16min chapter

The Sports Media Podcast cover image

Episode 110: DirecTV’s Rob Thun on the future of sports media, and Fox’s Joe Davis is The Big Get

The Sports Media Podcast

CHAPTER

Offering Subscriptions as a Value-Add and Rethinking Programming Deals

This chapter discusses the strategy of offering subscriptions as a value-add to combat cord cutting, negotiating deals with D2C platforms, and the importance of personalized pricing and rethinking programming deals. It highlights the changing ways people consume content and the need to rectify exclusive content practices. The chapter also touches on the possibility of ESPN going direct to consumer and the decision to discontinue the NFL Sunday Ticket product.

00:00
Speaker 1
channels and that content through their subscription to us would have free access to their direct consumer product and we were out there first to try to get those that what we called the don't pay twice principal and we got coupons effectively for customers who wanted to subscribe to those direct consumer products from the likes of Discovery Plus from the likes of AMC Plus, Paramount Plus, Peacock where we got a 40% off coupon for our customers. Charter got 100% off coupon and they're plugging in those D2C products as part of the subscription now into their subscription for Spectrum. That was an important move and in order to make room for that they also called out a lot of what I'd call longer tail channels or secondary or tertiary channels of the particular portfolios of these of these programmers that don't get a lot of viewership they're really just jammed into deals to get money out of distributors the price of Pay TV has gotten too high they're hobbies for these programming shops that don't throw off a lot of cash anyway those those should go away and we should retrench the programming into the channels that they have that are the flagship channels and too often I'm seeing the same bit of content ported across multiple channels of a particular portfolio. You see Monday Night Football that used to be exclusively an ESPN going to ABC. You see you know the Manning cast as it relates to that as well so ESPN to ESPN, ABC are all getting effectively the same game with different variations of it not to pick on ESPN Disney they're not alone you see a lot of duplicate broadcasts across portfolios and we don't need to pay twice for that kind of stuff. The shell game of programming cost needs to end and we need to get more personalized pricing so we keep more customers in the Pay TV ecosystem and if we don't then the programmers who are going to go direct to consumer and lose customers from us now have to they all if we lose one customer every one of the major programming shops needs to pick up that subscription for that customer with their D2C products and we know that's not going to happen it just isn't so it's kind of crazy that we've gotten to this point and it doesn't seem like logic prevailed in how program deals were done but here we are and now we have to try to re rationalize this and I think the chart or Disney deal was a good first step in towards reconstituting how these deals are done in a way that are most advantageous for customers. You did kind
Speaker 2
of answer it but I want to ask sort of an obvious question which is like how is this going to help you at Direct TV is this going to in your opinion going to stem cord cutting okay you're Direct TV do you call it cord cutting what do you call it we do we do yeah it's a
Speaker 1
fair it's a maybe it's a misnomer but yeah we think of his cord cutting work or churn really I guess there you go yeah I think it's churn we don't like that churn is not a good thing and so if we can come to the table in a renewal like you ask what are the important things I don't think I fully answered your question but there's a myriad of different things if we can provide subscriptions to D2C products that they didn't have previously that's value add that we can get back to customers to then say please stay with us because we're trying to give you more value than what you had previously
Speaker 2
with us. Do you have a number internally where you think the pay TV universe is going to sort of level out at? Look we've
Speaker 1
seen all kinds of different reports I think you see ranges between 40 and 60 percent as being sort of the the bottom and it's hard to know if that's correct or not but that's the best guess is by the the analysts who cover our industry but prices keep going the way they're going maybe that's underestimating the bottom because if you're if you're selling hamburgers and you were charging 10 bucks you know 10 years ago and now the hamburgers 50
Speaker 2
bucks maybe people aren't going to eat hamburgers. Give me a hot dog yeah
Speaker 1
you are. If there are other substitutes like the hot dog that you're bringing up the substitutes are bite-sized portions of D2C products that people could subscribe to or we're getting content through Amazon Prime that they get they're largely getting an Amazon Prime subscription for free shipping opportunistically getting content now and getting things such as Thursday night football as part of that subscription there's the value ad that's happening with Amazon. There are other ways for people to get to content that are different than the way probably you and me grew up watching at least I know I did I watched ESPN cycle through multiple versions of sports and I used to watch you know my local team my braids play or I watched my bulldogs player I watched my Hawks play or the threaded Falcons I'd watch those teams play and then I'd watch the ensuing sports local sports recap of that game and games and then I'd watch sports center to see how those things plugged in and I don't think millennials watch sports the same degree they certainly don't watch TV to the same degree we didn't grow up with TikTok but that's a phenomenon that people like to watch and it gets a lot of eyeballs so people have the time is really the measurement that shared across all these things and they spend their time in different things than just linear TV and if we price linear TV to expensively you're almost forcing their hand to go watch it differently spend their time with their eyeballs doing different things and watching pay TV.
Speaker 2
You know what's uh what what I find to be interesting about this is as I've been covering this it seems to me that Fox and ESPN have really been trying to support the cable bundle so even if Monday Night Football has sort of leaked out to ABC I mean it's a broadcast channel of course you can get get it within antenna but it's still somewhat within the bundle you look at like NBC which puts Sunday Night Football on Peacock or CBS which puts you know their NFL on Paramount+. That's different than what ESPN is doing but it doesn't sound like you view it much differently.
Speaker 1
No I do I mean I think um in Fox and Disney are the first ones to tell the fact that they are not the bad actors in the D2C regard because objectively Disney plus and ESPN plus are not pure you know replicate streams of Disney the Disney channel and ESPN they're different pieces of content whereas what you get in Peacock and what you get in Paramount plus are largely duplicative of what our experience is and all the channels that we license all the way to the broadcast channel. The one thing that they do maybe that's even worse though is they they take certain pieces of exclusive content uh to put into those D2C experiences and then are further driving people away from pay TV to go subscribe to those particular experiences. There's going to be a wildcard game in Peacock that won't be available in pay TV that's not a good thing and so those are the kind of things that we have to rectify in our upcoming deals so that the kind of behavior doesn't happen because we're they're probably being funded 100% through the content licensing of our deals. And
Speaker 2
the unique thing about Carter doing that was Carter had me believing at least that they were prepared to go as a broadband company you know that okay we we are going to shed video you of course at DirectTV you can't do that. Yeah
Speaker 1
we're a pure play video provider so we don't have the ability to point people to the broadband subscription hours and I and I don't think charter was you know playing a game I really do believe that they were at the point of indifference where they probably make just as much if not more money for a customer who's just a broadband customer versus a broadband and video. I think broadband's been subsidizing video for years and they kind of hit the point of it doesn't make sense anymore for video to be subsidized for broadband. We'll cut the cord and let you guys all then fight for yourselves to see who's going to get to your direct consumer subscription and so I don't think it was a bluff I think it was very real and I think that's important as a as a check against the programmers to get more rational and their pricing to realize that you that none of them not one of them could exist if it was just DTC only because not everybody watches ESPN not everybody watches Fox News not everybody watches a USA or Paramount channel they they just don't and but but through our subscriptions they pay we pay for every single one of those customers who has in their package those particular channels and so this buffet model that they enjoy if it's all a cart model it's a it's a whole different game of trying to get these customers and then servicing them which is another thing that they don't really have a lot of experience with and it's not it's not an easy part of what we do and what we provide the value
Speaker 2
chain. We have a long-standing bet here on the podcast that I think you're going to be able to help us with when in your opinion is ESPN going to take its it's a regular ESPN feed and go direct to consumer.
Speaker 1
That's that's a very intriguing question. I know which side of the answer I'd like to see which is never but but but in fairness to ESPN too I think they have to be very judicious about that move because if ESPN is fulsomely available on a direct consumer basis why do to the exact subsidization point that I made earlier why do we have to plug in ESPN to our packages and have our customers bear a very expensive price tag for ESPN when we can just point them to ESPN plus or ESPN or wherever they're going to call it ESPN flagship I guess is what I've heard out there just pointing to ESPN flagship and they can go get their subscription there and we can lower our prices. So I think that's why they haven't done it as of now they have to think through what are the pros and cons of that probably have to get a bunch of deals done to lock down those rights and distribution with with the distributors in a way that they have certainty around the carriage of ESPN but if they go do it in advance of certain renewals with with the bigger distributors they may find themselves without that distribution for that very reason there's no reason for if 20% of the universe watches ESPN I'm just making a number up why does the other 80% have to pay for it that that's been the argument of what you know pay TV product is you have to pay for every single channel in the dial and if customers can opportunistically pick onesie two Z3s I don't know why we would sort of continue with that same licensing model
Speaker 3
and
Speaker 1
by the way that's exactly where we have to have those conversations with those that more fulsome we put their products their linear products and broadcast products into their direct consumer products it doesn't make sense for us to license them in the same fashion then if that's if that's their longer term strategy that's
Speaker 2
why the business has been so good for sports a proverbial little old lady down the street is helping to pay for my Orioles
Speaker 1
addiction right that's right that's right
Speaker 2
so final final question you know we you and I were on a panel session last week in Los Angeles LA Sports Council where I asked you if it felt weird for direct TV for the first time since 1994 not having NFL Sunday ticket available and you had you had a great answer on on stage
Speaker 1
you want me to repeat that answer well I guess the answer was well we're a billion dollars richer for not doing that deal and it's not to be flipped and it's not to sort of degrade the NFL and their Sunday ticket product is a fantastic product and it helped drive our business for many years but where and where we sit in our product lifecycle it didn't make sense because we lost a billion dollars a year and so perpetuating that that sort of lost leader products that we weren't going to do anymore we were very data driven when we entered into those negotiations or frankly we didn't even enter in the negotiations the only thing that we were looking for for Sunday ticket was continuance within our commercial customer base and that ultimately we figured that out with the deal with EverPass that the NFL has an ownership stake in EverPass you've got YouTube TV who's in a different product lifecycle they're looking to still grow and if that's a vehicle to help them grow then it makes more sense for them to do it but for us it didn't make any sense at all anymore
Speaker 2
the group called antenna peg the number of YouTube TV subscribers for a Sunday ticket at 1.3 million what should we all make of that number
Speaker 1
well I suspected it needs to be higher because I suspect that's not enough to make what you can do the math and it's 1.3 million customers at 350 or 400 a month or not a month for the entire package and they're paying two billion dollars I don't think they made the cut so we'll see but they're in the first year of having it they're going to do everything they can to scale it they've used other partners outside of just YouTube TV with their own sister sort of company of YouTube the the bigger company frankly they have a deal with Verizon have a deal with Comcast so they're getting partners to try to help offset those costs but to me I think they they use it as a scale driver for YouTube TV and I think they also used it as a vehicle to drive their base up to ultimately reduce their programming cost because they likely have size-based MFNs against the bigger four that being Comcast, Charter, Direct TV and Dish they're trying to get to cross the Dish total subscriber number to then presumably trip up some size-based MFNs that they enjoy better rates from the various programmers that they have deals with I don't know I don't have full I don't have transparency into any of their deal making but that would be my hypothesis is part of the reason why they did that so I'm not sure what that is done to drive the ultimate YouTube numbers up but they if they can cross the Dish sub number then that presumably gets them into a better pricing place with various programmers and their deals. All
Speaker 2
right I lied one final question you brought up the MFNs why haven't you used an MFN on ESPN or Disney yet considering what their deal with Charter is it just a factor of that
Speaker 1
comes up? I can't get into the the confidential nature of our ideals but we will wait and see what comes out of that. Rob
Speaker 2
you can be a co-host on the March Andon Oran sports media podcast any week thanks a ton man you got
Speaker 1
it thanks John appreciate the
Speaker 2
time. I want to welcome in Fox's voice of the MLB Joe Davis the World Series starts later this week we know the Rangers will be in it we don't know as of this taping whether they're going to be facing the Phillies or the Diamondbacks but I do know a lot of MLB and Fox executives that are pulling for a train trip down to Philly instead of a plane trip a flight to Phoenix Joe's been with Fox for nine years I love talking to you you're a guy that's replaced Vinskully with the Dodgers replaced Joe Buck on Fox's MLB Joe thank you very much for joining us.
Speaker 3
Yeah of course John always good to talk
Speaker 2
to you too. So last night as we're taping this you called game seven in Houston where are you right now?

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.
App store bannerPlay store banner

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode