April 18, 2017
Cable programmers such as AMC Networks, Discovery Communications and Viacom find themselves in competition with streaming Internet TV services. Consumers are cutting off expensive pay TV bundles in favor of skinny ones, and streaming services such as YouTube TV and Hulu are among those that pare down the offerings, leaving cable programmers in the lurch. In response, four to six pay TV providers are now in negotiations to create a new online service devoid of sports programming that would cost less than $20 per month.
Bloomberg says that a source “familiar with the situation” reports that, “the talks are at various stages, but at least one service could be introduced this year.” Sports tend to be “the most popular live programming,” but also the most expensive.
Minus sports, the cable programmers could offer a streaming service that would be “about half the expected price of Hulu’s upcoming live TV service and YouTube’s new TV package.” AMC, Discovery and Viacom do not carry sports in the U.S.
The source also states that, “at one point, several cable network owners discussed creating their own online service, like Hulu,” but that could “trigger a backlash” from some media companies.
Moffett Nathanson analyst Michael Nathanson says that such entertainment-only TV packages “could violate deals that major media companies like Disney and 21st Century Fox have with cable and satellite providers” that “require that their networks be part of the most popular bundles or that a certain share of subscribers must receive their programming.”
“It’s meant to dissuade distributors from doing something like this,” said Nathanson. “The issue is how many subscribers they can have before the legal questions appear.”
Bloomberg asks whether “consumers even want TV without sports,” since many streaming TV services report live sports are “a big draw.” On the other hand, AT&T chief executive Randall Stephenson said, “there is a huge segment of our market that wants a bundle that doesn’t involve sports,” and adds that he expects subscribers will flock to a 100-channel bundle without sports that will be priced at $35 per month.
Viacom chief executive Bob Bakish adds that British pay TV provider Sky has also been successful selling sports-free bundles.
“You could certainly take a range of companies, ourselves included and some others, aggregate them together and put together a consumer offering,” he said, adding that he believes a sports-free service could yield a 30 percent profit margin. “It feels like an inevitable outcome and that will be a good thing.”