Sports TV Bundle Could Be Coming, Alongside One For General Entertainment: Analyst

by Wayne Friedman , June 21, 2023

Ever-increasing sports rights fees and cord-cutting are forcing sports TV and general entertainment viewing to increasingly become a bifurcated pay/streaming TV marketplace, according to a report from Morgan Stanley.

“The solution to this, in our view, is to create a sports bundle that finds a market clearing price for sports fans,” writes Ben Swinburne, media analyst for Morgan Stanley.

This will come as a result of current day “splintering” of sports content on TV and streaming.

“While we see Big Tech's investments in live sports as likely to increase over time and support continued sports rights inflation and sports asset appreciation, the splintering of sports across more and more services creates an increasingly complicated and expensive proposition for consumers.”

This could be accelerating, to a great extent. Industry-wide, Morgan Stanley notes that perhaps for the first time ever, TV network affiliate/retransmission revenues in the fourth quarter of 2022 and the first quarter of 2023 were down industry-wide by 0.6% and 1.4%, respectively.

This is a problem, the report concludes. For years, ever-higher affiliate/retransmission fees have helped pay for soaring sports rights fees. Cord-cutting has been the main reason for the decline.

The report goes on to say that revenues from high-priced consumer cable/satellite/telco/virtual pay TV packages, in effect, “subsidized” high sport- rights fees deals that TV networks paid for. That has made for some conflict among sports and non-sports fans.

“The fatal flaw of the linear [TV] bundle was that it forced non-sports fans to subsidize sports fans, and eventually that subsidization model broke as the cost of pay-TV increased and general entertainment streaming services like Netflix and Prime Video proliferated.”

This has helped to drive ever-higher cord-cutting. With significant declines set to take hold, TV networks will be getting less revenue from carriage fees and could drop some high-profile sports. Swinburne expects Amazon, Apple, Google (via YouTube) and Netflix to become more aggressive adding more TV sports franchises.

Swinburne believes we might be gravitating toward two types of TV bundles -- one for heavy-duty sports TV fans and another for general entertainment.

“Sports fans are most likely a minority of U.S. households -- but they are also fairly price inelastic. This would allow a robust, consumer friendly sports offering to scale and scale profitably while allowing general entertainment services to continue serving non-sports fans at attractive price points.”

cord-cutting, entertainment, sports, sports rights, television

2 comments about "Sports TV Bundle Could Be Coming, Alongside One For General Entertainment: Analyst".

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Ed Papazian from Media Dynamics Inc, June 22, 2023 at 9:16 a.m.
Interesting report by Morgan Stanley. One thing tht was not mentioned concerns the composition of the households of the so-called "sports fans" and how many of them are peopled by mostly males who are fans of virtually every sports---as opposed to some sports. Taking the latter point first, I doubt that you will find that most fans of, say the NBA, are also big fans of MLB, NFL, NCAA, NHL, etc. to say nothing of golf, tennis, , etc. While this may be true of some, I suspect that the majority are more selective about their addictions. So Morgan Stanley is right in speculating that the number of all-sports addicts may be limited---which means that an all-sports--or most sports---service bundle may have limited appeal.

This brings us to the household composition aspect. Most hard core TV sports buffs are males---the probable percentage being about 70-75% male over 25-30% female in terms of composition. But most of these mostly male fans reside in homes which contain women and teens or children who may have other interests in terms of TV program genres. So won't many of these households be obliged to buy both the sports and entertainment bundles---to satisfy the needs of the entire household---and wont that put a crimp in the amount they can spend for one or the other of the two supposed options?

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Ben B from Retired replied, June 22, 2023 at 8 p.m.

I agree with Ed very interesting article with having women, with kids that like entertainment may not bbe big on sports going to have to buy both which should be bundle or standlone for those that aren't into sports or those that just want sports only. I'd get both and get the bundle.