The Bundle Bulletin
Notes from the sports media podcast: What happened and what it means
It’s not Thursday! So why am I getting an Unofficial Partner Newsletter?
Short answer: We’re trying something.
Longer answer: Before we record The Bundle, my co-hosts Murray Barnett and Yannick Ramcke share possible topics, random thoughts and potential storylines that make up the episode.
I’ve always found this material very interesting, and have learnt loads just by being the person asking the questions.
So I thought you’d enjoy it too.
The Bundle goes out monthly, so that will be the cadence of this newsletter too.
(But…I like the idea of a dedicated Bundle WhatsApp Group that allows you to get involved more fully in creating each episode. More on this later maybe).
If you don’t want to receive The Bundle Bulletin next month, just let me know by responding to this newsletter.
Hear the latest episode here
Exam Questions
The next month will define the US broadcast market for the rest of the decade. Explain, and show your workings.
What’s the deeper meaning of the Jake Paul-Mike Tyson fight?
Netflix has inverted the sports rights market. Do you agree or disagree, give supporting arguments in each case.
‘College sport gives you tonnage and local relevance’. What does this phrase mean?
Apple’s new Sport app will be the new Buzzer. Agree or disagree?
NCAA and NBA mark the end of this rights cycle in the US
Territory: US
What happened?
Two big media rights stories from the US.
1. ESPN retains NCAA College Football rights
2. The NBA domestic rights process launches
Source: Variety
Why do we care?
College sport is far bigger than you think
College football on ESPN accounts for the top 15 and more than 50 of the top 100 most-watched cable programs on record (since 1987), with eight of the top 10 directly from CFP Semifinals or National Championship games.
The NBA is the final bit of the jigsaw - and the price will be massive
The directional rights in the US broadcast market are pretty much nailed down for the foreseeable future - apart from the NBA.
Current NBA TV agreement expires in 2025 with exclusive negotiating windows with TNT and ESPN running until 22nd April.
Allegedly the target is “at least 2.5 times as much as the one in place” – current 9 year deals are worth $24 billion. New deal would target $60 billion to $72 billion.
What does it mean?
NBA has been part of TNT Sports programming for nearly 30 years but it’s a challenging time at WBD – Q4 results reported a net loss of US$400 million, an annual decrease of seven per cent, falling short of investors’ expectations. The company’s share price fell by 12% as a result.
Increasing game inventory is a go-to strategy for rights owners to boost (or at least sustain) media rights revenues (see also English Premier League).
“The compressed schedule of the post-season format benefits ESPN and the incumbent could apply some media rights wizardry on its own to further optimize the company’s bottom line.” – This perfectly sums up the ESPN competitive advantage in this instance.
New expanded structure is perfect for ESPN’s “legacy multi-channel video programming bundle”: Low-volume, marquee but a compressed tournament schedule is best leveraged by linear pay-TV's dual-stream, wholesale revenue model (subs fees and advertising)
Subs fees - Retransmission (ABC) and carriage (ESPN) fees. Must-carry programming for which distributors are willing to pay to play (on the base of year-round contracts).
Advertising - Tentpole events with up to 50M+ viewers have become increasingly rare in today’s fragmented video entertainment marketplace.
Sub-licensing - Sublicensing leveraged to relieve pressure ESPN P&L. Tailored packages (e.g. singular games to drive subscriber acquisition for streaming services) will result in higher average per-game value (than ESPN per-game ‘bundle’ value).
NCAA and NBA key pieces of the much trumpeted “Spulu” JV
The NBA (and its advertiser-friendly, digital-native audience) is arguably the most important property WBD brings to the table and a failure to retain rights would have a significant impact on the company’s standing within the JV.
John Wallstreet commented in an article titled “NBA Should Cooperate with Linear Broadcast Partners to Protect Golden Goose”:
The NBA has “an amazing business model, one that is predicated on having healthy linear partners,” one former high-ranking ESPN executive said. “If it takes every last dollar out of the old system and breaks it, where does the next deal come from and what will it look like?”
Fee growth for NCAA (and possibly NBA) should have second tier rightsholders worried as there is not an unlimited pot of money. Logic dictates that second-tier properties up for renewal (e.g. US rights for German Bundesliga, Formula 1) might be on the chopping block.
Jake Paul v Mike Tyson reveals what Netflix thinks about when it thinks about sport
Territory: Worldwide
Sources: SportBusiness
What happened?
Jake Paul's Most Valuable Promotions (MVP) has made its biggest move in the sport, striking a deal with Netflix for Paul himself to take on legendary fighter Mike Tyson in the entertainment giant’s latest live sports offering.
Why do we care?
Boxing events are still big money spinners. Tyson’s exhibition fight against Roy Jones Jr. in November 2020, his first fight in 15 years, generated over 1.6 million pay-per-view buys. Streamers (should) like them because they are ‘tentpole’ events which can be promoted and attract wide and incremental audiences.
What does it mean?
It’s about Netflix, not sport
Netflix is in the business of storytelling, not sports. The company can cherry-pick its bets on sports, but as a market leader naturally faces an increasingly saturated landscape. Top-tier live sports programming is one of the very few sure things left for incremental audience expansion. The boxing exhibition addresses a demographic profile arguably underserved on Netflix, and comes with built-in social media reach multipliers and bespoke advertising opportunities.
Netflix has won, but investors still crave growth
With market-leading scale (240M subscribers, thereof 80M subscribers in the US) and retention metrics (2% monthly churn), audience expansion has become an increasingly difficult (expensive) challenge for the near-ubiquitous streaming service. WIth the introduction of ad-subsidized subscription plans and the password-sharing crackdown, the biggest remaining levers to grow subscribers/revenues in their most mature markets have now been pulled.
The Reverse Ferret: Netflix has inverted the sports model
This exhibition fight is not like other sports, it is made for TV, and follows Netflix’s inverted sports content strategy: shoulder content first (Untold: Jake Paul the Problem Child), complemented by live (sports) programming to further engage a built-in audience. Breaking Point (followed by Netflix Slam) and Full Swing (followed by Netflix Cup) are other example. The subscriber acquisition potential of the Paul-versus-Tyson fight is undeniable though, and might even be at the forefront of Netflix executives’ minds on this occasion.
Mike Tyson is a kind of weird loyalty reward scheme
Offering the fight as part of the base subscription, and not as a premium add-on or pay-per-view event, should positively impact brand perception and subscriber loyalty among new and existing ‘members’ tuning in for the event. This is presumably aimed at men given the boxer’s appalling record of domestic violence and previous convictions for rape.
Why is this different than DAZN’s boxing strategy?
Previous attempts to disrupt the pay-per-view model in combat sports and democratize fighting viewership failed, most recently when DAZN entered the US market in 2018 with such all-you-can-eat value proposition and a combat-heavy programming line-up. Due to overwhelming market forces and inferior economics, the streaming service quickly increased the monthly subscription price to $19.99, heavily discounted the annual plan to $99, and ultimately reverting back to the pay-per-view model in late 2020.
Half pregnant: Netflix and sport is about plausible deniability
Despite beefing up its executive ranks to head its live sports strategy (e.g. Gabe Spitzer, VP Nonfiction Sports) and having effectively shown its hand with the unsuccessful bid for global rights to Formula 1 ahead of last season, Netflix keeps insisting that WWE doesn’t necessarily fit one definition (live sports) or the other (entertainment) — which could also mean Netflix is halfway there. The fact that ad-tier subscribers will see commercials while ad-free members will not as part of the WWE programming adds at least some plausible deniability to their perspective.
“Netflix is not anti-sports. It’s pro-profit”
It requires return on any content investment which will be a wake-up call to sports rights owners who have enjoyed a golden period of rights inflation and who believe Netflix to be the saviour of live sports media. On the other hand, neither another bid for Fornula 1 as soon as next year (and even post-peak of Drive to Survice, see also below), the introduction of a pay-per-view model as further revenue expansion option, nor the blatant licensing of live sports programming (e.g. NBA In-Season Tournament)
The Outro:
Stuff we talked about and will come back to
Ratings challenges for F1 in the US (via SportsPro)
Yannick:
“Formula 1 has punched above its weight when comparing media rights income with TV ratings delivered [ever since it has signed the new ESPN agreement] — if you just look at what channels and broadcasters are getting for what they pay. Liberty Media leveraged the momentum at the height of Drive to Survive into tangible economic benefits. [There is a disconnect between] the focus of the sports media coverage and what is actually the common US sports fan into. NASCAR is not even comparable with F1, it's so much bigger.”
Murray:
”F1 can be bullish about continued fee growth due to the sports holistic halos of Drive to survive, Vegas and Miami and desirable demographics. A watch out could be slowing audience momentum”
Netflix ends Breaking Point (via Broadcast Now)
Yannick:
“There’s no cookie-cutter approach to replicate the success of Drive to Survive, and everyone jump on the bandwagon. It seemed like rights owners could not afford to not give it at least a shot. It is not a death knell into the recent ($38 million) investment into Box to Box Films though.”
Murray:
“A key component in the programming mix of many sports, the omnipresence of sports docuseries naturally requires increased creativity, controversy and charisma to attract audiences”
What will Apple’s Sport app become?
The iTunes for Sport, the new Buzzer, or just another betting and scores app?
To be continued.