in general will have to pivot towards.

As such, I’m not sure I agree with Richard Deitsch that this is entirely about monetizing a more expensive Premier League rights deal; if so it would raise the question of whether the deal was really worth it to begin with. I think there’s a bigger picture to look at here. Going back to its days as Versus, NBCSN has staked its territory around providing comprehensive coverage of sports that might get shorter shrift at ESPN or Fox, and that’s a territory that lends itself well to providing services oriented directly at those niche sports fans. The NBC Sports Gold service already sells access to many of those niche sports bundled together for up to $70 a year, but depending on how many butthurt Premier League fans (especially those that have attached themselves to teams further down the table) swallow their pride and pony up, Premier League Pass could easily make them more money. I could easily see NBC as laying the groundwork for the day it may ultimately have to shutter NBCSN in its current form and fold many of its rights into networks like CNBC or USA as the cable bundle finally utterly collapses, folding together many of its mid-to-lower tier rights into a direct-to-consumer offering targeted at the niche sports fans NBCSN serves today. I may have felt Fox was better positioned to run down ESPN than anyone else (certainly Fox themselves did) before it turned out Fox didn’t quite have the quality of rights to convince people to turn to FS1 on a regular basis, and I’m skeptical that anyone other than ESPN will survive the collapse of the cable bundle and shift to Internet streaming, but NBC may be better positioned than any of the alternatives to pivot to marketing a national service directly to the consumer, offering a simple value proposition to fans of niche sports (ignoring the question of the fate of local sports and what it would mean for Fox and NBC). With Premier League Pass, NBC is building the groundwork and subscriber base for whenever the day may come when NBC Sports Gold has to become its main offering to sports fans.

Ultimately, I think the effect of the Internet will be to collapse any intermediate distinctions preventing a step down from the ESPN level directly to pure streaming, with the only distinction being between the resources and quality poured into that streaming, with the likes of Amazon, Twitter, Facebook, and potentially Google on the high end, down to lesser offerings oriented towards more niche audiences like Premier League Pass, all the way down to free streams where there’s no room for monetization and no budget for any but the most rudimentary setups at all. For the truly tiniest leagues, I’m already seeing signs of streaming, of various degrees of monetization, being a boon to them; when the number of channels is effectively limitless, there’s little reason not to put up a stream of every game you have so long as you have the resources for it, especially when it comes to leagues popular in their home countries that just need to export their feeds to the States. But for these mid-tier leagues that have become used to comprehensive coverage subsidized by non-sports fans who continue to subscribe to the cable bundle, the party is over. Even if you believe that the most apocalyptic scenarios still involve the vast majority of Americans continuing to subscribe to some sort of comprehensive cable bundle for the foreseeable future, there’s still clear evidence of the fear of cord-cutting and sports-free packages driving sports networks to reduce their investment in mid-tier properties that don’t drive enough viewership and subscriptions on their own to justify the level of expense the cable bundle has inflated their perceived value to. Services like Premier League Pass are the first sign of sports networks sending a message that it’s time for sports fans to pay more of their fair share of the boom of sports television that has erupted in recent years.

The Music May Be Stopping for Cable Networks

It feels empty, going back to talking about television and the future of video at a time when it feels like, for a young liberal like myself, we might not have a future of any kind at all, but there was some news this week that made me reflect on one of my older posts and how the television landscape is shifting.

In 2012, Comcast was looking for something to do with its ten-year-old video game channel, G4, which had been dropped by DirecTV two years earlier and seemed to be inexorably on the wane. It eventually decided to rebrand it to the Esquire Network, a joint venture with Esquire magazine. Two weeks before the rebrand was to finally take effect, Comcast, now in control of NBC Universal, decided to rebrand the Style network as Esquire instead, figuring that Style’s female-oriented programming was now redundant with Bravo and Oxygen, and giving Esquire a slot that actually had DirecTV carriage. G4 would remain on the air under that name, endlessly rerunning its back library, until its existing carriage agreements ran out, and it was finally taken out of its misery a little over two years ago.

That Comcast was willing to rebrand Style as Esquire Network without having anything else to do with G4’s space was surprising to me, because as I wrote shortly before G4 was put out of its misery, the trend in the cable business seemed to be to constantly rebrand channels until companies found a format that stuck, holding on to established channel space and using whatever channel hadn’t caught on to launch the next format idea that came to the suits. Which brings me to this week, and the news that came out Wednesday that Comcast will be shutting down Esquire Network’s linear feed later this year, converting it to a digital on-demand service. On one level, that Comcast replaced Style, not G4, with the Esquire Network means they have now effectively killed two channels instead of one. But on another level, there’s no guarantee Comcast wouldn’t be shutting down Style now anyway, if they hadn’t already done so. In that sense, Comcast may have simply been ahead of its time, knowing that it might not have any new channel ideas with which to replace either Style or G4 – for both channels, the alternative to giving Esquire Network a try would be a full shutdown.

The notion of “cable network musical chairs” was from the start rooted in one of the dynamics captured in my book, The Game to Show the Games. As described in Chapter 7, for many years the Big Nine companies that control most of the channels on your cable lineup were able to use their popular channels to bully cable operators into carrying less popular channels. By about ten years ago, it became nearly impossible to launch a new channel from scratch unless you could convince cable operators it would have a built-in audience from the start, and since then the only channels the Big Nine have attempted to launch from scratch have been regional and college-conference-affiliated sports networks. But outright closing a network and giving up its channel space was unheard of. Until G4, the only truly national cable networks to completely shut down since the 2004 closure of CNNfn and TechTV were ABC News Now, which had highly limited distribution to begin with, and SoapNet, which only survived the launch of Disney Junior because of Disney’s inability to get cable operators to swap one out with the other. It made sense to keep a channel around, just to squat on the space, until you came up with a new idea for what to do with it, knowing that unless things became truly dire cable operators would continue to carry it.

Of course, the same phenomenon that keeps companies from launching new channels from scratch also makes it difficult to relaunch existing channels and attract enough of an audience to make up from the audience lost from the old format, especially in the age of cord-cutting where starting up a new linear network seems like a decidedly outmoded, foolish proposition, if you don’t have any of the live events that are the main purpose of linear television going forward, or any established shows moved from other networks. It’s become decidedly obvious to all parties involved that the cable network landscape is badly oversaturated, but I felt that, without cord-cutting accelerating substantially, no one had any incentive to shrink it – so long as the Big Nine could still get cable companies to carry them, they had no reason to shutter any of them and deprive themselves of a revenue stream. Rerunning old content over and over would still bring in more money than losing the space without being able to get it back if you had a better programming idea.

There is some evidence, though, that cable companies are getting more and more empowered to at least try to dump networks they see as worthless, as they look for ways to shrink their packages to deliver more value and more reason for people to sign up for them. As much as online pay-TV services like Sling TV and PlayStation Vue have failed to live up to their promise of slimmed-down channel lineups, instead carrying most of the Big Nine’s entire portfolios, they’ve still placed some pressure on the Big Nine to shrink down what they have to carry, especially coupled with traditional cable companies’ efforts to create truly “skinny bundles”.

It’s hard to say what the tipping point was. By the time A&E Networks followed through with its announced replacement of H2 with the Viceland network in February, it was already widely ridiculed despite the head of Vice boasting that it would “return millennials to cable TV”. The general consensus was that Vice had no illusions of reaching “millennials” by any means other than online, and a linear network would simply broaden who it could reach at very little cost to Vice itself with the potential to bring in additional ad revenue. Al Jazeera America shut down two months later without replacement, despite the efforts of OneAmerica News Network to take over the space, in part because it wasn’t backed by any of the Big Nine. The same goes for the October shutdown of the Pivot network, itself already a merger of the Documentary Channel and Halogen network. The shutdown of Esquire, triggered by both AT&T and Charter looking to dump it, suggests the Big Nine’s bundling practices won’t insulate them from having to cut down on their networks.

To be sure, the Big Nine will continue to play musical chairs for as long as they can – Comcast is reportedly also looking into converting Oxygen into an outlet for crime dramas – but if the shutdown of Esquire is any indication, we may finally be about to see a market correction as the cable network landscape contracts to just those networks that are absolutely necessary, or at least sustainable. Losing Esquire on its own won’t cause anyone to dump cable, but if the trend accelerates fast enough, as more networks shut down there will be less of a reason for those subscribers that remain to keep their cable subscription, and eventually we should reach an equilibrium where cable is priced low enough to actually be worth the cost for those subscribed to it, while the migration of the “lost” content to the Internet, heralded by Esquire’s conversion to a digital platform tied to the Esquire magazine web site, will minimize the damage from the contraction and increase the value of cord-cutting. We could be seeing the start of the formation of the video landscape of the future. Again, assuming there is a future.

How NBC Gets the Olympics Exactly Backwards

Another Olympics has come and gone, and with it another round of hand-wringing over NBC’s tape-delay policy, fueled further this time around by NBC’s historically low ratings for its primetime coverage. NBC’s primetime coverage averaged a 14.4 household rating, dominant over the rest of TV but the second-lowest mark for a Summer Games since at least 1968 and probably ever, beating only Sydney in 2000, with declines especially acute among key young-adult advertising demographics. People are still trying to figure out the reasons for the low ratings, especially since everyone expected numbers much closer to London (the highest-rated non-North American Summer Olympics since 1972), but plenty of wags on the Internet and among sportswriters are pointing the finger at NBC’s long-standing and woefully outdated policy of tape-delaying the marquee events for primetime. This, of course, despite the fact that Rio is only an hour off of the East Coast and many events, including the marquee track and swimming events, aired live in primetime, meaning if anything NBC is likely to come to the conclusion that the Games suffered because they were live, not because they were taped. London had no events live in primetime, while NBC pulled strings to get Michael Phelps’ chase for gold into the morning time slot in Beijing, putting it in primetime on the East Coast. The result: London’s completely taped coverage beat Beijing’s mostly-taped coverage, which beat Rio’s mostly-live coverage. It sure looks like tape delay helps NBC’s ratings rather than hurts them, no matter how much people on social media may whine about it.

Further fueling this attitude is the popularity of the Olympics on the West Coast, where even NBC’s live primetime coverage is delayed, and thus where the whining about tape delays reached a fever pitch, but which is perennially the region where the Olympics are most popular, something NBC Sports chairman Mark Lazarus pointed out. But the dominance of the West Coast is not what it used to be; Salt Lake City and Denver were the top two markets, but San Diego was the only other market in the Pacific or Mountain time zones to crack the top 20. In Beijing, those three markets were joined by Portland in the top 10, and at least in the first week (when Phelps raced), four more West Coast markets placed in the top 17 with higher-than-average ratings, including every West Coast market in the top 40 except for Seattle (which gets the CBC’s live coverage on our cable systems). Had that held, it would seem to suggest that, even holding the time slot and specific games constant, tape delay only improves ratings. Instead, it raises the question of whether the West Coast, and indirectly audiences in general, really are souring on tape-delayed Olympics coverage.

Of course, since 2012 NBC has allowed people to stream almost all the events live regardless of where they live, albeit with the Olympic international feed’s announcers, and NBC claims that when streaming and cable are added in (for the first time ever, NBCSN and Bravo aired coverage in primetime that cannibalized some of NBC’s audience), the Rio Games trailed only London as the second-most watched ever. Streaming, however, remains only a teeny-tiny subset of total viewing, with the total amount of streaming for the entire games accounting for as much consumption as an hour 45 minutes of NBC’s primetime coverage.

But even though live sports streaming in general has a fraction of the popularity of viewing sports on linear TV, that only gets to the real problem with NBC’s “Olympics as ultimate reality show” approach, namely that it treats the Olympics as a type of programming that is slowly losing its relevance to linear television. Indeed, as “cord-cutting” increasingly emphasizes being able to watch what you want when you want, leaving live events as the sole area where linear television retains a purpose in the face of the rise of the Internet, NBC’s approach of streaming the Games live and delaying events to be neatly packaged for its linear network seems to be exactly backwards. As I’ve said before, streaming is not and may never be well-suited for airing major live sports events, and while complaints about Olympic streaming seemed to be more about the experience of getting through NBC’s authentication and its insistence on delaying the Opening Ceremony even on the stream than the sluggishness experienced in London, if NBC continues to insist on streaming as the only guaranteed method of watching marquee events live, it will only put themselves under more and more strain, or alternately greatly increase the cost of delivering the Games smoothly, as streaming becomes more normalized as a means of watching content. On the other hand, it’s disingenuous for NBC to insist on packaging the marquee events for showing when everyone is at home and then require that those events be shown at the same time for everyone even when they’re not live; after all, not everyone has a 9-to-5 job where primetime is the most convenient time to watch the Games. There is a place for recorded, prearranged programming on linear television, but that place is heavily reliant on social media, and social media was disproportionately represented by those that didn’t like NBC’s current strategy.

By the end of NBC’s current contract running through 2032, I could see NBC’s linear channel(s) (assuming it still exists as such) sticking strictly to airing the marquee events live, while also offering its traditional packaged coverage for streaming online whenever someone wants to start it for those who want the Olympics as “ultimate reality show”. That NBC does not do this already, instead forcing both the sports and reality fans to watch tape-delayed, packaged coverage at a specific time in order to maximize ratings for that specific time and sell ads at the highest price, is a sign both of how far streaming has yet to go to achieve normalcy, and a sign of how slowly linear television is embracing its true nature and the key to its future.

Will an ACC Network Be Obsolete Before It Launches?

In 2013, a year after financially-struggling Maryland left the ACC for the greener pastures of the Big Ten, the Charlotte News and Observer obtained e-mails that circulated among the leadership of the University of North Carolina, perhaps the single most important school to the long-term survival of the ACC, showing their reaction to the news. Many of the e-mails expressed disbelief at a Sports Illustrated article that claimed that Maryland would make nearly $100 million more in its new conference by 2020, thanks to the Big Ten Network, than it would have made in the ACC, with UNC officials looking for confirmation that Maryland was going to make that much more money (indeed Maryland itself wasn’t aware of it until it started going through realignment talks). But for many college sports fans following the sports media and college sports realignment worlds, the fact that the Big Ten was making oodles more money than any other conference was hardly news, but something that had been widely reported throughout the sports media and had been fueling the current round of realignment from the start. Ordinary college sports fans and bloggers knew more about the financial disparities between the major conferences than the university presidents within them whose job it was to make informed decisions. As Frank the Tank, one of the bloggers most responsible for exposing the implications of those disparities, put it:

It would have been one thing if these were average sports fans just focused on on-the-field results, but it’s quite amazing that university leaders and athletic department officials didn’t seem to be as informed on college sports financial matters as, say, most of the people reading this blog or those that followed the reporting of mainstream media members like Brett McMurphy of ESPN.com, Andy Staples of SI.com and Dennis Dodd of CBSSports.com. It’s an indication of the insularity of many universities and athletic departments and partially explains why the inertia in favor of the status quo is often stronger than many conference expansionistas would like to believe. What we’re seeing is that it takes a real external crisis for the vast majority of power conference schools to take notice of the information that’s out there and consider switching leagues.

I thought of this upon hearing about the ACC’s move announced last week to try to rectify this disparity, which has only grown to their further disadvantage with the launch of the SEC (and Pac-12) Network, yet the circumstances surrounding it have changed considerably since 2012. The sports-network market has always been built on the con of the cable bundle, where people with little to no interest in sports see large chunks of their cable bill get shipped off to pay for sports networks, and recent years have seen one piece of news after another suggesting that bundle is being increasingly undermined. My generation sees little value in the bundle and has increasingly been “cord-cutting” to get their entertainment from sources like Netflix and Amazon, getting away from bloated bundles that exist largely to subsidize sports networks. Investors are increasingly concerned about what the trend means for the sports-network market and especially ESPN, which finds itself caught between the rock of cord-cutting and the hard place of their desire to keep the cable bundle going for as long as possible; no less an institution than Moody’s has predicted the end of the cable bundle and that regional sports networks are looking like an increasingly dicey proposition. Meanwhile, cable companies, blamed for higher prices even as they struggle to keep pace with the rising price of sports networks, have increasingly taken stands against the launch of more and more new networks, as evidenced by the carriage struggles of SportsNet LA and the network formerly known as CSN Houston, with SportsNet LA remaining uncarried even as Time Warner Cable has reduced its price and even in Vin Scully’s final season.

Against this backdrop, the ACC has been the one major college conference with a substantial number of third-tier games still airing on broadcast television through regional syndication on Raycom. Assuming broadcast stations could get their act together and ensure wide coverage without relying on the crutch of retransmission consent (hardly a sure thing), I felt that, for all the ACC may have looked longingly at the SEC and Big Ten Networks and the revenue they make, staying the course could prove to give them a massive advantage in exposure if the market flipped and the SEC Network and BTN found themselves limited to what could be a distinct minority of people willing to pay relatively large amounts of money for them or for bundles including them, especially among poorer recruits, and especially if the ACC made an aggressive move to distribute their syndication package nationwide.

Instead, last week the ACC and ESPN announced an extension of their existing media rights agreement for the next twenty years, with the launch of a new “ACC Network Plus” digital network this fall leading up to the launch of a full-fledged linear ACC Network in 2019. I’d be shocked if the cable bundle still looked anything like it does today by 2036, and frankly I’d be surprised if it still looked viable in 2019. Reportedly, the long delay for the launch is related to the expiration of ESPN’s carriage agreements with cable providers, meaning ESPN would rather hold off on the launch of the ACC Network until it can tie it in with its established linear networks. But the addition of the ACC Network to ESPN’s bundle could be what causes the bundle to collapse entirely and marks the fall of ESPN’s empire.

Cable operators have been chafing under ESPN’s tops-in-the-industry subscriber fees for a long time, with Dish Network chairman Charles Ergen suggesting in 2011, following the signing of an expensive Monday Night Football deal, that certain companies might decide to go without ESPN and market their service as a low-cost alternative for non-sports fans, and in recent years many such operators have been experimenting with sports-free packages that offer a selection of popular channels at a lower price, resulting in ESPN’s carriage falling considerably. But no cable or satellite company has taken the plunge and experimented with cutting ESPN out of their lineups entirely, instead limiting the availability of their sports-free packages to avoid violating their ESPN contracts, and online “skinny bundles” that have won considerable acclaim for being an “alternative to the cable bundle”, including Dish’s own Sling TV, have made themselves part of the problem by including ESPN and other sports networks. For now, pay-TV providers feel they must have ESPN’s high-value programming such as MNF and the College Football Playoff, even though they know it’s almost single-handedly fueling the revolt against the cable bundle, because even as the cost of sports drives people away from the cable bundle, the presence of sports is the one thing keeping people tied to it, because live events, especially sports, are the one thing linear TV does better than the Internet. The power of ESPN explains why the SEC Network, theoretically a channel of regional interest, had the largest launch in cable TV history, avoiding even the carriage battles that bedeviled the Big Ten Network.

But for as much as the SEC Network benefited from the ESPN connection, it may not have been so successful if it weren’t sufficiently valuable in its own right. The SEC and Big Ten have the most passionate fanbases and bring the most value to any sports network by a significant margin over any other conference, even any other college conference; the ACC is strong in basketball, but their football conference tends to consist of Florida State and not much else, both in terms of quality on the field and in terms of schools with passionate fanbases that can attract large audiences, and football is what drives TV deals and conference realignment. What may be more relevant to what the ACC Network has to look forward to is the fate of the Pac-12 Networks, which remains uncarried by DirecTV years after launch; it was thought the DirecTV-AT&T merger would smooth along talks, but instead it seems more likely that AT&T will drop Pac-12 Networks from U-Verse systems once that deal expires than that DirecTV will add them. According to Washington State AD Bill Moos, Pac-12 schools were hoping to receive $5 million a year from the Pac-12 Networks at this point, but instead are only collecting $1.4 million. Unlike the SEC and Big Ten Networks, the Pac-12 went it alone on their network without selling any stake to anyone that might have helped their network gain carriage (or shared in the network’s expenses), but thanks to the CSN Houston and SportsNet LA struggles – not to mention ESPN’s Longhorn Network, which recently eliminated much if not all of its studio programming – cable operators are a lot more confident in their ability to stand up to sports networks than they were in the late 2000s when they challenged the BTN.

They may not have wanted to alienate ESPN’s many loyal viewers over the SEC Network, but the ACC Network won’t bring nearly as much value to the table, and while ESPN may have largely escaped the bruising carriage battles other large programmers have fought, if they overestimate how much cable operators are willing to pay for an ACC Network, at least one large programmer may just decide they’ve had enough of ESPN pushing them around and go to war (especially since even with the wait, ESPN’s carriage deals with Comcast, Charter, and Dish Network still won’t have expired yet by 2019, meaning the ACC Network will have to stand and fall on its own merits with them). Even if they don’t, the resulting hike in people’s cable bills might just be the spur cord-cutting needs to cross a tipping point and cause large numbers of people to dump their cable subscriptions en masse – and that assumes it won’t have done so already. Cord-cutting has come a long way in just the last three years – HBO went from disdaining the possibility of a direct-to-consumer offering to offering one in less time – and there’s no reason not to assume it won’t go even further in the next three. If ESPN escapes any major controversy surrounding the ACC Network, it may only be because the popularity of the cable bundle will have shrunk enough for it not to matter, to the point that ESPN might just decide to make the ACC Network the centerpiece of their own direct-to-consumer offering. Any of these scenarios would likely result in the ACC making substantially less money than they might have planned (or, depending on the structure of the contract, ESPN taking a loss on the enterprise).

ESPN likely knows all this, and tried for a long time to dissuade the ACC from the idea, preferring to let a clause activate this summer that would have substantially increased its payouts to the conference (and which, apparently, will still activate in the interim) than to launch a network that would not only lose money or fail to achieve the conference’s goals, but would accelerate the larger trend ESPN has been trying to slow down or fight off. But all the ACC sees is the boatloads of money the Big Ten and SEC are making, even though they have no chance whatsoever at making anywhere near that much, despite the conference’s consultant, Dean Jordan, claiming that if it “performs even moderately, it’ll put the ACC in a situation where they’ll be very, very competitive financially with the upper tier of the collegiate industry”. The ACC is deluded not only about the changes sweeping the video industry, but about its own value compared to “the upper tier of the collegiate industry”. There may have been a time when ESPN could ask for any price for an ACC Network and gotten the ACC money on par with the SEC, but that time has been long past for several years now.

ESPN President John Skipper points out that 93 of the top 100 TV programs in the ratings in 2015 were sports, compared to 14 just five years ago, and takes that as evidence that live sports is growing more popular and that the insatiable appetite for it will justify an ACC network, not that linear television is growing less popular among people who don’t watch live sports. The ACC is confident that ESPN will “find a way to make this work” no matter how untenable the cable bundle becomes in the interim. But that assumes live sports will maintain their elevated position, that the economics of the video content market won’t recalibrate themselves to favor video-on-demand services and linear television becomes the specific subset of the larger video landscape delivering a specific type of content, live content of all types, that it should be, that the linear market doesn’t greatly and rapidly contract to the level actually warranted by the provenance and popularity of live events that are out there, that conference-specific networks reliant on subscription revenue and showing lower-tier games don’t become an increasingly dicey proposition when they have to stand and fall based on their target audience alone. In that case, the best-case scenario for the ACC could be that the SEC and Big Ten networks become equally untenable, and if that happens they’ll still be in better shape than the ACC. I don’t know if the ACC will ever realize the scenario they passed up, but I do know they could find themselves cursing their foolishness – especially if their decision turns out to be the proximate cause of exposing its own foolishness.

Want to learn more about all this? As this post goes up, you still have a few hours left to get my book THE GAME TO SHOW THE GAMES on your Kindle for FREE! Or you can order the paperback or get it on your Kindle for cheap anytime! Find out more about the book by clicking the cover on the sidebar!

Why the Proposed “Hulu Skinny Bundle” Will Be Set Up to Fail

The Wall Street Journal reported Sunday night that Hulu is developing its own over-the-top “skinny bundle” for release sometime in the first half of 2017. (Note: since the WSJ article is paywalled, most of this info comes from a Mutlichannel News writeup of it.)

According to the WSJ, the bundle would include, at minimum, channels associated with two of Hulu’s co-owners, Disney and Fox, including ABC and Fox owned-and-operated stations and other popular channels they own, including ESPN, FS1, and Fox’s regional sports networks. The reports I’ve seen don’t say whether the service would include channels from anyone else other than the third co-owner, NBC Universal, but one analyst speculated a little over a week ago that it might end up including channels from CBS and Time Warner, both of which have contributed to Hulu’s existing on-demand service (with Time Warner even approached about a stake in the company last year). In other words, it would include the five companies that offer substantial sports content and that, together, keep the cable bundle together. Even if Disney and Fox were only able to get the Turner networks on board, the Hulu service could conceivably be a one-stop-shop for sports fans with every nationally-televised game from MLB, the NBA, and every major college conference, every bowl game of significance, and every NCAA Tournament game not on broadcast television, plus, for fans of local teams, games of any team with an agreement with a Fox network. The main reason to get NBCU on board would be to appeal to NHL, NASCAR, golf, and soccer fans, as well as fans of teams on Comcast’s RSNs. All told, it could well be the biggest step yet towards the breakup of the cable bundle.

Which is precisely why the companies creating it, especially Disney, won’t let it be.

Both the analyst that speculated about this a couple weeks ago and the WSJ report suggest that a Hulu skinny bundle would cost around $40 per month. After slashing the price earlier this year, PlayStation Vue currently offers broadcast stations and a broad selection of popular channels, including ESPN, ESPN2, FS1, FS2, and all three of Turner’s networks that carry NCAA Tournament games, and popular networks from NBCU (but not NBCSN) and all of the non-sports four, for $39.99 a month in the markets where it carries broadcast stations. If you have an antenna and live in one of Vue’s non-broadcast markets, for just $5 more than the proposed Hulu skinny bundle, you can add most of the channels left out of Vue’s base package, including NBCSN, Golf Channel, beIN Sport, ESPNU, BTN, SEC Network, and regional sports networks. Of course, considering PS Vue dropped its price at the same time it added the uber-expensive Disney networks, it may well be operating at a loss in an attempt to spur adoption, and may hike its prices again later. Still, if the Hulu skinny bundle is competing with PS Vue at those prices, not to mention Sling TV currently offering (with the single stream package) all the ESPNs, including SEC Network, plus TNT and TBS for $25 a month or (with the multi-stream package) FS1, the Fox RSNs, and all three Turner networks for $20 a month (suggesting Sling would probably offer all those channels for around $40 once it synchronizes its packages, depending on the effect of adding the Viacom channels), there’s really little reason to sign up for the Hulu skinny bundle unless you really want NBCSN and Golf Channel or you just want to deny the non-sports four your money out of principle.

It’s hard to see who the Hulu skinny bundle would appeal to that wouldn’t be better served with Vue or Sling – which, of course, is probably the point. Disney and Fox don’t really want to do anything that would hasten the breakup of the cable bundle, so it’s not surprising they’d price it to be uncompetitive with Sling and Vue given its selection, even though they could theoretically offer a lower price since they’re not really going through middlemen, potentially setting it up to fail and giving them a reason to claim skinny bundles and going direct-to-consumer doesn’t work. If they did try to competitively price it, Disney likely wouldn’t sign off on launching it unless it had the non-sports four on board, effectively making it the same as Vue, because there’s nothing Disney fears more than cutting the non-sports four out of, and thus motivating them to become independent from, the cable bundle. (Incidentally, that same analyst that speculated about a Hulu skinny bundle, and about a skinny bundle with the non-sports four, suggests that the latter could cost just $9 a month. That’s cheaper than anything I speculated about at the time, though only barely.)

It’s become increasingly apparent that the current batch of “skinny bundles” is more about the Big Nine declaring their independence from cable companies and networks not owned by the Big Nine (not to mention broadcast stations) than from the cable bundle itself, with all of them too scared of the consequences of leaving the others. In that sense, there is some importance to a Hulu skinny bundle that gives Disney and Fox a distribution mechanism independent not only of cable companies but of any middlemen whatsoever. But don’t be fooled by the uncritical pro-cord-cutting media touting it as some sort of landmark development in the breakup of the cable bundle. In the end, a Hulu skinny bundle will do little to benefit the consumer, at least in the short term, only its owners.

Two Types of Station Owners: How Broadcasters’ Inability to Navigate OTT Services Could Be Their Undoing – And Broadcasting’s Salvation

Ever since the Aereo controversy caused broadcast networks to threaten to pull their signals from the free airwaves, I’ve long accused broadcasters as a whole of being led by retransmission consent to disdain their own nominal medium. But it’s not a coincidence that ground zero of the Aereo controversy was New York, the single largest market in the nation where most of the biggest stations are owned and operated by their networks. The networks are on the front lines of fighting with cable networks for sports and other content, and are deeply aware of the advantages of the cable business model. Many of them have substantial investments in cable networks themselves or would like to have them.

Their affiliates are a lot harder to read. On the one hand, many affiliate owners were pursuing cash in retransmission consent negotiations even before the networks got in on it. The National Association of Broadcasters, which is supposed to represent broadcasters as a whole, has fought hard to preserve the retransmission consent system as it is and to weaken ownership restrictions so station owners can get more leverage at the expense of the overall viability of broadcasting. And certainly affiliated stations aren’t falling over themselves to improve their coverage areas any more than their networks are. So it’s pretty clear that affiliate groups, like their networks, staunchly try to preserve their retransmission consent revenue against forces trying to disrupt it. But are they willing to go so far as to give up their identity the way the networks are?

On the surface, there is reason to think they wouldn’t, simply because if the networks went cable-only they would effectively shut the affiliates out entirely, but during the Aereo affair Fox only threatened to take away the most valuable programming that seemed to most need retransmission consent to support it, and pretty much seemed set to simply insert their programming into affiliates’ feeds they sent to cable companies, allowing them to keep the affiliates in the process, and they seemed fine with that. More tellingly, I don’t think any broadcasters, no matter how small, vouched for Aereo’s argument that they were simply broadening broadcast stations’ reach, nor did affiliates indicate that they were in any way resisting the moves their networks seemed to be making to undermine broadcasting except insofar as it undermined their own access to top-tier programming, and even then in utterly ineffectual ways; certainly keeping the CW and MyNetworkTV alive in their current forms suggested they had no ambitions to improve the relevance of broadcasting as a whole. So my assumption was that the affiliates understood the perceived importance of retransmission consent to their business and to their networks’ ability to compete with cable networks, and so wouldn’t do anything to make broadcast more viable and would present a united front to preserve retrans and keep people tied to the cable bundle, with some potentially bailing in the incentive auction out of a belief that broadcasting isn’t viable on its own (and certainly the fact the FCC’s initial clearing target is the maximum possible suggests broadcasting is being as undervalued as I’ve long feared).

But there was always reason to think the networks were overselling the importance of retrans and their signal-pulling threat had more to do with their cable-network offerings than any actual importance of retrans; after all, contrary to popular belief advertising is sufficient to pay broadcast networks’ NFL rights fees and even Fox’s deal with the BCS, the one it ended up losing to ESPN because they couldn’t pay enough to make up ESPN’s subscription fee advantage and kicking off the retrans mania to begin with, actually made money for them without needing to be a loss leader. At the same time, someone was leading the charge to develop ATSC M/H and ATSC 3.0, technologies that hold (or held) the promise to increase the usefulness and viability of broadcasting as a technology without, by themselves, changing the economic incentives favoring cable, and while the networks seemed reticent to lend their full support behind ATSC 3.0, the largest non-network station groups were pretty much staunchly behind it, and while they’ve never quite fought the forces undermining their industry as strenuously as I might like (and in some cases have doubled down on them), the NAB and several other groups representing broadcasters have made many of the same pro-broadcasting arguments that I’ve made on this blog, even if they’ve come across as more self-serving lip service than actually being reflected in their actual policy recommendations, which suggest they’re more interested in protecting incumbents than in the actual overall relevance of broadcasting. And while they never quite addressed the question, reading between the lines of their FCC filings, by and large station owners seemed fine with over-the-top providers omitting broadcast stations from their offerings.

Which brings me to what really has me scratching my head: TV Everywhere. In the wake of the Aereo affair, the Big Four networks have all rolled out apps allowing you to access their programming and a live feed of your local station, so long as you “authenticate” with a cable or satellite provider. In theory, these apps are a centralized clearinghouse to watch any station associated with the network, regardless of who owns them, and have been explicitly pitched to affiliates this way, with CBS All Access offering most of its affiliates through the service. The ABC and NBC apps, however, still only include their respective owned-and-operated stations, with CBS reaching an agreement with Cablevision for authenticated access to their O&Os a few months ago and Fox offering no stream of any of its stations through the app. The only markets where all the Big Four stations are owned-and-operated are New York, Los Angeles, Chicago, Philadelphia, and the Bay Area, so as a result of this, among other things, those markets plus Dallas and Miami were the only ones PlayStation Vue was operating in. This despite Hearst being announced as a partner with Watch ABC pretty much as soon as the app itself was announced, yet their stations remain absent nearly three years later – supposedly because of the need to reach agreements with the cable companies, but if Hearst was in charge of that there’s little reason for that to be a problem if they were as into it as ABC itself was, and if ABC was in charge of that you’d think they’d have already struck those agreements to begin with, and in any case there’s not much reason to announce Hearst jumping on board if it wasn’t going to actually smooth out the negotiations with cable companies. It does suggest that, on the surface, it’s understandable that three-way negotiations between network, affiliate, and cable company would be difficult to make work, and ABC just announced a “clearinghouse” intended to make it easier for stations to latch on to their existing agreements with DirecTV and PlayStation Vue for streaming, with Hearst stated to be taking part with the former. But other recent developments suggest it may be too late.

Last month, PlayStation Vue, evidently fed up with the slow progress of reaching agreements with non-owned-and-operated stations, rolled out its service nationwide (and to devices other than the PlayStation itself), omitting broadcast networks entirely in the new markets with “Slim” options $10 cheaper than the equivalent full-service options, but not giving customers in its existing markets the ability to sign up for the “slim” packages. This raises the prospect the networks feared with Aereo: people paying for cable channels including ESPN but watching broadcast networks without paying for them if they can get them with an antenna, outside of markets where PS Vue was already offering them. Then, a couple weeks ago, rival Sling TV made that prospect explicit by reportedly introducing a new “AirTV” box that enables broadcast content received over-the-air to be integrated with Sling’s own offerings in Sling’s programming guide, regardless of whether Sling has an agreement with the station or even the network in question. I’m not sure I agree with the implied notion of continuing to treat linear television as something special and separate regardless of its nature, putting all linear television into a single, separate app as though linear television itself is the product, and as such Sling isn’t really doing anything it wasn’t already doing by its own nature, but integration of OTA content on streaming boxes can be hit-or-miss enough that AirTV can still encourage people to pick up broadcast stations over-the-air without paying for them, if they can. More to the point, it sounds like Sling can then deliver the broadcast content to any device, like a legitimate use of what Aereo was doing, actually providing some usefulness to the product.

To put this in perspective, last week Dish and Viacom avoided a potentially nasty and damaging carriage dispute with an agreement that will put Viacom’s channels on SlingTV, to the confusion and disappointment of analysts who felt Dish “caved” in not standing up to a Viacom that Suddenlink and Cable One have already seemed to do well enough without. Coupled with the inclusion of Fox in the new multi-screen bundle and the mutual interest on both sides to add ESPN and the other Disney networks to it as well, explicitly hiking the price and obviating everything I said about its potential impact, it seems like Sling TV is coming awfully close to recreating the entire bloated cable bundle just like PS Vue, putting the lie to all the public statements Dish made at its launch about wanting to keep it slimmed down to provide maximum value, and making me wonder, if they really did mean those things, if the Dish-Viacom deal pointed to ESPN acting as the Godfather of the cable bundle in keeping it together at all costs, certainly in keeping Viacom dependent on it. Putting aside anything else, if Sling TV and PS Vue weren’t going to actually provide anything different from the existing cable bundles, it would seem that the cable companies could pretty easily put them out of business, even without shady tactics, by lowering their prices to make a cable/internet bundle competitive with internet plus Sling or Vue and/or making it easier to watch their linear television content on a streaming device… that is, if they weren’t hamstrung by the need to charge retransmission consent to all their customers. Sling TV and PS Vue’s ability to offer broadcast stations separately or not at all, allowing people to rely on an antenna to receive them, could well be their one major, vital advantage over traditional cable television, what allows them to continue providing value even with a traditional bloated cable bundle. I didn’t agree with Rich Greenfield that retransmission consent was the major factor causing the cable bundle to lose its perceived value, but if Sling TV and PS Vue can continue making it optional, it may well prove to be traditional cable’s fatal flaw.

The funny thing about this is that other companies have felt that finding a way to untangle the thicket of broadcast stations was so vital that Apple outright gave up on creating its own Apple TV service when it couldn’t negotiate with broadcast stations. Indeed, PS Vue itself not only offered broadcast stations in its launch markets but included them in its base packages, forcing everyone to pay for them, and showed every indication of applying the same to any market it expanded to. PS Vue wanted to play by broadcasters’ rules, yet when the affiliates couldn’t get their act together, leaving the service still stuck with just the O&Os, PS Vue decided “screw it” and took its service nationwide without broadcast stations, effectively costing the affiliates their opportunity to make OTT work for them and not against them. If Sling TV and PS Vue prove successful enough without broadcast stations, Apple and other companies that felt they had to offer them may decide that, at the very least, they’re not worth the hassle, and broadcasters will have completely missed the boat, left to see the gap between them and cable networks widen again, and seeing cable operators redouble their efforts to undo or shake up retrans.

Again, it’s possible the affiliates just didn’t grasp the importance of getting some deal, any deal done before Sony decided to go without them… but this has me wondering whether the affiliates deliberately dragged their feet as part of a larger effort to make broadcast the center of the broadcast industry again. Perhaps the affiliates really don’t want to be as dependent on cable-style bundles as their networks want them to be, and recognize that it is killing broadcasting as a medium and that nurturing the creation of a large base of people aware of and exploiting broadcasters’ free over-the-air signals is vital to broadcasting’s long-term survival (even if it might hit their pocketbooks in the short-term), by creating a group of people interested in the fate of the medium and ultimately providing motivation for broadcasters to actually invest in their signals and in technology to make them easier to access on a wider variety of devices. Perhaps they felt all along that they preferred to rely on ATSC 3.0 as their ticket to reach mobile devices and that there was no reason for cord-cutting to work to its detriment rather than its benefit. Or perhaps it’s a combination of both and they haven’t yet grasped that Sling TV and PS Vue haven’t been the threats to the cable bundle they thought they would be (not helped by uncritical media coverage that has treated them as “a boon to cord-cutters” without questioning whether someone signing up to either service is truly living up to the spirit of cord-cutting), or just didn’t anticipate “cable minus broadcast” being the niche “skinny bundles” would occupy so early, before “cable minus sports” or something else that would actually deconstruct the cable bundle… or maybe they don’t even care about that and care more about getting broadcast out of its cable-imposed ghetto.

By goading PS Vue into encouraging customers to pick up broadcast stations with an antenna while still delivering them cable channels, broadcasters may have dealt themselves a fatal blow. But if Sling TV and PS Vue have the effect of encouraging widespread antenna adoption, it may well prove the best thing to happen to broadcasting as a whole.

Sling TV May Have Just Triggered the Beginning of the End of the Reign of ESPN

“Skinny bundles” have long been an overhyped disappointment. Cable companies offering sports-free packages have been hamstrung by contractural provisions and legal threats from offering them all that widely, when they’ve bothered to promote them at all. And efforts to create over-the-top offerings, like Sling TV, have kept most of the most expsnsive channels, including ESPN, thus preserving, not undermining, the worst parts of the cable bundle.

Last week Sling TV unveiled a new “beta” multi-screen offering, allowing customers to stream Sling TV content on up to three screens, rather than the single screen their existing offering was limited to. But that’s not the only difference between the multi-screen and single-screen offerings. For the first time, the multi-screen offering provides access to the Fox networks, including FX, FS1, and Fox’s RSNs. And perhaps more to the point, the multi-screen offering does not include ESPN or the other Disney networks. For the first time, there is a widely-available linear TV service that can actually free you from paying the ESPN tax.

The new multi-screen offering is not perfect; for one thing, Fox is nearly as much of a contributor to the high price of the cable bundle as ESPN, through FS1 and especially its regional sports networks, though Sling does not appear to be offering Fox News. So subscribers to the new package may not be subsidizing ESPN, but if they have no interest in sports they’re still subsidizing expensive regional sports networks, and unlike with the single-stream product broadcast networks are included so you’re paying retransmission consent (or at least making up Fox’s share of it) even if you can get Fox with an antenna. Sports fans are still hitched to the entire cable bundle, and FS1 offers few sports whose fans can go without ESPN or other sports networks (basically the UFC, NHRA, and that’s it). As a result of Fox’s own high price, the new service’s $20 price tag offers no savings over the single-screen product, so it might seem like someone would only switch to it if they’ve read my book and are dropping ESPN out of principle, especially since the Discovery networks are also missing so anyone who wants any of them will be stuck with the single-stream offering and paying the ESPN tax.

But if you’re someone who’s interested in Sling TV for reasons other than ESPN, if your interest revolves around the AMC, A&E, and Scripps networks (and Turner as well), you’re going to gravitate to the service that actually allows you to stream the content on multiple screens. And for sports fans, local sports is arguably more of a motivator to remain signed up for cable than ESPN is, and while fans of local teams can’t necessarily go without ESPN entirely, since ESPN has a significant number of exclusive baseball and basketball games including Sunday Night Baseball, one baseball wild-card game, and one of the NBA’s Conference Finals, fans of teams on Fox networks can still watch most of their games without paying the ESPN tax, especially if the teams aren’t that good.

A part of me thinks that Disney and Discovery are just the only two companies that haven’t given Dish the right to offer their content on multiple screens and this is just Dish’s way of pushing them to re-do their deal, meaning ESPN will be there to inflate the price of the offering and keep people paying the ESPN tax soon enough (as Disney seemed to imply in a statement), making this not that different from when PlayStation Vue didn’t include ESPN until earlier this year. But Sling is a lot more visible, and provides more cost savings over a more traditional bundle, than PS Vue ever did, and it’s not exactly obvious that ESPN will eventually join the multi-screen offering. Unless and until it does or Dish ends up nerfing it in other ways, people looking to save money on their cable subscriptions now have a viable option that deprives ESPN of their revenue stream and broad reach that allows them to keep high-profile sports hostage to the cable bundle. And if AMC and Scripps find the multi-screen offering attractive enough, they may just decide they don’t need to be propped up by sports networks at all – and that’s when the real threat to ESPN’s business model begins.