• by Karlene Lukovitz  @KLmarketdaily, August 4, 2023

During Warner Bros. Discovery’s Q2 earnings call on Thursday, CEO David Zaslav seemed to hint at imminent plans to bring live news and sports to the new Max streaming platform.

On a separate sports front, the company, which in February announced its intention to exit the regional sports network (RSN) business, confirmed that it plans to complete that process by year end.

On the live content front, “News and sports are important: They’re differentiators, they’re compelling and they make [subscription-based video-on-demand/SVOD] platforms come alive,” Zaslav told analysts. “Importantly, the [Max] platform now has full capability to deliver live programming. We’ll have more to say about that soon,” he added.

Such moves would hardly be surprising.

Reports that WBD is working on bringing at least some CNN live content to Max before the end of this year, likely starting in markets outside the U.S., emerged in late June. In the news arena, that will require finding ways to navigate around exclusive contracts with traditional cable and satellite operators, such as negotiating agreements to share streaming advertising and/or distribution revenue with the MVPDs.

Given streaming’s preeminence in major media companies’ strategic road maps, and the value-added reasons noted by Zaslav, it's only logical that WBD and other players are also eyeing live sports opportunities for their streamers, while trying to preserve revenue streams from traditional media holdings as much as possible.

In fact, during the earnings call, Zaslav pointed out that WBD already has “significant digital [sports] rights in the U.S. that we’re not currently deploying but plan to in the future, and that has a real chance to create meaningful strategic value” and has had “some good success in Europe and Latin America with layering sports into streaming with various business models”— experience that is “informing our view on how to best deploy these sports rights here in the U.S.”

WBD’s models in non-U.S. markets have included creating new sports tiers and platforms.

One example cited by Zaslav: In the U.K. and the Republic of Ireland, WBD added the content from its Eurosport pay-TV network to its newly acquired BT Sport network to launch TNT Sports, which is available through the Discovery+ Premium streaming plan as well as linear. (EurosportPlayer.com and the Eurosport Player app were shut down in January, but subscribers to that app continue to have the option of accessing the content through Eurosport.com.)

In other sports-related news from WBD’s earnings call, CFO Gunnar Wiedenfels revealed that the company believes it will complete its exit from the regional sports networks (RSN) business by the end of 2023.

Discovery’s acquisition of WarnerMedia came with several RSNs, including AT&T SportsNet-branded channels in Denver, Houston and Pittsburgh. (WBD is also a minority in Root Sports Northwest in Seattle.)

Wiedenfels said WBD expects all of the SportsNet networks to be sold or have their operations seized by year-end, while stressing that WBD has been “working diligently” with the leagues and teams involved to create a plan that “minimizes the disruption to teams and their fans.”

The RSN business has been disintegrating due to declining pay-TV audiences and revenue and mounting distribution rights costs that result in small margins and high fees for consumers.

Sinclair, which paid Fox $10.6 billion in 2019 for the Diamond Sports Group, filed for bankruptcy protection for the business in March.

WBD notified affected sports clubs early in the year that its RSN business would not have sufficient cash to pay upcoming rights fees, and that they had until March 31 to reach agreements to reclaim their media rights, or the RSNs would be put into Chapter 7 bankruptcy.

WBD, which earned nearly $400 million in revenue from the RSNs last year (mostly through distribution, with some advertising) expects a “modest” impact on distribution and advertising revenues in Q3 and a “more meaningful” impact in Q4 and 2024, according to Wiedenfels.

Some affected sports clubs are experimenting with new direct-to-consumer models, though they are unlikely to generate the rights fee levels yielded through the RSNs.  

For example, the NBA’s Phoenix Suns and Utah Jazz have created deals that include a D2C streaming service as well as local broadcast TV distribution.