Cable TV’s survival chances as streaming gobbles up live sports

Since people first started cutting the cable cord more than a decade ago, broadcast and cable networks have clung to two facets of live television for dear life: News and sports.

In 2023, every major news agency has an online presence. CNN just announced a streamed version of the network live on Max. And in more bad news for linear TV, sports are now all over these streaming platforms.

DirecTV lost NFL Sunday Ticket to YouTube, Paramount+ carries local CBS NFL games, and Amazon Prime has “Thursday Night Football.” And all of that is just for the NFL, the most profitable league in the United States.

Max started streaming live sports just in time for MLB playoffs, and now the NBA has a big decision to make: Cable or streaming? The broadcast rights expire after next year’s season.

For the first time ever, linear TV usage fell below 50%, according to Nielsen data from July.

Broadcast and Cable fall below 50%
Are streaming services about to achieve the big payday that’s so far largely eluded them? Is it the end of linear TV? Michael Pachter joins Straight Arrow News to discuss. Pachter covers Netflix, FuboTV and Amazon as the managing director of equity research with Wedbush Securities.

This interview has been edited for length and clarity.

Q: Broadcast contracts come up every decade or so. Do you think NBA to Netflix is a real possibility?

A: I don’t. I don’t think Netflix will ever dedicate enough cash to win those rights. I think, unfortunately, all the leagues are looking for maximum dollars. And I think they’re far less interested in reaching the maximum audience.

Netflix will just never pay as much as linear broadcast. There’s a possibility somebody like Max, like Warner Brothers Discovery, would pay that much. But I don’t see Netflix competing at all.

Q: The NBA may want to divvy up broadcast rights amongst a few bidders. Do you think that’s an area where streamers are going to be able to compete?

A: Able to, sure. Disney can do whatever it wants, and Warner Brothers Discovery, who’s debt laden, already has NBA rights, so they certainly can change how those rights are broadcast.

I think the sad thing is that they’re going to cut out a chunk of the audience. We have this in Los Angeles, with Spectrum having the rights to Dodgers broadcasts, so fewer people were able to see their home team.

It’s really lame of Warner Brothers Discovery to think that they’re going to shift broadcast rights from linear television to a subscription streaming service, because you’re going to take away from people who would otherwise watch it, the ability to see that stuff, and then impose a fee.

All that does is exacerbate the issue that they already face, which is cord-cutting. Their lifeblood is not streaming; their lifeblood is retransmission fees. So if they suddenly tell me the only reason I have cable is no longer a reason to have cable, they make it very, very easy to cut the cord.

I think they’re going to do it. I think they’re immensely stupid. And I think that they’re going to end up just sealing the fate of cable and driving people to cut the cord.

What is served by making “Thursday Night Football” only available through Amazon Prime? There’s just a giant chunk of households who have cable TV, and certainly have rabbit ears so they could watch a game on ABC or NBC, who either can’t afford Prime or don’t choose to be Prime members.

By definition, it’s probably about 40% of households who lost access to “Thursday Night Football.” That’s just stupid. The more they do that, the NFL is going to hurt itself, because it’s going to have fewer and fewer fans if all of its broadcasts go to streaming. And the NBA is going to hurt itself.

I already have a problem with my streaming services just trying to remember what channel anything I watch is on. I predict that all of this stuff is going to end up being consolidated by cable TV. They’re going to see the light, they’re going to say, “You can’t even get Max unless you have a cable subscription.” That’s a smarter way to run the business.

Disney is not going that way. Disney is trying to split ESPN off as a separate subscription. Really dumb. And again, I think [Bob] Iger probably has 100 IQ points on me. He’s a pretty smart man. Really stupid about streaming.

Q: Do you think local rights are going to be linear TV’s saving grace, in that the cord will never truly be cut off?

A: Linear TV has two things going for it that you really can’t get elsewhere. That’s live sports, any live sports. So long as live sports are available exclusively on linear TV, there’s a reason to subscribe. And the second is live events that we care about: “Academy Awards” or “American Idol” or “The Bachelor.”

Each has a different constituency. I’ve never watched “The Bachelor,” but I used to watch “American Idol,” and I remember back in the day when we all went to the office, I didn’t want anybody to tell me who got booted off the night before, because I had recorded it and I wanted to watch it the next day. That’s how we feel about live sports as well.

Q: Do you think Amazon’s decision to make the “Thursday Night Football” deal will be a financial winner?

A: Oh, absolutely not. Absolute zero. They’re an interesting company, because they only do streaming to reinforce the value of a subscription to something else.

We signed up for Amazon for free shipping, period. And the only person who churns out of Amazon and quits is the person who finds that they didn’t buy enough stuff to justify that $120 a year. So if you go three or four months without ordering something on Amazon, you might say, “This just isn’t worth it.”

But if you watch a TV show every month, just one, or an NFL broadcast, they think that’s enough that you’ll say, “I can’t give this up.” So I think it’s smart for anti-churn. But they can produce a lot of content for the price that they’re paying for “Thursday Night Football.” They can produce literally dozens of television shows if they want. I think they’re trying to make a splash.

Q: To that end, is that why you say you don’t see Netflix ponying up a large amount of money to get into sports, because they could use that money to create so much more content?

A: Yeah, I think Netflix might have been leaning that way at one point. They aired a Chris Rock live special last year. They made a big deal about it, and then you never heard about it again. They never put out any data about how few people actually tuned in by appointment.

Netflix is not by-appointment TV, period. It is catch-up TV. And it’s antithetical to what Netflix is, to its mission, to turn themselves into by-appointment TV. They drop all episodes of every season when the show comes out, and they refuse to move off of that. So why is that important? Because people don’t want to tune in every week to catch the next episode.

Hulu is by-appointment TV, HBO is by-appointment TV, not Netflix. So they’re the last guys in the world that should be doing live broadcasts of anything. And as dumb as I think everybody in streaming is, Netflix guys are the smartest guys in the room. So I think they are smart enough not to overpay for something that won’t resonate with their customers.

Q: NFL’s broadcast agreement doesn’t end until 2033. I’m curious how you see the streaming and linear landscape a decade from now, when those rights are back up.

A: I’m pretty infamous, notorious, for having a sell on Netflix into 2011 and keeping it until 2022. I was convinced that streaming was a race to the bottom, and was convinced that either the broadcast guys would shun Netflix and pull their content, or they would try to compete and pull their content. The latter happened, but it didn’t happen till 2019, and it didn’t become obvious till 2021.

So I’m making the same kind of prediction here about sports. I actually think, in the next 10 years, you’re going to see a reconsolidation of streaming with cable, because I think the constituents that lose, which are anybody who is in broadcast and anybody who creates content for broadcast, are going to figure out that a monthly $100 cable bill plus an add-on $15 for HBO is better than $15 standalone for HBO.

There’s $115 in the ecosystem to pay for content if we keep people subscribing to cable. And even if they replace cable with $40 or $50 or $60 worth of streaming, there’s less money for everybody to get paid.

So I think that the sports leagues are going to figure out that they lose money if that ecosystem shrinks. The money in a consumer’s pocket is not going to the talent that creates the experience. So the NFL is not going to make as much money, and studio actors and writers aren’t going to make as much money.

The ultimate solution is a reconsolidation. We all have a cable system with a Netflix button on our remote. That should be automatic. We should have a Disney+ button. We should have an integrated program guide that helps old people like me figure out what show they were watching and where it is. And we don’t have that right now. SAN