This presentation may contain statements that may be deemed to be "forward-looking" and involve risk and uncertainty. Actual results may differ materially from what is actually happening in the real effing world. Yeah, you should take this all with half a grain of salt.
DAVID BLOOM: Hello, Daniel. So, the big NBA playoffs are underway, with huge implications for all the teams involved. I’m not, of course, talking about mere basketball teams such as the soon-to-be-fishing Lakers or formidable defending champs in Denver, but the tech and media teams at Amazon, YouTube and Comcast, all of which joined the playoffs for the next era of NBA video rights.
Also read: ESPN, Amazon Prime Video Reportedly Close To New Deals With the NBA
Disney/ESPN and Warner Bros. Discovery/Bleacher Report saw their exclusive renewal negotiation periods expire this past week, with all those new teams jumping in, according to various reports. To me, the most intriguing new team is YouTube. Alphabet, the $2.1 trillion tech giant that owns YouTube, reported blowout quarterly earnings Thursday, sending share prices soaring a remarkable 15%. Investors distracted by vast capex spending on AI infrastructure were reminded that Alphabet expects to generate a mind-crushing $100 billion in revenues this year from YouTube and cloud computing.
Ad operations in Google’s still-dominant search engine and YouTube video continue to print money. And now, they’re looking to grab a share of the NBA, which is not only No. 2 among sports leagues in value, but far more global in audience reach and interest than the No. 1 NFL. Pair an NBA package on YouTube TV with their NFL Sunday Ticket and it’s not hard to see YouTube TV growing beyond the 8 million subscribers it already claims. Amazon, of course, has its Thursday night NFL package, and also would lock down more sports fans for its package with a deal. And Comcast looks highly motivated, perhaps even more so after being excluded from that ESPN/Fox/WBD sports skinny bundle. The incumbent rights holders can match any newcomer bid, but can they afford to?
That’s particularly the question for WBD CEO David “Mr. $50 Million” Zaslav as he navigates a net debt load that’s still 3.9 times the value of his underperforming media company. Any handicapping you’d like to make on how this NBA playoff turns out?
DANIEL FRANKEL: Well, for starters, even though my Lakers are in another 0-3 hole against the superior defending champion Denver Nuggets, I sleep easy knowing that the Clippers are going to hand their first-round playoff matchup to Luka Dončić and the Dallas Mavericks. But if we needed any further proof that Los Angeles will never be a Clippers town, the trailer is out for FX and Hulu's Clipped, the six-part limited-series biopic featuring Ed O'Neill as blatantly and stupidly racist former Clippers owner Donald Sterling, and Laurence Fishburne as the befuddled (and privately enraged) championship-winning head coach who must deal with the aftermath of Sterling's mini-Chernobyl on the eve of the 2014 NBA Playoffs. All six episodes of Clipped drop on June 4. Looks like another can't-miss FX miniseries.
As of Friday afternoon, we'd heard that Disney and the league had largely come to an understanding. Amazon was close to its first-ever NBA deal, and Warner Bros. was being challenged by NBCUniversal. I haven't heard about Google being a serious contender, but YouTube TV is a big advertising partner with the league, so who knows. As far as the playoffs themselves, watching my Lakers try to keep up with Denver is a bit like seeing the aging San Antonio Spurs in the last years of David Robinson try to play against peak-dominant Shaq and the steeply ascendent Kobe. After getting absolutely smoked in the 2001 Western Conference Finals, the Spurs got smart, blew up everything around future Hall-of-Famer Tim Duncan, and rebuilt with more future Hall-of-Famers.
They added a 19-year-old Parisian, point guard Tony Parker the following fall. Then in 2002, the Spurs' brilliant coach and general manager, Gregg Popovich, convinced one of my favorite players of all time, Argentina's Manu Ginobili, to take his talents north to the River Walk. Well, I should restate that ... as a Lakers honk, who saw his Lakers eighty-sixed from the Western Conference Semifinals by a rebuilt, reinvigorated Spurs team in 2003, it took time to appreciate the ambidextrous brilliance of Ginobili.
But the Lakers need to follow that playbook and let LeBron James, who will be 40 when the playoffs start next season, retire somewhere else. Fantastic player. And I would never argue the GOAT credentials of a man who has played at a championship level longer than Michael Jordan or Kobe Bryant. But the Lakers can't improve paying him $50 million next year against the salary cap.
They are now a perennial "play-in" team that isn't going to get better with him at this point. Besides being a bit of an awkward twerp in press conferences, Anthony Davis is a great player on both sides of the court who the Lakers can rebuild around. That should start Saturday night after the vastly superior Denver Nuggets finish a second consecutive sweep of them. And if I'm the NBA, I also have to think long and hard about giving a 10-year commitment to David Zaslav and his WBD team to be a key TV partner. What evidence is there that Turner Networks or a WBD successor platform will be a scaled, vital part of the video ecosystem in a decade when that contract concludes?
BLOOM: Yes, after I wrote the opening, news arrived that the remaining slots for NBA TV rights playoffs appear to be down to one, to be filled by either WBD or Comcast. Turner Sports' much-loved Inside the NBA studio show, with Ernie, The Jet, Sir Charles and Shaq Diesel, certainly attracts much fond fan feeling. There’s much less fondness for WBD’s battered finances and uncertain prospects. On the other hand, the company threw off so much cash flow that it could afford to pay the extractive Zaslav $49.7 million in thanks for his many, many company excisions the past year. Maybe WBD can devote what’s left to this absolutely must-have package of rights. The current contract costs around $2.4 billion a year. Speculation suggests new contracts will be around double previous prices, for fewer games per rights holder.
If the league sticks with three deals, I have to think Comcast -- with its $153 billion market capitalization and diversified reach across cable and satellite, technology and mobile, parks and resorts, film and television, big European presence and international ambitions -- makes a better long-term partner. And rebuilding Inside the NBA inside, say, Amazon, would be pretty easy for Andy Jassy to pull off, just as he did in hiring the sainted Al Michaels for Thursday Night Football. WBD has the right to match any Comcast bid, and it almost has to for existential reasons. Will Brian Roberts do to WBD what he did to Disney with the $71 billion Fox acquisition, pushing bids through the roof, then leaving the other bidder stuck with a ruinous final price if they absolutely have to have to have to make the deal? Speaking of ruinous deals, the romance between David Ellison’s private equity dude bros and highly motivated seller Shari Redstone seems to be progressing nicely, to the great chagrin of most shareholders not named Redstone.
Also, it turns out CEO Bob Bakish thinks it’s a bad idea, enough that Shari is pushing to eject Bakish from his job. It hasn’t gone well for Paramount/Viacom/CBS CEOs who were crosswise with Redstone, but replacing Bakish doesn’t seem wise. For that matter, Redstone’s decision to merge Viacom and CBS remains one of the most epic acts of value destruction in recent capitalism. Maybe doing the Ellison deal, grabbing a couple of billion dollars for her little family company, and heading off amid broader chaos would be the perfect ending for Redstone's media mogul era. Kicking out Bakish might get the deal done, but means a temporary collection of department heads would shepherd this Ellison thing on to an eventual blizzard of shareholder lawsuits and perhaps months or years of suspended animation.
FRANKEL: Maybe more like a mountain of shareholder lawsuits? Be interesting to see if Bakish is there Monday when Paramount does earnings. Speaking of earnings, Roku was down another 10%+ Friday ... after it soundly beat revenue and subscriber forecasts.
Also read: Roku Soundly Beats Q1 Revenue Forecasts with Sales of $881.5 Million
I'm sorry, I know you guys like to poo on this company that supposedly has no future ... but keeps growing, anyway, and controls around 80 million streaming living rooms in North America. I just can't stand the cosmic injustice of Wall Street sometimes. If you beat forecasts in all the key metrics, it seems like you should get a run on the scoreboard. Speaking of runs, Roku is reportedly in the running to get live baseball for its FAST. Sunday Leadoff seems like a package the Roku Channel can afford. Tubi, meanwhile, made a deal with DAZN for live MMA fights and Euro women's soccer.
BLOOM: I expect the FASTs, especially on big platforms like Roku’s, will evolve toward more sports and other live content. Consolidation will root out the redundant and boring bottom couple of thousand such channels, while the big operators further evolve their business models and integrate programming with other operations. Advertisers will get more sophisticated too. I mean, AM radio was home for decades for baseball teams such as my beloved St. Louis Cardinals. Thanks to the 50,000-watt power of KMOX-AM, the Cards were effectively MLB’s “West Coast” team across the Midwest and beyond, until the Dodgers and Giants finally headed left. Early in my journalism career, I knew plenty of West Texans who lived many hundreds of miles from St. Louis but were still ardent Cardinals fans. It was the only team they’d heard for years in Amarillo and Borger, Canyon and Pampa. FAST feels like it could become that too, free and widely available, with diverse ad-supported offerings. Now, though, between you and Bob Lefsetz’s dispatch from the first day of the Stagecoach country music festival, I’m thinking about George Strait’s Amarillo by Morning, a truly great song about a very specific place and sensibility.
And the cowboys trying gamely in the music video to hold onto bucking broncos absolutely remind me of Bob Bakish. Hope when he almost certainly gets thrown that he lands gently. I think he did a solid, if imperfect job, playing a very bad hand trying to corral Paramount Global into a functioning business.
FRANKEL: I'll tell you who isn't being, er, straight with us: Telecom companies who are masking schemes based on lease deals for extra network capacity, such as cable companies marketing consumer-grade mobile services, and wireless companies selling froth 5G capacity as home internet.
I keep insisting that my Spectrum Mobile experience, now almost five months in, is subpar. Sure, I'm on promotion with Spectrum One, and I'm getting my 300 Mbps wireline at $49.95, a lot cheaper than the $84.99 I was paying. But that promo expires in about seven months. The family received fancy new iPhones, and the prepaid on the wireless side is about $30 less a month than T-Mobile's postpaid unlimited plan we were on. The problem is the connectivity. I find a dead spot whenever I venture out into a major mid-city metropolitan region, Los Angeles. The loss of utility, which is real, is actually not worth the savings. I'd give T-Mobile its money if I had to do it all over again.
On the other side, I think customers of fixed wireless access are finding out the same thing. Both T-Mobile and Verizon reported decelerated FWA growth in the first quarter. Their networks just don't have the capacity to keep expanding services ... that are built on excess capacity. Of course, in life, it's about making tough decisions every day. Just ask South Dakota Gov. Kristi Noem, who somehow makes Michael Vick look like Cesar Millan. Who needs all the hard work thousands of American humanitarians throw each day at trying to find new homes for the pets of people who abandon them (for good reasons and bad)? The "untrainable" Fido can't hunt? Just take him to the ol' "gravel pit." Very Vice Presidential ...
BLOOM: Continued condolences about your Spectrum Mobile misadventures. At least their customer-service people are extremely pleasant. But get used to your ongoing state of annoyance/acceptance. As multiple analysts noted after this week’s Comcast and Charter earnings announcements, the cable giants are thumping wireless companies on mobile prices and market growth.
Also read: Charter Reports Higher Q1 Profits Despite Broadband, Video Losses
Meanwhile, attempts by AT&T, T-Mobile and Verizon to turn the tables, delivering internet and video with fixed wireless or fiber to the home, seem to be stuttering like a bad connection. The phone companies just don’t have the capacity or reach in most of the country. The cablers are winning, by a lot. And you're still paying less for bad service. One side note on Charter: The Redstone-Ellison Par pair-up is forging ahead even as Paramount’s carriage agreement with Charter expires this week. Those negotiations will have an absolutely massive impact on the value of Paramount’s Viacom and broadcast holdings, the biggest part by far of its revenues. What happens when, as expected, the deal looks like what Charter exacted from Disney last fall? For one thing, a bunch of Par’s undead cable channels would finally just be dead dead.
Also read: Paramount Faces Challenging Renewal Talks with Charter, Analyst Says
Speaking of shooting things out back, Kristi Noem’s tale is no Old Yeller, that’s for sure. The crazy part is she seemed to think explaining why she shot her puppy (it was “untrainable” as a hunting dog) would help her increasingly desperate quest to be Don Trump’s VP candidate. Her story may have played well among the dour American Gothic farmers and hunters who elected her, but it rendered her unelectable among most of the nearly 45% of American households that own dogs, including all those suburban pet lovers who are crucial swing voters.
Noem, of course, is already banned from significant portions of her own state, after angering four Native American tribes with her performative blather about immigration in far-away Texas, and the Mexican cartels she says are taking over the rez. This is what happens when small-timers emerge from the Pierre, S.D., echo chamber to talk to the rest of the universe.
FRANKEL: Well D., that's about all the time I have. Busy week ahead. We have Par earnings to get ready for, and my Lakers somehow managed to hold a third-quarter lead Saturday and hold off the Nuggets ... who will undoubtedly be determined in the Mile High air on Monday evening to close the series out. Oh, and the Pali Dolphins have won three in a row as they prepare to make some noise in the CIF Los Angeles City Section high school baseball playoffs. Big games against Westchester, San Pedro and Banning this week to close out the regular season. See you at the ballpark ... But don't try to text me or call me. Spectrum Mobile doesn't have a good connection in the Palisades.
