Tennis Channel is lining up to play on multiple distribution courts in 2024 as it looks to serve its hard-core viewers wherever and whenever they want to see live tennis and pickleball action, network president Ken Solomon said. 

The Sinclair-owned service is planning to launch a direct-to-consumer offering this year to complement its lineup of the Tennis Channel linear service, its Pickleballtv and T2 FAST Channels and its Tennis Channel Plus SVOD service. 

“The mission is to bring the sport to life fully and let everyone who might potentially be a fan find out if they want to be,” he said. “It used to be very hard to do because only a fraction of the sport was on television.”

Also Read: Sinclair Putting Tennis Channel’s T2 On NextGen Broadcast Channels

Click below to hear more of the interview with Ken Solomon on the latest episode of the “TV Sportsplay” podcast.

Major League Baseball‘s Chicago Cubs are negotiating with Sinclair Broadcast Group to possibly take the regional sports network they co-own direct-to-consumer, according to the New York Post.

The negotiations come after the Cubs and Sinclair had difficult talks with Comcast to re-up its pay TV distribution license for the channel, Marquee Sports Network. Those negotiations ultimately resulted in the Cubs and Sinclair agreeing to cap licensing costs. 

Also: Sinclair Still Faces Long Odds on DTC Regional Sports Streaming, Despite NBA Deal, Analyst Says

Through its Diamond Sports subsidiary, Sinclair owns — or co-owns — 19 RSNs. The company has recently signed agreements with the National Basketball Association and National Hockey League that include limited DTC streaming rights to local teams covered by those networks. 

Fourteen of Sinclair's RSN's have contracts with local MLB clubs, but MLB Commissioner Rob Manfred has expressed reluctance to cast his league's DTC fortunes with Sinclair, given the nearly $10 billion in debt the company incurred while building its Diamond Sports empire. 

Manfred wants a unified strategy for launching MLB clubs into DTC distribution. But a DTC deal from a marquee team like the Cubs might influence other MLB teams to go it alone with Sinclair. 

TMT equity analysts including the celebrity-likes of Richard Greenfield have been highly skeptical of leveraged Sinclair's ability to pull off a DTC promise the company made to investors last summer. 

Then again, the consensus was that it was unlikely that Sinclair could secure NBA and NHL rights, and that has already been accomplished. ■

In October, Richard Greenfield, high-profile analyst for TMT research company LightShed Partners, blogged that it was unlikely that Sinclair Broadcast Group would secure direct-to-consumer streaming rights from the NBA, NHL and Major League Baseball for a new regional sports network model untethered by the linear MVPD business. 

With NBA and NHL deals DTC deals now, in fact, under Sinclair's belt, how does Greenfield -- who headlined his Oct. 18 posting with a pungent "#Gameover" to describe Sinclair's RSN future -- like the station group's forward-looking plan now?

Still not so much.

Also read: Sinclair’s NBA Deal: Two Down, Two More To Go

The "primary problem," the analyst still maintains, "is that there is no economic model for regional sports networks that can generate enough cash to pay off their $8.7 billion of debt (nearly 22x levered); implying bankruptcy is a matter of 'when' not 'if.'

Indeed, despite last week's deal that gave 16 of the regional sports networks, branded under the Bally Sports moniker and operated by Sinclair's Diamond Sports Group subsidiary, streaming rights to local NBA teams, Sinclair's streaming plan does seem far from a slam dunk. 

For one, Sinclair only has rights from the NBA to create a DTC stream of what's live and linear on its regional sports networks. For another, it still hasn't tied down DTC rights for 10 of the 14 MLB teams in its Diamond Sports Group portfolio. 

"They cannot repackage the content or add content; they are only able to air exactly what is on the RSN today. More importantly, any stream would exclude MLB games, as there is still no deal with the MLB meaning a third of Sinclair’s teams are out," Greenfield noted in his latest posting. 

Forget for a moment that Sinclair will be trying to sell an OTT service for $20 or more a month, facing the kind of churn one might expect with content that's programmed for only for late October through May. And forget that the typical RSN customer pays for an MVPD, and might be more inclined to keep paying for a pay TV service that has the sports networks they want rather than pay an additional $20+ over their current base MVPD bill. 

There's also the matter of a foundational flawed assumption -- in pitching investors on a financial plan that will pay down Diamond Sports Group's massive debt, Sinclair is assuming that the enterprise's current bread and butter, revenue from pay TV companies, will decline at a rate of only 2% a year. 

With Sinclair currently trying to renew its carriage deal with the No. 2 pay TV operator in the U.S., Charter Communications, Greenfield said the cable company won't accept the launch of a competing DTC service without major concessions on distribution requirements for the Bally Sports RSNs. This will have huge impacts on legacy MVPD revenue that far exceed a mere 2% annual decline.  

Sinclair bought the Fox Sports RSNs from Disney, as well as the Marquee Network and YES Network, in August 2019 for $9.6 billion, putting them under the control of a separate company it owns, Diamond Sports, and selling the naming rights to the channels. 

Whatever you think about Sinclair Broadcast Group's planned direct-to-consumer offering, slated for next year, one thing is certain: in the near term it really doesn’t mean that much. A more pressing deal, and one that may have even broader implications to the broadcast giant, could be answered in the next few weeks -- its carriage deals with No. 2 satellite TV service provider Dish Network.

Sinclair's retransmission consent agreement with Dish expires on Aug. 15, and many have expected that carriage of the RSNs will become a big part of that negotiation. Dish represents about 8 million subscribers for Sinclair, and the company has said in Securities and Exchange Commission filings that it is counting on the revenue from that Dish deal to keep its engines humming.

“The Dish deal has become overly important,” sports consultant Lee Berke, president and CEO of LHB Entertainment & Sports, said. “There is no question it is an issue, but now everybody is focused on it.”

The jury is still out as to just what Sinclair is willing to do to ensure that carriage. Some have speculated that the broadcaster could allow Dish to place the RSNs on tiers -- long a bone of contention between programmers and distributors -- and/or offer the satellite TV giant an equity piece of its DTC offering. So far, neither side is saying anything officially about the talks. 

Also Read: Sinclair’s Streaming RSNs and Warner’s CNN Plus May Be Pay TV’s Biggest Disruptors

Dish has pushed for tiering sports networks before -- it was one of its reasons for dropping the Sinclair RSNs in 2019.

In an interview in 2019, Dish executive VP Andy LeCuyer didn’t say the “T-word,” but it was pretty clear what the company wanted. 

“We think the RSN content should be sort of like a ticket to the ballpark. Fans who love and want that content should be the ones who pay for it, not forcing the vast majority of other subscribers to subsidize it, ” LeCuyer said in that 2019 interview. 

Dish declined to comment on the current negotiations with Sinclair, but perhaps the company will have more to say when it releases its Q2 results on Aug. 9.

Now, with the negotiating ball clearly in their court and the pressure to make a deal squarely on Sinclair, it could be Dish’s best chance ever to make that happen.  

And though Dish chairman Charlie Ergen has been critical of Sinclair’s sports networks in the past, Dish could be open to a deal, especially after it ended a three-year blackout of premium channel HBO on July 29. Dish let HBO go dark on Oct. 31, 2018 claiming high prices and retaliation by HBO parent AT&T over Dish’s objection to its merger with Time Warner Inc. When the dispute was settled, Dish subscribers were allowed to purchase HBO’s streaming service HBO Max at a 20% discount ($12 per month for one year) and get sister premium channel Cinemax, for $10 per month. 

Sinclair apparently baked in the Dish deal in a proposal to its bondholders to restructure about $8 billion in debt at its Diamond Sports Group unit, the vehicle that houses its RSNs. In an 8-K filed with the Securities and Exchange Commission in June, Diamond Sports estimated its revenue would be between $3.07 billion and $3.249 billion in 2021, and analysts have estimated that about $400 million of that would come from Dish. 

According to the 8-K, Sinclair said the talks with bondholders were ongoing, but the companies were “unable to reach a definitive agreement at the time.”  Some analysts took that to mean bondholders wanted to see how the Dish talks panned out before committing to a deal, which according to some reports included a proposal to get bondholders to invest an additional $300 million to $500 million in Diamond Sports.

On its conference call to discuss Q2 results on Aug, 4, Sinclair CEO Chris Ripley chafed when an analyst characterized the proposed restructuring as “unsuccessful,” adding that he saw it as more of a move “towards a deal that is amenable to both sides.”  

He added that Sinclair didn’t want to do just any agreement, but wants the right agreement. Just what that is, he didn’t say.   

To be fair, Ripley is really in a difficult place. He can’t say anything about ongoing talks with bondholders or distributors because of non-disclosure agreements and as a result, investors and onlookers assume the worst. Only time will tell the true story, but unfortunately time is running out. 

Sinclair stock has been battered over the past two years, rising as much as 46% to $61.81 per share in the days after it said in May 2019 that it would buy the Disney RSNs. The stock has been on a downward slope practically ever since, closing at $31 each on Aug. 6, down about 1% for the year and priced at about half what it was in May 2019. 

Ripley was frustrated about the stock performance, devoting a good portion of his opening statements on the conference call to what he said was a “significantly undervalued” stock.

During the presentation he went through a sum-of-the-parts valuation of Sinclair, pointing out its warrants for Bally stock -- part of its deal to sell branding rights to the RSNs in 2020 -- that are worth about $600 million at current prices and would cost Sinclair about $60 million to execute; a $1.2 billion tax shelter benefit that also came out of the RSN buy; the $1.7 billion  value of its licensed broadcast spectrum; and finally, $200 million in non core businesses and equity stakes in companies like antenna maker Dielectric and 5G solutions provider Saankhya Labs. And that’s not even including the value of its core TV broadcast and cable networks businesses. 

“When you put even a conservative valuation on our 185 TV stations, Tennis Channel, stadium, news on STIRR and RSNs and account for the net debt of Sinclair, you will get a per share value that is more than double the current level of where our stock is trading today,” Ripley said.

But there are a lot of factors to considering share prices, and right now Sinclair is in the middle of a transition. In a research note, Wells Fargo Securities media analyst Steven Cahall noted that Sinclair's investor base has shifted from broadcast-centric to a broadcast/media/gaming hybrid, which has caused some confusion. . 

“Investors are recalibrating, and we think, not sure quite what to do with the new Sinclair,” Cahall said in a research note. “Things have not gone well for the RSNs, leaving no equity value, consuming management resources (e.g., potential restructuring, loss of sports during coronavirus) and non-stop estimate revision risk. We also think the RSNs can drag TV retrans as SBGI supports the whole portfolio in future deals.”

So, in other words, all eyes are on the Dish deal.    

At the moment, Dish appears to be in the best negotiating position. The old threat that keeping the channels off will lead to subscriber losses means little because any such declines have already happened. Dish has little to lose by not carrying the RSNs, and therefore could force some concessions in negotiations that Sinclair might otherwise reject. Some believe that Dish could be allowed to put the RSNs on a separate tier as well as receive a small ownership interest in the DTC offering.

Allowing RSNs on a tier could affect future negotiations with other distributors, but some observers believe that Dish is enough of an outlier that Sinclair will be able to keep its other deals intact. 

“I don’t think you can lump all of the RSNs together and say this is a bellwether,” said one sports exec who asked not to be named, adding that while tiering isn’t optimal, he’s more worried about allowing distributors to cherry pick which RSNs they want to carry. But he also conceded that shifting to a tier-model would shave linear carriage at least in half. 

The rest of the RSN business is somewhat insulated in its ownership. Comcast and AT&T own the NBC Sports RSNs and Root Sports RSNs respectively, so if they were going to get placed on a tier, many believe it would have happened already. Others like MSG, SNY and YES Network are in major markets where tiering may not have that huge an impact.   

“Sinclair is going to do whatever it has to do to get this deal done,” the sports exec said. “They’re going to be as creative as they can get. If they have to shave off certain RSNs, if they’ve got to tier, they're going to do whatever they can.”

Next week’s Major League Baseball All-Star Game — the traditional midpoint of the season — is just one of a series of crucial events that could profoundly impact Sinclair Broadcast Group’s regional sports network experiment, according to some analysts.

The All-Star Break (the few off days after the All-Star Game, scheduled this year for July 13 in Denver) is usually the point when the baseball gods decide whether teams are in or out of playoff contention. While there have been a few exceptions over the years, it also is traditionally the time of year when fans decide whether it’s worth it to religiously follow said ball clubs for the remainder of the year. 

For Sinclair’s RSNs, owned by subsidiary Diamond Sports Group and marketed under the Bally Sports Networks moniker, it means the beginning of a series of events that could seal the fate of the channels they bought just two years ago for $9.6 billion.

The All-Star break will likely pass without a streaming carriage deal for the RSNs with YouTube TV, Hulu and fuboTV, which earlier dropped the channels over pricing. YouTube TV has been without the Sinclair RSNs since September, while Hulu and fuboTV dropped the channels in October and January, respectively. 

So far there seems to have been little impact from the decision to drop the channels on the streamers. On June 2, Evercore ISI media analyst Vijay Jayant issued a report that downloads for the YouTube TV, Hulu and fuboTV apps were up sharply during June, largely because of sports like the U.S. Olympic Trials, NBA Playoffs and other non-RSN related fare. 

While Sinclair and the streamers appear to be living well without each other, another deadline approaches that could have a far greater impact — Sinclair’s upcoming broadcast retransmission consent negotiations with Dish Network. That deal expires in August and is expected to include at least discussions regarding the RSNs. Dish dropped the Sinclair RSNs in 2019, and restoring that deal is a key part of Diamond Sports’ attempts to restructure its $8 billion in bond debt. According to documents filed with the Securities and Exchange Commission in June, Diamond Sports based its future revenue projections on getting that Dish deal done.    

“The countdown clock is ticking,” said LHB Sports, media & entertainment CEO Lee Berke, adding that the more pressing deal to get done is probably the August Dish deal. “It’s July 8. We’ve got 23 days to go.”

“The All-Star Game is coming next week, pennant races are underway, you’ve passed the midpoint of the season,” Berke continued. “If they [Sinclair] are going to cut deals for the RSNs with vMVPDs and Dish, it’s going to have to happen very, very quickly.”

Dish Deal Looms Large

One sports executive who asked not to be named said the importance of the Dish deal can’t be exaggerated.

“I wouldn’t say it’s do or die, but it is ultra, ultra important,” the executive said.   

Dish has driven a hard bargain in past RSN negotiations and seems to have the advantage with Sinclair. After two years without the channels, the subscribers Dish would have lost as a result are already gone. For some observers, the only incentive for Dish to do a deal for the RSNs would be a steep discount in retrans fees for the broadcast channels. 

“That flies against what everybody is looking for in the marketplace from a broadcast standpoint,” Berke said. “If they can achieve it, that’s what Dish does, they negotiate very aggressively.”

On the other hand, Sinclair plans to launch a direct-to-consumer version of the RSNs next year, which could offset those losses. Still, Sinclair has taken an extremely conservative approach to the DTC service, which according to the SEC documents is expected to have 4.4 million customers in five years. Dish represents about 8 million subscribers to the RSNs.  

In a research note last month, Wells Fargo media analyst Steven Cahall wrote that he believed the Dish deal needs to get done before bondholders would commit to a restructuring.

RSNs in general have been under pressure as distributors seek lower prices and pay TV customers jump ship for streaming services. Cord cutting has carved a huge chunk out of the traditional affiliate fee structure of the RSN business — about 6 million cable, satellite and telco TV customers cut the cord in 2020 — and programmers have been hard pressed to find a replacement. While DTC could solve part of that problem, it isn’t expected to be the be all, end all for the business. 

As a result, programmers are looking for other ways to monetize and distribute sports content in addition to traditional models.

NBCUniversal said it plans to shutter sports network NBCSN at the end of this year and shift some of that programming to USA Network and streaming service Peacock. Others like AT&T’s Root Sports Networks, were put on and taken off the block in the past two years, as demand for the channels waned. Root Sports recently agreed to carry the NBA’s Portland Trail Blazers on its Root Sports Northwest RSN — jointly owned with the MLB Seattle Mariners — beginning in 2022. That deal could mean that NBCU’s NBC Sports Northwest will close its doors.   

Berke added that whether the NBC RSNs are up for sale or not, it appears that come next basketball season, at least NBC Sports Northwest will be no more. 

“That one’s dropping out of the portfolio regardless of what takes place with the rest," Berke said, adding that an RSN losing all the professional teams in a single city hasn’t happened since 2004, when Fox Sports Chicago lost the Bulls, Cubs, Blackhawks and White Sox to Comcast SportsNet.

“That’s a major shift,” Berke said. “It sure seems to confirm that once the basketball season rolls around, they won’t have anything to show.”    

And while sources said that NBCU has not started a formal process to sell its other RSNs yet — no bankers have been hired nor consultants consulted as of July 9 — the programmer has been thinking outside of the box regarding sports programming.

Peacock‘s Philly Experiment

On June 18, 19 and 20 NBC aired a three-game series between the Philadelphia Phillies and San Francisco Giants exclusively on Peacock. The move was thought by many to be another experiment by the league to look at different ways to distribute content.

In a press release, Major League Baseball said the move was part of its “ongoing commitment to deliver unique game presentations via emerging distribution platforms within the evolving media landscape.”

Back in April, MLB chief operating officer Chris Marinak told SportsPro Media  that the league was trying to “figure out what type of structure would make sense for an over-the-top product that may not require authentication.” 

Currently, RSNs stream in-market games to their pay TV subscribers, not on a standalone basis. The league has its own standalone streaming product — MLB.tv — that allows customers to stream every team’s out-of-market games for $44.99 per month or a single team’s out of market games for $34.99 per month. Blackout restrictions apply. 

Some reports have said that Sinclair has failed to secure approvals from some distributors for its DTC offering, but the company appears to be going full steam ahead with its streaming plans. In the meantime, Sinclair is scheduled to report its Q2 results on Aug. 4, and may have some updates on its DTC status, as well as that of its Dish negotiations. Maybe then investors will decide whether it's worth sticking around for the rest of the regular season.  

Sinclair Broadcast Group chief Chris Ripley denied reports that its planned direct-to-consumer RSN service would be priced at $23 per month, but declined to reveal how much the company will charge for the service, according to an interview the CEO had with the Baltimore Business Journal.

Baltimore Business Journal reporter Holden Wilen corralled Ripley briefly during a celebration for Sinclair’s entry into the Fortune 500 on June 21. Wilen asked Ripley about the $23 price point.

"That number is inaccurate and I can’t comment on what the ultimate pricing will be," Ripley said, according to the publication.

That denial also comes on the heels of Sinclair’s 8-K filing with the Securities and Exchange Commission that offered more details -- but no pricing information -- on the proposed DTC service.  

According to the Business Journal report, Ripley said Sinclair is conducting market research to determine a “fair price” for the DTC service, but his reluctance to offer any guidance as to the ultimate price of the service could speak volumes. Is he saying the reported price is too low or too high? 

Ripley and Sinclair have been keeping any information concerning the pricing of the service close to the vest. At the JP Morgan Telecom, Media & Communications conference in late May, Ripley would only say that there would be a “substantial difference” between pricing for the DTC service and  what the RSNs charge traditional distributors. 

According to Kagan, a unit of S&P Global Market Intelligence, the average RSN charges about $3.53 per subscriber per month. The Sinclair RSNs -- which are branded as Bally Sports Networks -- charge distributors between $7.52 and $2.42 per subscriber per month, Kagan said.

Earlier this month the New York Post reported that Sinclair was trying to raise $250 million for the DTC service, which would be launched in 2022 at a price of about $23 per month.  

Media outlets quickly spread the news, with some in markets like Minneapolis and Fort Worth, Texas, where Sinclair has an RSN presence, expressing varied opinions about the cost.

Also Read: Why Sinclair’s $250 Million Sports Streaming Swing Could Deliver a Walk-Off Defeat of Pay TV 

In a March podcast with the Minneapolis Star-Tribune, The Streamable co-founder Jason Gurwin estimated that Sinclair would have to charge as much as $40 per month for the standalone service, less if there is a heavy sports betting component. 

“So if they need to charge the consumer $40 a month in order to break even on rights fees, I could imagine a world where they're like 'Hey, if you are gambling $100 a month through our service, we'll give you the RSNs for free.' But obviously online sports betting is not legal yet in Minnesota," Gurwin said in the podcast.

Sinclair filed documents with the Securities and Exchange Commission on Tuesday that showed in part its plans for the DTC service. While it did not include pricing, it did say that the company expected to have about 4.4 million subscribers to the service within 5 years  that would generate about $1.025 billion in revenue. At that rate, ARPU for the service works out to be about $26 per month, but that could also include advertising revenue. 

Other sports pundits have estimated that Sinclair would have to charge between $25 and $30 per month for the standalone streaming service. And they have said that the company’s goal of attracting 4.4 million customers for the DTC service was surprisingly low.

Also Read: Ripley Says Bally Sports Net DTC Offering Will Be a Lean-Forward Experience 

Sinclair has estimated previously that the standalone service would tap into as many as 30 million homes within the networks’ service territory that don’t subscribe to a pay TV service. Add that to the 52 million subscribers to its traditional pay TV offering, and the potential universe for the DTC service looks large. 

Sinclair bought the RSNs in 2019 for about $9.6 billion from The Walt Disney Co., placing the networks in a separate subsidiary called Diamond Sports Group. Diamond has been trying to restructure about $8 billion in debt associated with the purchase for months.  

Sports consultant Lee Berke, president and CEO of LHB Sports, Entertainment & Media, said RSNs across the country are grappling with ways to make up for the rapidly declining linear pay TV customer base, which is shrinking at a 6% to 7% annual clip as consumers increasingly cut the cord. Sinclair is faced with the added obstacle of restructuring its debt, meaning it has yet another party to sign off on its plans -- its bondholders. 

“You need viewers, you need distributors and you need the bondholders to all enthusiastically support this,” Berke said. “So far it seems like there is limited support from all three.”

According to the SEC filing, Sinclair has proposed restructuring Diamond Sports Group’s $8 billion in debt by asking for an additional $1.1 billion in cash from bondholders in exchange for higher interest rates, but that it had not been able to reach an agreement. News of that failure sent the DSG bonds below 66 cents on the dollar for the first time since November, according to The Wall Street Journal. 

The bondholder proposal seems similar to one floated back in April that was outlined in greater detail by Wells Fargo media analyst Steven Cahall. 

“This is not just a Sinclair problem, it’s an NBC problem, it’s an AT&T problem, it’s everybody in the RSN marketplace,” Berke said. “But it sure seems like you’re going to have to come up with something that is more aggressive to get a buy-in from all three parties. The sort of buy-in you need to move things forward.”

Ripley said on Sinclair’s Q1 earnings conference call in May that it has “cleared the path” with distributors regarding the DTC offering, but a Sports Business Journal report claims that at least two major distributors say they have not held “meaningful contact” with the broadcaster and are “in the dark” concerning the direct-to-consumer plans for the RSNs. 

Those same distributors said they would consider dropping Sinclair’s RSNs from their pay TV lineups if they launched a standalone DTC version of the networks, encouraged by Dish Network, which dropped the linear RSNs in 2019. 

In the SEC filing, Sinclair estimated that the linear RSNs would generate about between $3.07 billion and $3.249 billion in revenue in 2021, but that appeared to include Dish subscribers. Dish is set to renew its retransmission-consent agreement with DSG parent Sinclair's broadcast TV stations in August, at which time the RSN agreement could also be renewed.

Sinclair Broadcast Group outlined its $250 million plan for a separate direct-to-consumer offering for its 19 regional sports networks in a Securities and Exchange Commission filing Tuesday, coupled with a pair of proposals to bondholders that will restructure more than $8 billion in debt.

Sinclair’s RSNs are held in a separate entity, Diamond Sports Group, which has been in talks with bondholders for months  about restructuring that obligation. On Tuesday DSG said it has offered proposals that would allow it to borrow an additional $1.1 billion in debt, but added in the filing that it has been “unable to reach a definitive agreement” with its lenders and bondholder so far.

News that the talks had stalled pushed the price of the Diamond Sports bonds down about 6%, according to the Wall Street Journal, adding the price of the bonds had dropped below 66 cents on the dollar for the first time since November.  

At the same time, DSG offered some more detail regarding its plans to launch a direct-to-consumer version of the sports networks, claiming it could generate about $300 million in annual revenue from about 1.3 million current pay TV RSN subscribers, another $325 million from 1.4 million non-RSN customers and $400 million from 1.7 million cord cutters. Overall, the company said it believes it can generate about $1.025 billion in revenue from 4.4 million DTC subscribers in the next five years. 

Also Read: Ripley Says Ballys Sports Net DTC Offering Will Be ‘Lean Forward’ Experience

Earlier this month, a report in the New York Post said as part of its debt restructuring, Sinclair was proposing a DTC offering of the RSNs that would be priced at about $23 per month.  

While the SEC filing did not talk about pricing, the revenue and subscriber figures imply a monthly ARPU of about $26, which could be in the form of advertising and fees per customer. In his research note, Wells Fargo media analyst Steven Cahall estimated that at $2 billion in total revenue, ARPU would be about $38, split evenly between fees and advertising. But the analyst also admitted to “a healthy level of skepticism” concerning Sinclair’s estimates, noting that the company’s predictions for the RSNs after purchasing them in 2019 ‘proved overly optimistic.”

Also Read: Sinclair RSNs: Timing Is Everything  

Diamond Sports also reiterated 2021 revenue guidance for the RSNs at between $3.07 billion and $3.249 billion. Cash flow for the year is expected to be between $458 million and $637 million. But the guidance appears to depend on the RSNs winning back Dish Network, which dropped the channels in 2019.  

In his research note, Cahall estimated that Dish represents about 8 million RSN customers for DSG, or about $400 million in revenue. Dish is set to renew its retransmission consent agreement with DSG parent Sinclair for its broadcast TV stations in August, at which time the RSN agreement could also be renewed.

“We're of the view that the August Dish renewal for SBGI’s Broadcast stations + RSNs likely needs to conclude before bondholders commit to any restructuring,” Cahall wrote. 

As video subscriber losses continue to rise across the board in the pay TV segment, Comcast Cable CEO Dave Watson and Charter Communications chairman and CEO Tom Rutledge told a virtual industry audience Wednesday that a new double play that ties wireless and broadband is beginning to emerge. 

Comcast lost about 491,000 video subscribers in the first quarter, up from the 409,000 it lost in the prior year and a trend that Watson said would likely continue. While the cable operator will continue to focus on high-end video subscribers who want a full package of video, at Wednesday’s MoffettNathanson Virtual Media & Communications Summit, Watson said the company is not ignoring the growth at its wireless unit.

Comcast launched Xfinity Mobile in 2017, part of its MVNO agreement with Verizon Communications, and has grown the business to about 3.1 million customers. The mobile unit had its best quarter ever in Q1, adding about 278,000 customers (its highest quarterly number) and becoming profitable for the first time.

Watson said the mobile product has “energized our sales channels,” including digital, call center agents and retail. 

“I think there’s definitely an opportunity to combine an elegant and seamless broadband- mobile offering. We’ve done it in a whole bunch of our go-to-market approaches and for the right segment, it's a great way to start the relationship,” Watson said. He added that tacking on the Xfinity Flex product to that double play could make it even more attractive. 

“That is a really unique proposition that we have that no one else has,” Watson continued.  “Over time, look for us to do more of that.”

Later on in the conference, Rutledge said that wireless is an integral part of the company’s connectivity strategy, adding that that ultimate goal is to converge wireless and broadband.

Charter, which also has an MVNO agreement with Verizon for its Spectrum Mobile service, added about 300,000 wireless customers in Q1. It ended the quarter with 2.7 million wireless customers. 

“I look at our opportunity to create customers that buy mobile services, and create those customers along with the capabilities that we have added through our broadband network, which are vast, and to converge the product itself into a single product,” Rutledge said. "If you look at the total prices that people pay for these products today, I think we could gain significant market share at much lower pieces than people are currently paying. I think mobile represents the opportunity for us to save people money and give them better products than they have today. .... The combination of the product is bigger than the component pieces.”  

Rutledge added that profitability for Spectrum Mobile isn’t that far off. 

“They [Comcast] reached a point that we will reach,” Rutledge said. “From a break even perspective, we said previously that about 2 million customers is all we needed to make the business profitable. That’s true and that proved out to be true. The difference between us and Comcast at the moment, I believe, is where we are in the cycle and how much new growth we have versus how much base.” 

Rutledge added that he expects mobile to be a real contributor to profitability going forward.

“To the extent  you create a customer that raises your ARPU but saves the customer money on their household spend and creates additional EBITDA per customer for you, that both allows your existing base to be more profitable and your incremental growth opportunities to be greater because you more valuable, that’s a really attractive model,” Rutledge said. “I think that’s what mobile does for us.”

On the flip side, some have complained that the emergence of streaming apps and the trend toward content companies shifting content -- like sports -- to their direct-to-consumer products, adds more pressure to carriage negotiations.   

“Obviously it changes the dynamic,” Rutledge said, adding that in the current climate, content distributors would be “much better off not blowing up the existing model just now," mainly because it generates much more revenue than its streaming counterpart. 

The dilemma, he continued, for content companies is in deciding whether to keep raising linear prices while premium content is available on streaming apps and risk being dropped by traditional distributors, or maintaining or lowering rates to preserve that distribution relationship. 

Rutledge guessed that content companies would choose the second route, which would mean less money “but it’s still better than the alternative.”  

And despite continued pay TV subscriber losses -- MoffettNathanson estimates that pay TV is losing about 7% of its video customer base per year -- Rutledge believes there is still some life left in the traditional linear video business.

“It’s hard for me to believe that there won't be linear TV at all in the near term,” Rutledge said. “I think the model is under pressure, it's been under pressure for a  long time. I don’t think it’s about to collapse, but I do think it's shrinking rapidly. I think the most likely scenario is that rate changes will moderate and you’ll still have a pretty expensive linear model. I don’t see it just collapsing.”  

Tatari, an analytics platform for buying and measuring advertising, has formed an exclusive partnership with Clearco under which Clearco will provide young companies with up to $10 million for TV advertising, and Tatari will help them grow their brands by spending it.

The novel buy-now, pay-later arrangement comes at a time when direct-to-consumer companies are having more success buying television, and companies like Tatari can provide digital-minded marketers with data to confirm the effectiveness of their campaigns.

“The data consistently proves that TV advertising performs for growth-stage companies. When these brands want to scale their investments, the cost of TV media can become a barrier to entry,” said Todd Gordon, VP of client development at Tatari.

Also Read: Bad Audience Estimates Hurt Linear Television as Upfronts Approach

“Tatari’s deal with Clearco aims to address that sticking point,” Gordon said. “Brands can now fund their TV advertising with quick, sensible financing without having to raise it as venture capital, and we can immediately put that money to work in the form of data-driven, performance-minded TV ad buys.”

Since being founded in 2015, Clearco (formerly known as Clearbanc) has invested more than $2 billion in 4,000 online businesses.

“In the past year, we’ve seen consumers buy goods and services online, pushing more dollars into e-commerce,” said Andrew D’Souza, CEO & co-founder of Clearco. “While a larger market means more ecommerce merchants, advertising still is one of the largest costs for growing brands. And traditional equity-based financing can dilute the cap table. Our partnership with Tatari provides the solution for companies to grow and leverage data-driven practices to TV.”

Also Read: Comscore Adds Sling TV Data in Expanded Deal With Dish

Instead of taking equity, Clearco provides funds for media buying for a fee and a share of future revenues.

One of the first clients to take advantage of the Clearco partnership with Tatari is Resident’s Nectar Sleep Brands. Resident has been working with both companies separately.

“Performance marketers are always interested in inventory that can be proven to generate outcomes, and Tatari has made it possible for us to hold TV to that rigorous standard.” said Eric Hutchinson, co-founder and co-CEO of Resident. “Clearco was also a key partner to help fund our marketing spend in the early days of Nectar Sleep without diluting the business."

Also Read: Americans Planning Post-COVID Travel Heed CTV Ads: Magnite

Most young companies start slow with TV, but soon become believers, said Tatari’s Gordon, who headed negotiations as U.S. director at Magna Global before moving on to posts at Tube Mogul and Adobe.

“Our clients are growth junkies. They’re addicted to growth and we show them in small doses that TV can work,” Gordon said. “And then once it does, they’re off to the races. If you can show that Bravo works, if you can show that ESPN works, you can spend a million dollars a week.”

Tatari helps make sure the media spending pays off. “We read the data in the moment and take quick action to optimize away from the things that aren’t working and optimize towards the things that are working, and then try to scale,” Gordon said. “There’s more on-demand funding as you need it. It fits well with the way we look at the media world.”

The partnership is also good for Tatari, he said. “It brings benefits to our client and honestly, help us to continue to grow as amazingly fast as we are.”

Program Note: Future's Advanced Advertising Summit is today (April 27), register for free at SpringTVEvents.com. On-demand session viewing after the event available for registered attendees.

While most of us will be happy to say goodbye to 2020, it undoubtedly provided a major boost for direct-to-consumer (DTC) brands. Altered consumption and purchasing habits brought on by COVID-19 forced them to focus on the effectiveness of their marketing to an unprecedented degree. Riding the wave of consumer viewing habits, these brands significantly increased their overall ad spend dollars allocated to Connected TV (CTV) in an effort to improve performance; however, CTV spending still represented a minor portion of overall spending. And now, as we head into 2021, the smart DTCs are beginning to see CTV for what else it can offer them—a vital branding tool. 

CTV audiences eclipsed those of cable TV for the first time in 2020, and DTC companies took notice, turning to the medium to drive successful and measurable outcomes. In fact, CTV and over-the-top (OTT) ad spend rose an astounding 70% between Q1 and Q3 in 2020 according to a recent report from Pixalate. eMarketer is predicting a whopping $11 billion in CTV ad spend in 2021, up from $7 billion in 2019. This exponential growth is in large part due to CTV’s suite of analytics, which allows marketers to drive measurable performance through TV—a perfect marriage of sight, sound and results. But while CTV’s data-driven appeal is clear, it’s less obvious asset may be its effectiveness in providing upper-funnel awareness. 

Despite common misconceptions, awareness and branding are crucial for DTCs. Initial punditry around the DTC revolution emphasized how companies like Dollar Shave Club represented the death of brands, because they were all about user acquisition marketing and pinpointing marketing down funnel. Over time, the opposite has proven itself to be true: the direct-to-consumer revolution represents the democratization of three of the traditional advantages of legacy brands: distribution, scaled production, and advertising support. Consider the following:

Distribution: Brands can now quickly build a website or app and distribute their product directly. 

Production: While scale used to be a key factor in producing consumer goods, it’s now easy to design and manufacture a consumer product on demand, typically overseas, and quickly have it shipped to the U.S.

Advertising: While historically only big brands could afford major advertising campaigns, brands can now build an ad campaign tailored to their needs with just a few clicks.

With these competitive advantages gone, all market players, including DTCs, are left competing primarily on either price or brand. And let’s face it, not too many marketers want to always compete on price. 

Because of this newly-leveled playing field, brand awareness is now a critical piece of the customer acquisition puzzle for DTC brands to stand out and assert themselves. Take a look at the mattress industry. In an incredibly crowded space of over 150 brands, and despite the influx of well-funded challengers, legacy brands like Sealy and Serta are still top-of-mind for mattress shoppers. Challenger DTC mattress brands such as Casper, despite allocating significant marketing budgets to compete, still rank relatively low on unaided brand awareness. They must default to a greater focus on brand to survive, let alone thrive. This is where CTV offers a unique opportunity for brands to differentiate themselves, helping them to hone top-of-mind awareness so consumers think to type their name into browser bars to drive direct results.

CTV’s targeting capabilities, coupled with demographic breakdown, make the platform the perfect wingman to be the driving force behind these new DTC brand-building stories. CTV provides an ideal audience, with 85% of DTC consumers reportedly watching streaming content each week, and an astounding 82% of DTC shoppers taking action after seeing an ad on CTV according to a recent report from Telaria. The same report shows DTC shoppers’ streaming TV consumption totals nearly 13 hours each week, nearly 20% more than time spent watching cable TV. CTV also reaches coveted demographics outside of noisy social platforms and in the homes of a captive audience. A recent report by Telaria and Hulu found that DTC shoppers spend 70% more time streaming TV each week than using social media—welcome news for marketers who have found the cost-per-click increasing on social platforms.

CTV is well-positioned to take on the increased advertising burden. Recent research conducted by Fox found that CTV generates return on ad spend (ROAS) between four and ten times higher than linear TV, and even more so when compared with digital behemoths YouTube and Facebook. Yet fewer than 40% of advertisers have spent on CTV/OTT channels in the past year, significantly lagging behind social media, display, and non-CTV video. As CTV continues to develop and mature, so too will the platform’s use and flexibility evolve as an advertising channel. As one of our clients recently told me, “Like most other brands, 2020 pushed us to look for more efficient marketing channels and we turned to CTV. While we expected to enjoy the benefits of its performance, we were pleasantly surprised by what CTV offered for brand lift. Going forward we’ll be focusing even more on how we can maximize ROI across the board from our CTV spending.” Smart DTCs who flex CTV’s muscles for branding AND performance will be the real winners in 2021.

Upwave (formerly Survata) is a fast-growing marketing analytics company providing machine learning-driven brand marketing measurement technology and intelligence to the world's leading brands, agencies, and publishers.

In recent years, savvy advertisers—particularly those working with innovative young direct-to-consumer (DTC) brands—have accelerated their paths to TV advertising, upending historical patterns in which brands slowly built presences in other channels for years before launching their first TV efforts. Since the onset of COVID-19, this trend has increased dramatically, with young DTC brands racing to fill the void left by traditional TV advertisers that cancelled campaigns amid the pandemic.

This sudden shift sets the stage for a potential sea change within the competitive landscape of TV advertising in the coming years—provided that the brands that are accelerating their entry into TV are seeing the returns needed to continue their investments. Which begs the question: Do brands that launch their first TV campaign earlier in their lives see a greater impact on their digital performance than more-established brands?

To explore the implications of brands entering the TV advertising space earlier in their life cycles, Effectv and VAB recently took on an expansive analysis of hundreds of brands, both DTC and non-DTC, that have turned to TV as a way to drive their businesses forward. Let’s take a deeper dive into the motivations of these brands and the results that their TV efforts have delivered to date. 

The Pandemic-Driven Shift to TV

The diversification of advertisers within the TV space in 2020 has been swift and significant. According to a VAB analysis, nearly $460 million entered the national TV marketplace in the first half of 2020 from 110 first-time national advertisers across 59 categories. Impressively, nearly 70 percent of new first-half national TV dollars were invested during Q2, the heart of the pandemic. 

There’s a number of reasons why these young DTC brands are now accelerating their paths to TV advertising. These include the continued expansion and evolution of targeting and measurement capabilities within the TV space, both of which create greater efficiencies and lower costs of entry in TV. But it goes deeper than that. The legitimizing effect of TV advertising for brands, along with the medium’s enablement of deeper brand storytelling, are rapidly making TV a must-have for the type of growth that today’s young startups need to deliver. 

The Outsized Impact of TV Advertising for Young Brands

Given the short-term, lower-cost TV inventory opportunity opened by the pandemic, it’s not terribly surprising that more early stage companies started to experiment with TV advertising. But according to our analysis, the results these brands are achieving suggest that they are going to continue to invest—and likely attract more and more young brands like themselves to the channel. 

For our analysis with Effectv, we looked at the average monthly unique website visitors that were recorded in relation to the TV campaign launches for 190 new TV advertisers. When we examined results according to the age of the advertising companies, interesting patterns emerged. While both DTC and non-DTC brands across all life stages saw an immediate double-digit increase in unique visitors to their digital platforms during their TV launch month, the results were even more striking among younger companies. 

According to our analysis, younger brands (3 years old or less) saw the largest lift—23 percent—in average website traffic within their launch month alone. Younger DTC brands are particularly aggressive as they challenge the incumbent brands in their spaces. They’re spending more (33-36 percent more) and advertising more consistently than the older brands, resulting in a greater return on their investment. The results speak for themselves. 

TV can serve as a great validator for new brands, bringing swift credibility and scale, fast-tracking them to become household names quicker than those confined to digital channels. But our analysis also found that TV’s power as a growth engine isn’t confined to young brands. Across all measures, we found that TV campaigns drove improved results across brands, DTC and non-DTC alike, regardless of age. 

As the economy accelerates and younger brands seize their opportunity to challenge incumbents on their own turf, the TV advertising landscape will look a lot different than it did back in 2019. Established brands that continue to invest in TV advertising will be able to hold their ground and catapult their businesses forward. But in areas where legacy brands pull back their TV spend amid the uncertainty of the pandemic, there will be no shortage of hungry young brands waiting to battle it out. 

VAB, the trade group representing the video industry, is an insights-driven organization that inspires marketers to reimagine their media strategies resulting in smarter, more educated decisions that drive business growth.    

TV advertising gives brands a quick boost, but a sustained presence on air provides the biggest lift, according to a new study from Comcast’s Effectv and VAB, the trade group representing TV networks and distributors.

The study looked at both direct-to-consumer brands and more traditional brands and found that both type of brands, whether new or old, see measurable results from TV advertising.

With the 140 DTC brands studies, TV advertising provided an immediate double-digit increase in unique visitors to their digital platforms during their launch month, compared to the three-month average prior to the campaign. The lift came whether the DTC brand was new or more established.

For non-DTC brands 50 companies were analyzed, with some younger than 20 years, the rest older. The average non-DTC brand also saw a double-digit increase to its digital platforms during their TV launch month.

Beyond getting a quick boost from TV advertising, the study noted that a sustained presence on TV provided brands with an even more pronounced lift, particularly for younger brands. Unique website visitors for young brands during months with TV advertising were 50% higher than their pre-launch visitor normal. Older brands saw a 21% increase in website visitors.

“Over the last few years, savvy data-driven marketers have accelerated the advertising journey by introducing TV earlier in their brand life cycle,” said Jason Wiese, senior VP, director of strategic Insights at the VAB. “These younger brands spend aggressively and advertise more consistently than their competitors resulting in higher engagement and better digital outcomes. Our findings confirm the most effective way for brands to challenge incumbents and establish themselves within a category is through TV advertising.”

The report, entitled The Halo Effect: TV as a Growth Engine, is the third report released as part of Effectv’s Halo Effect Series. Effectv has worked with TV Squared, MediaSciences and VAB on the reports.

“This study establishes that TV is a critical growth engine for brands at any life stage,” said James Rothwell, VP, global agency, brand & industry relations, Comcast Advertising. “This is especially important today, as economic uncertainty makes it even more important that brands build a media mix that will reach new audiences and drive measurable growth. And for newer brands, who are still establishing their story and identity in market, TV presents an opportunity to ‘legitimize’ their products, bringing credibility and scale in ways no other advertising medium can.”

While cord-cutters and cord-nevers are redefining what the modern TV experience will look like in the future, the immense appetite for new and engaging content remains a constant. Live TV continues to reign as the most popular form of consumer content, although various models of on-demand content are becoming increasingly popular methods to access TV shows and movies. The global health crisis and subsequent lockdown viewing culture has only further highlighted the popularity of these viewing mediums. 

Conviva’s Streaming in the Time of Coronavirus report, published in early April 2020, found global streaming demand jumped by more than 20 per cent when compared with figures from March. Virtual, shared experiences are of greater significance now more than ever, and as a result, media companies are increasingly looking to offer highly personalized content to differentiate their services. 

Long before the COVID-19 outbreak, the media industry had been shifting its attention towards monetization opportunities which are able to accommodate and embrace the growing demand for more personalized and relevant video experiences. With the cost of content acquisition rights soaring and the pervasiveness of content digitization, maximizing revenues from every potential viewer is now of critical importance to media businesses. To manage these increasing challenges – including the complexities that surround content distribution negotiations - media content companies need to find new innovative ways to deliver high-quality content to expectant viewers. 

Luckily, the growing number of Direct-To-Consumer (DTC) and TV Everywhere (TVE) multiscreen services offered by broadcasters and operators are enabling advertisers to shift from traditional ‘one-to-many’ to ‘one-to-one’ session-based conversations with targeted audiences, in a high value premium TV environment. 

This nuanced approach is made possible thanks to high-quality, first-party data gathered from long-standing relationships established with end-users. 

Going beyond billboards: Target advertising 

With the steep rise in popularity of OTT video services, programmers and multichannel video programming distributors (MVPDs) must find new methods of monetization through targeted advertising. 

(Server-side) Dynamic ad insertion (DAI) helps broadcasters and service providers to effectively personalize and monetize multiscreen video services across linear, OTT, and streaming services. By analyzing consumer profiles while complying with privacy protection regulations, TV operators and service providers can gain a better understanding of consumer behavior, and the type of content that different audience segments regard as premium. 

Through a more personalized advertising offering, broadcasters and service providers can retain much better control of the content they are delivering to viewers, based on geography, socio, demo and behavioral data, as well as enabling new monetization opportunities for existing inventory and content assets. 

To fully utilize this, media operators and content owners need vendors that can help them recognize the full revenue potential of advertising. Advertising solutions are now in place to empower advertisers to obtain a greater level of control and insight, enabling them to provide a more streamlined and cost-efficient means to reach audiences. This is particularly pertinent given the significant budget restrictions caused by the current situation around COVID-19 and its subsequent disruptive impact on the wider media landscape.

Leveraging industry standards 

In response to the increasing market complexity triggered by the surge of new OTT-based services, MVPDs must continue to offer natural value-adds to advertisers. For this, global standards will be critical for the successful management of programmatic advertising workflows. In addition, given the complexity behind handling distribution rights agreements, it will be vital that the industry adopts and supports key video standards such as the SCTE-224 standard, now regarded as the most advanced and standardized data model dedicated to distribution rights. 

SCTE-224 is being rapidly adopted by both broadcasters (as a way to define rights) and by operators (as a way to enforce them), particularly in the US. Moving forward, the combination of SCTE-35 to handle in-band signaling and SCTE-224 for processing out-of-band rules (such as blackout and program substitution) will be fundamental to enabling  easy deployments and implementations. 

It is very difficult to predict how consumers will gravitate towards different types of content consumption models. And with the global health crisis temporarily impacting traditional TV heavy hitters, such as sports and soap operas, operators need to be ready to react to the shifting needs of consumers and advertisers as quickly as possible. 

Operators today have a unique advantage as they are able to understand their audiences’ preferences and viewing patterns in greater depth than ever before. Having the core technology in place is a prerequisite, but almost as important is the ability to adapt in line with the market. Yet at a time when the current global health crisis is changing the dynamics of an already shifting media landscape, operators and broadcasters must continue to react to the needs of consumers and advertisers, and the challenges of a digital world.

The decline in cable network affiliate fees in the last quarter has been blamed on the sharp fall-off in pay TV service customers, but Wells Fargo Securities’ media analyst Steven Cahall notes that direct-to-consumer streaming offerings from networks could be having an impact on rates. 

In the second quarter, affiliate fee growth ranged from an 11% decline at AMC Networks to a 2% gain at Discovery. In a note to clients, Cahall said that he believes in addition to video subscriber declines, corporate strategies are playing and will continue to play a role in future affiliate fee softness.

“We think those network operators that choose to take their content DTC will face rate pressure from distributors in renewals,” Cahall wrote.

Overall cable network affiliate fees were down for the first time ever in Q2, according to MoffettNathanson media analyst Michael Nathanson, to -3% after a 1% gain in each of the prior three quarters. According to Nathanson, overall affiliate fee growth has been spiraling downward since Q1 2014, when rates increased by 12%.

Nathanson attributes most of that decline to the erosion of video subscribers. In his report, Nathanson noted that traditional video subscribers fell 8.3% in Q2, compared to a 7.6% decline in Q1.

“With cord cutting at record levels, price increases are no longer enough to offset distribution declines,” Nathanson wrote.

The Wells Fargo analyst acknowledged that separating DTC, licensing fees and the impact of subscriber declines from programmers’ balance sheets can be difficult. But in his report he estimated that content companies like The Walt Disney Co., Fox Corp. and Discovery showed modest positive growth in affiliate revenue in Q2 -- basically a mid-to-high single digit increase in affiliate fees offset by a 5% to 7% decline in subscribers. In comparison, AMC Networks and ViacomCBS appear to have had -4% and -3% affiliate fee growth, respectively, not including the impact of subscriber losses.

Cahall wrote that differences in content -- Disney with ESPN and Fox with its sports networks and news channels, which traditionally fare stronger than entertainment networks -- could explain the disparity. But he noted that Discovery has no domestic sports or news and managed a 2% rise in affiliate fees during the period. Cahall added that the difference is DTC strategies,

“AMC Networks and ViacomCBS are shuttling more content to their SVOD/DTC services and we think distributors are noticing, and negotiating lower linear rates since the content is no longer exclusive,” Cahall wrote. While Disney and Fox have been even more aggressive on the DTC front -- Disney Plus has more than 60 million subscribers and is considered to be the model for DTC offerings -- Cahall added that both are keeping most of their cable content separate from streaming.

Discovery said on its Q2 earnings call with analysts that it will beef up its own DTC offerings in the coming months, but Cahall doubted it would be too disruptive.

“We’d argue they’re doing OK in the bundle so maybe rocking the affiliate fee boat isn’t the best approach," Cahall wrote.

As cable network affiliate rates have fallen, both Cahall and Nathanson noted that retransmission consent fees have continued to rise strongly.

According to Nathanson, Fox had the biggest increase in retrans fees in Q2 (22%), followed by ViacomCBS (17.1%), Disney (13.3%) and NBCUniversal (6.7%). Cahall noted that station groups also saw sharp retrans fee increases, led by E.W. Scripps (up 27%), Tegna (18.6%), Gray TV (9.5%) and Sinclair Broadcast Group (4.3%).

In his note, Cahall estimated that gross retrans revenue would rise between 15% and 20% over the next couple of years.

The NBA is back. So is the Premier League, Bundesliga, La Liga, Nascar, MLB and the NHL. Above all, Football (American football, that is) is less than 100 days away from a planned on-time start. 

There remain question marks as to whether any of the above can complete a full season without having to pull back. Still, this represents real change from where we were only a few weeks ago, in the midst of the most unprecedented absence of the live programming that anchors the media calendar. With major sports set to resume, it’s a good time to take stock of what we learned from the hiatus. And how these learning may influence the TV industry and advertising market for live sports moving forward. 

Lower barriers to entry gave performance advertisers a taste for premium inventory 

The overnight exodus of live sports programming, combined with the rapid retrenchment from major TV advertisers, occurred at the same time as quarantines and stay-at-home orders led to a massive surge in TV viewership. It created a buyer’s market where many small TV advertisers (often performance-oriented DTC brands) could taste premium inventory for the first time. In many cases, it performed quite well. It has been a truly perfect storm. 

When sports return, the market for that (super?) premium inventory will be larger and more diverse than ever before. We have some early evidence from this already: Tatari advertisers were fast to buy into the NFL Draft and Nascar’s return. They are hungry for more and will enter the sports market with less sticker shock (or willing to pay higher CPMs).  

Traditional networks will write blank checks for sports right

Brands understand that no inventory provides the same reach as live sports. To cite a recent example, the average audience of the 2019 NCAA Basketball Championship game is still larger than March 2020’s top two prime-time entertainment shows combined - and that’s with a larger, stay-at-home audience. 

Networks know this all too well, as they struggle to replace the billions in lost ad revenues that suddenly evaporated from their balance sheets. Reruns of old games, video game tournaments, golf friendlies, and documentaries, no matter how compelling, hardly make up for the loss. 

This harsh reminder has come at a pivotal time, as networks prepare to bid on landmark sports rights contracts next year. 2021 was already shaping up to be a bidding war, with networks facing potential competition from deep-pocketed tech companies like Amazon, Twitter, and Apple. Now that networks (and their shareholders) have experienced what it’s like to not have this inventory, it’s a safe bet that they will approach next year’s TV rights negotiations with a new sense of resolve. Sometimes you don’t know what you have, or how much it’s worth, until you lose it. A blank check will give the traditional TV networks the needed life-support in their managed decline. 

At Tatari, we actually don’t believe that the tech companies are 100% ready and willing to write big checks for sports. Unlike DirecTV, whose customer acquisition hinged on NFL Sunday Ticket, technology companies have enjoyed massive growth - so far - without much sports content. They don’t need it, just yet. Furthermore, a total switch to streaming might just be too much for them to swallow. The largest streaming event, as measured in concurrent viewers, took place on April 12 when almost 3 million people simultaneously watched Andrea Bocelli. That’s just a fraction of an average NFL game: 15 million+ (the Super Bowl itself is a cool ~100 million). So let’s give credit where credit is due; today, only traditional TV networks can pull this off flawlessly. Besides, too many fans across the country still don’t have fast enough Internet access yet, and the sports league ought to be careful to not alienate them.  

Lesson Learned 

Sports is indispensable for all marketers. Coronavirus has demonstrated this and given many upcoming brands the needed confidence to take the plunge. In that, sports is equally indispensable for the TV industry, both legacy (cable and broadcast networks) and future media players alike.

Tatari is a TV media buying agency with a growing practice among DTCs. Philip, its founder, previously ran TrueCar and Shazam before exiting both.

Discovery said it signed a new long-term distribution deal with Sky that includes linear channels, video on demand, direct-to-consumer products and an extension of their advertising relationship.

Related: Direct-to-Consumers Head Faricy Quits Discovery

The deal covers the U.K., Ireland, Germany and Austria. Financial terms were not disclosed.

“Discovery can take you from the depths of the ocean out to deepest space, all from the comfort of your living room. We bring together the best content from partners like Discovery,HBO and Showtime, add it to the best live sport in Europe, our award-winning Sky Originals and apps we love like Netflix, and put it all in one place on the world’s best platform, Sky Q,” said Stephen van Rooyen, CEO, U.K. & Europe, at Sky.

In addition to carrying Discovery’s linear networks, Sky will distribute Discovery streaming services such as MotorTrend, as well as future DTC offerings.

Sky Q and Discovery’s Eurosport will work together to create new experiences across the U.K. and Ireland during the 2021 Olympics. These would include UHD feeds and pop up channels dedicated to specific sports and events.

Sky Media will continue to air ads on Discovery channels and look to create new opportunities for advertisers in VOD with AdSmart, its targeting service.

“Sky and Discovery have been working together for over 30 years to bring audiences the best in real-life entertainment,” said Kasia Kieli, president and managing director. “Discovery EMEA. We are very pleased that our strategic relationship continues to grow, and our new multi-dimensional agreement means Sky customers can continue to enjoy our wide range of factual, sport, lifestyle and entertainment channels and programs for years to come.”

Discovery Communications said its global direct-to-consumer CEO Peter Faricy has resigned, effective July 15. His role will be assumed by three current Discovery executives, chief technology officer, direct-to-consumer Avi Saxena; president U.S. Digital and Product Marketing Karen Leever; and group SVP, Content and Commercial Strategy, direct-to-consumer Lisa Holme.

Faricy joined Discovery in August 2018 from Amazon, where he led the online retailers Amazon marketplace third party seller business. At Discovery, he was in charge of its Discovery’s direct-to-consumer streaming efforts, including Discovery GO TV Everywhere products, as well as Motor Trend, Eurosport Player, Discovery Kids, Dplay, and Discovery’s strategic alliance with PGA Tour.

In a memo to employees, Discovery CEO David Zaslav said Faricy decided to leave the company to be closer to his family.

“After a few months of discussions, Peter Faricy has decided that now is the right time to leave Discovery,” Zaslav said according to the memo. “I want to thank Peter for all of his hard work, and contributions which have allowed us to make meaningful progress. But I also recognize, and am grateful for, his personal sacrifices over the last 2 years, much of which he has spent away from his family in Seattle. Peter has decided that time with his family will come first once travel starts up again.”

Zaslav added that effective immediately, Saxena, who is currently in charge of global technology at Discovery, will add responsibility for Food Network Kitchen and the Magnolia direct-to-consumer strategy. Leever,who heads up content and commercial strategy, will also be responsible for Discovery’s app strategy in the U.S and U.K. and Holme, who heads up Content and Commercial Strategy, will have responsibility for content and programming strategies around its aggregated app as well as its partnership strategy.

Discovery International CEO JB Perrette will also assume oversight for Dplay and all of Discovery;s sports DTC offerings, as well as MotorTrend, according to the memo. Dplay International general manager Win Kolasastraseni, Discovery Golf Group president and GM Alex Kaplan and Motor Trend Group global president and GM Alex Wellen will report directly to Perrette, effective immediately. 

Discovery is continuing its talks with distributors as it tries to determine its streaming strategy.

Discovery CEO David Zaslav boasts about the volume of content the company owns, its local programming and the direct-to-consumer offerings it has already launched or acquired, including the Eurosport Player in Europe and Food Network Kitchen in the U.S.

But while The Walt Disney Co. has launched Disney Plus, NBCUnversal hatched Peacock and AT&T dialed up HBO Max, Discovery as yet hasn’t decided how to best monetize its content and reach non-cable subscribers.

“We’re working with our distributors. We’re in discussions with almost all the large distributors,” Zaslav said Tuesday at the 2020 Credit Suisse Virtual Communications Conference.

He noted that Discovery’s distributors have about 30 million broadband-only subscribers. “There’s a way for us to work with them to reach those broadband-only subscribers and those are the discussions that we’re having and they’re going pretty well.”

Programmers looking to go direct-to-consumer put their current distribution revenue at risk unless they can find a way to make the deal attractive for their current video partners. Discovery has a number of cable execs on its board of directors.

Discovery has also been doing research with consumers.

“We’ve been out in the market. Last Monday, I spent the whole day with focus groups of people that never had cable, cord cutters, under 40, over 40, people that have cable,” Zaslav said.

He said that while the other media companies compete to acquire and produce expensive scripted content, Discovery’s mostly unscripted content and the personalities that star in it have a different but strong appeal.

“We think there’s a lot of product out there, but we think great family content that’s differentiated and easy to navigate will be a real winner in direct-to-consumer around the world,” he said.

Zaslav declined to say when a decision would be made or when a DTC product might launch.

“We're feeling good about it. We're doing a lot of work and you're going to hear from us on it. We think there's an open space for us,” he said.

Discovery is also feeling better about the ad market. On its last earnings call, Discovery predicted that ad revenues might be down 20% in the second quarter as COVID-19 disrupted businesses.

Ad revenues were down 18% in April, May is tracking “significantly better and June is tracking meaningfully better,” Zaslav said.

“The scatter market is picking up. Cancellations in the third quarter were significantly better than we thought they were going to be. They’re more meaningful than what we’ve seen in the past, but they’re much better than we thought they were going to be,” he said.

Volume in the scatter market has been going up week by week, and advertisers that pulled money early in the pandemic are now coming back into the market, paying a higher price than they’d agreed to in last year’s upfront, he said.

This year’s upfront will take longer than expected, Zaslav said.

“Right now there’s a fight over price. I think everyone is looking at this environment and saying ‘shouldn’t I get something for cheaper,’ or ‘shouldn’t I get a deal.’ And I think the media side is saying no,” he said. “We think we should get higher pricing. The inventory to promote on television is going in the aggregate down and our share is going up. And so we think we should be more in volume and in price.”

The recent launch of new direct-to-consumer sports services is quickly changing the game, as professional leagues and other sports entities contemplate playing ball with industry rookies to increase greater awareness and sales opportunities.

Season-long, out-of-market live game packages from Major League Baseball (MLB.tv) and the National Hockey League (NHL Center Ice) have become part of the upstart ESPN+ direct-to-consumer service lineup, and the National Basketball Association’s NBA League Pass is taking its shots from inside Turner Sports’ Bleacher Report Live (B/R Live) DTC offering this fall. Against this backdrop, industry observers said the now wide-open field of standalone sports league and conference OTT offerings could be winnowed down to a handful of big, conglomerated DTC entities in the near future.

“These very elaborate, multi-sport [DTC] services aspire to be a Netflix of sports, and it certainly seems like they’re making substantial progress in doing so,” sports television consultant Lee Berke said.

Related: Sports Streaming Picks Up the Pace

The current roster of standalone subscription OTT sports services features a number of live out-of-market game packages ranging from the major pro sports leagues to college conferences such as the Atlantic 10 to smaller pro sports leagues such as the National Lacrosse League. Most of the packages operated independently from other digital services until this year, when B/R Live and ESPN+ launched with agreements to add many of the OTT services under their respective banners.

Berke said the emergence of DTC services like ESPN+, Bleacher/Report Live, CBS Sports’s CBS Sports HQ — with huge digital footprints and significant resources — have provided another platform for standalone sports networks to distribute and sell their content while maintaining their core OTT product for the diehards.

“Everybody is looking for as much shelf space as possible, so they will increasingly look to offer standalones or create partnerships with other entities and run the services side by side,” Berke said. “As long as the programming is being sold and watched, they’ll try all these different things out.”

Bleacher Seats

Turner, which launched its Bleacher Report Live in April, will offer several OTT sports services within its app, including NBA League Pass — which Turner Sports distributes in association with the league — and the National Lacrosse League’s out-of-market service for the 2018-19 season, which last year was offered at a suggested retail price of $49.99.

Related: Turner to Launch Streaming Service Bleacher Report Live 

While Bleacher Report Live is offering all of its live events — which include Spring League football games, the World Arm-wrestling League and UEFA Champions League soccer games — for free as part of the service’s introductory offer, eventually consumers will be able to purchase sports content through B/R Live by subscription or on an individual-game basis, according to Turner Sports president Lenny Daniels.

B/R Live will support its league partners with marketing and promotional opportunities across the full spectrum of the services, he added.

“We’re not paying for the rights and saying go away — we’re partners through and through, and we’re going to help them sell their services,” Daniels said. “You just can’t pay someone a rights fee and say we’ll see you in a couple of years — it just doesn’t work like that anymore.”

Along with offering the NHL and MLB out-of-market packages, the ESPN+ service last week secured digital rights to the Atlantic 10 Conference, which gives the $4.99 per month service rights to more than 500 college sports events per year. Those events were previously available through the conference’s website, with consumers paying an average of $9.95 to $14.95 per month to access them.

Related: ESPN Makes Direct-to-Consumer Pitch With ESPN+

The Atlantic 10 deal adds to an already strong price-value proposition for ESPN+, which will offer thousands of live sports events for less than $5 per month.

“There’s just an incredible amount of sports content, and the fan affinity for all the different sports out there just make it a very rich environment for the fan,” said ESPN executive vice president and chief technology officer Aaron LeBerge.

Berke, who consulted on the ESPN+-Atlantic 10 deal, believes more standalone OTT sports services will look to partner with other DTC services for the opportunity to increase sales and marketing opportunities.

“You’re going to want to partner up with [DTC] services that are highly distributed and that have substantial resources behind them,” Berke said. “You’re seeing properties partner up with very well-financed and well-distributed OTT platforms to gain eyeballs and distribution.”

That outreach also extends to the traditional pay-per-view business. ESPN+ will offer for purchase UFC’s monthly pay-per-view fight cards beginning in 2019 as part of its recent five-year, $1.5 billion TV deal with the mixed martial arts outfit reached last month.

While UFC will not offer its globally distributed Fight Pass OTT service within ESPN+, UFC chief operating officer Lawrence Epstein said the MMA outfit’s PPV events will benefit greatly from the additional editorial coverage from ESPN’s linear and digital outlets. The PPV preliminary fights will air on the flagship ESPN channel as part of the deal.

“We see this as a massive enhancer to the growth of our PPV business,” Epstein said. “Everyone was focused on the numbers associated with the ESPN+ and ESPN broadcast deal, but the enhancement to PPV, which is still a big part of our business, is going to be incredible.”

It’s unclear whether ESPN will charge the same suggested retail price for the UFC PPV events as the linear cable distributors. Epstein added that the licensing fee deals with traditional PPV distributors such as In Demand and DirecTV are up at the end of this year, but would not provide details on negotiation points.

“The splits are clearly better for content owners in the digital landscape than they are for traditional cable and satellite distributors, at least for right now,” Epstein said.

Sports executives said they can envision creating new packages exclusively for the DTC services.

The NBA in particular would potentially look to expand NBA League Pass — which already includes full-season, per-game and per-team subscription offerings — to include live game micro-transaction buys in which consumers would be able to purchase live games in progress, potentially beginning at the start of the fourth quarter.

NBA commissioner Adam Silver said during Turner’s March B/R Live press conference that the micro transactions through B/R Live, targeted toward fans with limited free time who want to catch an exciting end to a game or a spectacular performance from a player, will further enhance the league’s already popular league out-of-market package without cutting into traditional package purchases.

“The advantage we have online as opposed to traditional cable systems is that we can test and respond in real time,” Silver said. “We can set price points and experiment with different ones.”

The potential marketing and promotional opportunities aren’t lost on other standalone OTT sports content providers. FITE TV, which offers more than 60 live boxing, wrestling and mixed martial arts matches per month, would be interested in partnering with an ESPN+ or B/R Live for distribution of its PPV events, chief operating officer Michael Weber said, although no negotiations are ongoing. While the company has a strong technological backbone delivering its PPV events as well as a comprehensive website and FITE TV app, Weber said the company’s events would gain more exposure if packaged with a larger DTC sports service.

“Building a relationship with someone who could build off of our technology platforms would be very welcome,” he said. “We also bring a lot to the table that could help them as well.”

While the partnerships benefit both parties, Daniels doesn’t believe the leagues will abandon their standalone OTT offerings anytime soon.

“A lot of people are wondering if consolidation is going to happen,” he said. “Maybe long-term, but I think leagues like the NBA will continue to do their own thing, and I think they need to because there are fans that will want to go all in on a particular league. I think they can co-exist.”

Seeing select premium networks alongside a few other channels going direct-to-consumer (DTC) with streaming services is more than a passing fad.

Citing the ongoing unbundling of cable TV packages in the coming years, The Diffusion Group predicts that all “major” TV networks will introduce OTT-powered, direct-to-consumer services by 2022.

That, of course, would build on several of the services that have already been launched, such as HBO Now, Starz, Showtime and CBS All Access, as well as those that are in the plans from The Walt Disney Co., including ESPN Plus, among others.

RELATED: ESPN Plus Is Name of New Streaming Sports Service

Mike Berkley, TDG’s senior advisor and author of the report -- The Future of Direct-to-Consumer Video Services - Analysis & Forecasts, 2018-2028 – said those mark the “early signs of an emerging media tribalism.”

TDG predicted that the move by major networks to go OTT and reserve their best content for direct-to-consumer offerings will help drive total DTC subscriptions close to 50 million by 2022.

"Big media companies are reacting more boldly to changes in TV viewing behavior," Berkley added. "Consolidating, bulking up on originals, and marketing directly to consumers are driving their strategic direction."

He also stressed that DTC strategies by networks are also risky and could damage their relationships with traditional distributors.

“If networks extract too much high-value content too quickly, channel conflicts are inevitable,” he said.