Specialist
Executive at Pac-12 Networks
Agenda
- Operating environment for Sinclair (NASDAQ: SBGI), ESPN (NYSE: DIS), Amazon (NASDAQ: AMZN) and others – value perception towards national and local sports rights and ability to distribute and monetise
- Viability of standalone D2C sports streaming application relative to bundling opportunities in broader OTT (over-the-top) sphere – implications for subscriber uptake and sports-related ARPU
- Evolving role of big tech in sports-related initiatives – Amazon, Facebook (NASDAQ: FB), Google (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL)
- Outlook for H2 2021 and beyond – sizing sports betting, understanding monetisation economics, plus longer-term winners and losers
Questions
1.
What are some key trends or drivers that will impact sports network distribution models at the network, league or distributor level? What are you most concerned about?
2.
You mentioned the bundle concept, which has arguably been kept together by sports. What do the RSNs’ [regional sports networks] struggles around securing carriage without taking a rollback mean for that basic thesis of sports of being the last frontier of the bundle?
3.
When might the subscriber declines in traditional bundles plateau? How much does the cord-cutting trend exacerbate the issue of trying to recoup economic investment and get to a place where companies are growing P&L incrementally? Do you think the YoY subscriber decline rate of 5-7% you mentioned could stick around for the next 3-5 years or even longer?
4.
It seems that the NFL can be different in that people might like the league more as a whole without just following a certain team. Does the recent sports renewal on the NFL rights confirm that both the NFL and the networks consider linear broadcast as the best medium through which to monetise the NFL at scale for the next 5-10 years?
5.
Both CBS or Peacock retained the rights linearly on the NFL but will also simultaneously stream each week’s game on Paramount+ or on Peacock. That seems great for D2C viewership, but does this give an obvious alternative to viewers for linearly broadcasted games? Is it really shining a light on the fact that there isn’t a need for the pay TV bundle?
6.
MLB [Major League Baseball] is the driving force for RSNs. Do networks such as Bally Sports actually have right ownership to roll out a D2C product or is that something that still needs to be negotiated with leagues such as MLB?
7.
What obstacles might a player such as Bally Sports have to work through with its distributors around measures such as contract relief to start doubling down on a digital product? How do you expect the cable distributors to react to this upcoming streaming product?
8.
What packaging optionality do you consider out there? There were rumours that Bally might do a nationwide packaging at USD 23 per month. Do you think anyone really wants to watch out-of-market games, especially in MLB? What else do you think might make sense? Could a network package up per-state across league types? How does this inform the nature of a potential OTT [over-the-top] platform for sports?
9.
Bally is targeting 4.4 million subscribers for its OTT platform, which could generate USD 2bn in D2C revenues in a steady-state form over a five-year period. That’s around a USD 38 per-viewer monthly ARPU. How might the company achieve that? You alluded to sports betting. How close to that ARPU can a network price an à la carte dependent upon how it goes? What other revenue generators could contribute to attaining that figure?
10.
Bally has around 52 million subscribers through just the passive linear affiliate model. What factors could drive 4.4 million uptake of the OTT platform over the next few years? What upfront price seems possible? Would the remaining ARPU be indirect through outlets such as advertising or sports betting? What price point do you think could make 4.4 million subscribers a possible achievement?
11.
What is the opportunity around creating a hyper-regionalised offering? MLB allows the clubs to sell some of their local streaming rights. Why isn’t a state-by-state product popping up, such as a cross-league collaboration where the Rangers and the Spurs in Texas, come together as a regionalised sports product?
12.
Bally Sports has a lot of debt on the balance sheet that came alongside the Fox RSN assets, trading meaningfully below par. Do you think that state of distress is reason for concern for some of the league partners that it wants to excel with? Do you think the leagues are aware of the company’s current situation and does that pose a risk to the confidence that any of the leagues might hold in Sinclair, Bally being the key partner there?
13.
Amazon bought Thursday night rights and have a deal with Yes. Do you think the big tech players could help solve the waning viewership levels or the ageing demographic problem? The 49ers-Cardinals game was casted by Amazon. The game didn’t matter from a play-off potential, but it only got sub-five million viewers on an AMA [average minute audience] basis, relative to the low teens levels that the prime time usually gets linearly. Do you think any of those alternative options could provide anything to improve average viewership across any of the leagues?
14.
Could you outline the potential ad-supported ARPUs for all these OTT distribution opportunities? Will companies be able to monetise through advertising orders of magnitude higher given that they’re extending the reach so meaningfully? What sort of ARPU would be achievable from advertising specifically for the digital sports viewer?
15.
Do you think a USD 100bn-plus deal for the NFL is peak rights renewal? Alternatively, could that come back in the next decade but will trough in how much the leagues will accept getting paid to experiment with digital?
16.
What are the nuances at the network level, especially for the national streamers around what they’re doing with sports? What do you think are the reasons for ESPN+’s struggles relative to Hulu and Disney+? Do you consider ESPN+ core to what Disney can do with sports even in an OTT world?
17.
Why do you think there hasn’t been more high-profile live content filtered through the ESPN+ app? The way it broadcast Euro 2020 was unique with the four frames, no highlights and then the actual live broadcast on Hulu itself.
18.
Why doesn’t the existential crisis exist in the sense that distributors get more contentious around carriage linearly? What could preserve that business throughout the transition the most? What is stopping distributors being more aggressive around it?
19.
The crux of EBITDA and the free cash flow for companies such as Comcast, Charter, even AT&T and Verizon comes from the broadband business, not the video business. Is there a point at which some of these distributors give up on video, given the cord-cutting element as well? How does this contribute to the suggestion that there is no existential crisis here?
20.
I’ve read estimates that sports betting could be a USD 12bn market in 2025 and a USD 50bn market in steady state. How do the networks or content owners themselves play a part in that?
21.
How would it impact the process of building a digital business if that business were based on moving from linear views to digital views to then clicks, to making a bet? How many impressions do you think are hoped to be achieved to really drive the contributions to the betting at a scale that meaningfully improves the P&L?
22.
Do you think there will be a lot of attribution issues with companies actually convincing the betting platforms themselves that they’re contributing to the bets? Is it good for engagement and viewership for networks and thus, good for advertising revenues more than it is a way to get direct revenue share through contributing to the betting platform?
23.
Does the USD 12bn market by 2025 estimate imply that any content owner at the national sports level could turn sports betting into a USD 1bn revenue line in the next 4-5 years?
24.
It seems there’s an uptick of media consolidation again with Warner Bros-Discovery and Amazon MGM deals. Do you think we’re still middle innings around what kind of consolidation might occur between studios or content owners over the next few years? What are your expectations for how much more concentrated the media landscape could be in the next 5-10 years?
25.
There are rumours that Comcast is interested in Roku and ViacomCBS. What potential pairings in this market make the most sense for you? Is there a strategic partner that Sinclair would benefit from, whether Amazon or otherwise?
26.
Do you consider Microsoft, Sony and Google to be sleeping giants in distribution, given they have been working through cloud portals in video gaming? Could Microsoft and Sony acquire studios for video gaming? Why haven’t they been interested in more premium traditional video content?
27.
What are your thoughts on sports NFTs [non-fungible tokens] and their long-term potential?
28.
What are your thoughts on NFTs as the predominant way to monetise name and image likeness? What do you think about it occurring for a player such as LeBron James?
29.
Is there anything you would like to highlight or do you have any closing remarks?
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