Could sports bundling be the future of streaming?

Wed, Feb 7, 2024, 8:24 AM

Mark Boidman, Solomon Partners Partner and Head of Global Media, joins Yahoo Finance’s Alexandra Canal, Seana Smith, and Brad Smith to discuss what this service entails and how receptive consumers will be to it. Boidman believes this sports bundling package will save costs for the streamers, noting a "competitive tension" as to why “these companies need to come together.”

Boidman believes “the consumer should win here,” due to the offerings, while cost could be a deterrent. With changes in consumer norms, Boidman believes streaming services will have to pivot to meet their needs.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

BRAD SMITH: The team up of Warner Brothers Discovery, Fox, and Disney's ESPN shaking up the sports arena, but it's also a big hint about the future of streaming. Here for more insights, we've got Mark Boidman who is the partner and head of Global Media over at Solomon Partners. We're also joined by Alexandra Canal here in studio. So Mark, take us into this one. As we were just talking about, this essentially just sounds like cable all over again.

MARK BOIDMAN: It does. It's a nice flashback to the old ways. But the interesting thing is that these companies need to come together. Bundling has been part of the driving force but as has the cost of sports. The cost continues to go up as earlier just mentioned. We're hearing rumors of close to $75 billion for some sports programming that's coming up, and that's a big number.

And so you bring these companies together, it takes the competitive tension out of the mix. You have consolidation. So companies coming together bidding on potential sports rights could be interesting. We don't know if that will happen, but that's certainly something that we project could happen.

And that will be very interesting to see when they come out with this new programming, you know, how much does it cost every month. And as earlier mentioned, the costs continue to go up for subscribers and streaming services, and at some point, they do get tapped out.

ALEXANDRA CANAL: And Mark, I wanted to pick up on that point on costs. We've seen estimates on the street anywhere from $35 to $40 a month. But considering we've seen increased churn even when the most basic of services raised prices, is that a price point that you think consumers would be comfortable with, and does it make a difference that it's sports as opposed to pure entertainment like television shows or movies?

MARK BOIDMAN: Yes, that's exactly right. It's going to be expensive. But relative to what you're paying for cable, maybe not, right? So the reality is those who do decide to stream this service will have cut the cord. And so people are thinking about that as they think about, OK, am I going to pay $30, $40, $50 even more per month for streaming services?

They think about the cost differential versus their cable programming. And as these companies think about pricing of this plan, they're going to think very carefully about how people are paying for what they're paying for today to offset any losses. So the reality is the consumer should win here because you'll have more choice. But the question is, will you actually want to fork out that amount of money for this programming? And it all depends on the quality of the content. And it sounds like it's going to be robust.

SEANA SMITH: Mark, what do you think this means for these companies bottom lines? We talk about the fact that so many of these streamers are streaming services, I should say, struggle to get to profitability. Obviously, that has been a massive concern here. When it comes to Disney, how much is this really going to move the needle in order to inch them closer to some of those profitability targets?

MARK BOIDMAN: Sure. Rather than comment on Disney in particular, let's just look at the whole landscape, right? And if you think about every company in this sector, they're all trying to figure out the path to profitability. They have a revenue stream today that they need to protect those who subscribe to cable networks. And if you think about the future, by 2027, cable TV penetration is going to probably drop to about 35%, 40%.

So you're going to see rapid deceleration of cable households. How do you protect that revenue stream? You have to offer programs like sports programming through streaming. They don't want to see consumer habits change too much. Young people today they're OK getting highlights for sports through various streaming applications. How do you make sure that those streaming highlight users don't disappear completely?

You need to make sure you engage them with live sports content and live entertainment. And again, the reason why we see companies coming together because we believe in the medium term, it's going to allow them to better compete for this content which is extremely expensive. And it's also going to allow them to absorb the cost together as a group as opposed to each of them individually going after the same content.

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Could sports bundling be the future of streaming?

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