In his capacity as a Columnist for California Sports Lawyer®, Founder Jeremy Evans has written a column about the on-going Hollywood strike and carriage disputes in sports leading to more content on streaming platforms and increased collaboration in distribution.
You can read the full column below.
With Disney-owned ESPN and Charter-owned Spectrum having a dispute that saw thousands of customers in the Denver, Colorado area unable to watch the U.S. Open in Queens, New York, and the opening weekend for NCAA College Football among other programming, many are calling into question whether the remaining regional sports networks (RSN) will also close and move to streaming.
In Major League Baseball (MLB), the Arizona Diamondbacks and San Diego Padres have already closed their RSN distribution and moved to streaming. The Colorado Rockies will likely follow suit and go streaming similar to their National League West Division foes. SportsNet Pittsburgh for the Pittsburgh Penguins (National Hockey League, NHL) and the Houston Astros SportsNet Southwest have sold to buyers or soon will be sold. The Penguins franchise purchased the RSN from AT&T and similar to the Diamondbacks and Padres, except through traditional cable and some streaming opportunities. The Diamondbacks and Padres specifically utilize MLB.tv and the existing MLB owned platform for streaming distribution. With a record 73.5 million Americans set to place a bet(s) on the National Football League alone in 2023, it would be high time for distribution and viewership to be solidified among the professional sports leagues and teams.
ESPN, maybe rightfully so, wants to charge more to rights fees to have Charter-owned Spectrum carry its ESPN-branded channels. Those increased costs are passed to the customer, which Spectrum is resisting. The problem for both ESPN and Spectrum is that viewership is down across the board for RSN’s in a model that seems less feasible by the day. Customers can still watch ESPN on other streaming platforms like Fubo, or Hulu, which is also owned by Disney. Advertisers will continue to make the move to streaming as well. Meaning, despite ESPN obtaining at least $1.5 billion in the PENN deal, it will lose $2.2 billion per year by not having its programming available on Spectrum. Charter is also facing class-action litigation for the loss of the ESPN channels in its cable package.
If a deal is made between ESPN and Spectrum, it will require compromise, collaboration, and thinking towards the future. It could also mean Apple, Amazon, or another streaming business looking to purchase ESPN for the content and exposure. Streaming is continuing its rise, as Tubi, created in 2014 and owned by FOX, reached 74 million subscribers. Nonetheless, as stated by Warner Music Group (WMG) CEO Robert Kyncl recently, “Focusing on revenue per user is a very, very important part of what the industry needs to do . . . Taking a page out of Netflix’s playbook is a smart thing for all of us to do . . . the amount of work and innovation that happens around price optimization at Netflix is incredible. And I think we all have a lot to learn from that and we should adopt it.”
The WMG CEO’s point is that pricing will be an essential component to success for streaming. This is where the strike with the writers and actors is so important in Hollywood and for streaming customers (subscribers). Any residuals going to the talent from streaming (e.g., based on subscriber numbers, hours viewed, or another model) will require a price increase, which will be passed to consumers. The question will be how much of an increase, not if. Furthermore, will the price increase be to the point where cable prices are the norm in the streaming age? Hollywood could certainly learn from the music industry as to minutes listened to music and payment compared to hours viewed for film and television.
Paramount Global CEO Bob Bakish believes the pricing for the Paramount+ platform will increase. The increase being related to more competitive pricing, adding more content, and in likely anticipating an increase in residuals for talent. That being said, artificial intelligence is a potential cost reduction, but better for efficiency.
Spotify CFO Paul Vogel recently discussed the company’s strategy in free and paid streaming services, plus the use of an AI Disc Jockey, DJ to help customers select music lists and suggestions. The AI DJ helps customers and reduces costs from a person having to create lists. The streaming options allows for increased listening and getting new music out the door with a more bespoke option for a price.
There is light at the end of the tunnel when Warner Bros. Discovery CEO David Zaslav says that the on-going strike will lead to more bundles to help share in costs, while increasing distribution and reach. Collaboration is good for consumers in that it could potentially lower the paywall and increase access, while keeping business autonomy absent a merger so companies stay competitive. Interestingly, there are not too many major collaborations in the streaming age that have ended badly—they have mostly been received with a positive response. It will help that Warner Bros/ Discovery’s MAX will provide sports content to paid customers at no additional cost, but could be increased for playoff and more sought-after matches similar to the pay-per-view model. Again, that cost increase issue.
Through disputes and negotiation, there is opportunity for streaming collaboration and growth.
About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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