• by Wayne Friedman , Staff Writer, November 3, 2023

One viewpoint coming out of the Charter Communications/Walt Disney deal still lingers -- that the linear TV bundle survives, in the long term.

Consider the eye-opening component deal -- where a forthcoming, full-fledged ESPN streaming service with all the bells and whistles not only survives, but that legacy pay TV distributors of all types get to package this into their existing and declining pay TV bundle of networks.

Add this wrinkle into the mix: that the new upcoming NBA contract will return -- albeit at a very high renewal price -- for Disney’s ESPN and Warner Bros. Discovery’s TNT.

WBD may need the NBA deal more than Disney, which already has loads of other sports programming content. 

Can Warner Bros. Discovery really afford not to compete for this package? All this leaves WBD with just the NCAA “March Madness” three-week event as its main sports attraction, along with NHL and Major League Baseball.

Warner Bros. Discovery's NBA deal is twice the size of its NCAA "March Madness," Major League Baseball and NHL deals combined, according to Max Greve, a business analyst at Seeking Alpha.

When WBD gets outbid by a strong digital media competitor, what then happens to the rest of WBD’s non-sports cable tv network performance -- CNN, truTV, TNT and Discovery Channel content? Yikes.

Greve says: “Even if total revenues are not increasing at 10% a year, sports-related revenues, for all intents and purposes, are.” And what you are left with isn’t pretty:  “It’s scripted revenues that are collapsing.”

Some good news: Warner will continue to reap outsized profits from its NBA deal for the next two years -- the two most profitable years of the deal for the company.

Now, compared to Disney, what can WBD do? Maybe they could get some help -- perhaps from legacy pay TV distributors similar to what Charter’s deal is to sell/distribute ESPN+ and the forthcoming bigger ESPN streaming service. 

For both WBD and Disney the main issues are forward-looking profitability of direct to consumer businesses, which both companies continue to struggle with-- Max and Disney+ respectively.

Sports rights fee increases are not slowing down. Trouble is cash-strong Apple TV+ and Amazon Prime Video are ready to swoop in and easily pick up at least a piece of the future NBA contract.

In better news, the NBA -- as well as the NFL, NHL, and Major League Baseball -- still believe linear TV will be of continuing importance to the financial health and exposure of their brands.

With that glimmer of a positive mind-set, legacy TV network-based media companies need to alter their play-calling in their financial huddle. Better teamwork might be coming.