The glory days of Cable TV are over and the coronavirus pandemic has helped accelerate that.
A report from research analysis firm eMarketer noted in September that more than 6 million American households would cancel their traditional pay-TV services in 2020, down 7.5% year-over-year--marking the biggest dip ever.
That would mean just 77.6 million American households either hold subscriptions for cable, satellite, or telecom TV packages, down 23% from its peak in 2014, according to the report.
The sharp decline in pay-TV came as consumers were looking to cut their bills during the financial crisis and pursue a cheaper alternative.
And cord-cutting is expected to get worse; By 2024, eMarketer forecasts less than half of American households will subscribe for pay-TV.
Now it appears that big media companies have finally faced the reality that the consumption in pay-TV will continue to get worse over the years, according to a report by CNBC in October.
However, at the same time, this presents a big opportunity for large media corporations to expand into streaming. In particular, big media players have been setting their sites on live sports.
NFL Scores Big Deals From Amazon and Disney
Just recently, the National Football League (NFL) signed big TV and digital media rights agreements with large corporations. The deals will include expanding digital distribution to several streaming platforms to help target a younger audience.
Specifically, Amazon (Nasdaq: AMZN) delivered a blow to cable providers when it struck a deal to acquire exclusive rights to the NFL's Thursday Night Football. The deal, which Amazon will reportedly pay $1 billion annually for 11 years (beginning in 2023), became the first time a streaming service secured an exclusive national broadcast package from the NFL.
Along with Amazon, The Walt Disney Co. (NYSE: DIS) will also come out as a winner in a separate deal with the NFL. Under the new deal, Disney will get to broadcast two super bowls through ABC and add six games a season to its sports entertainment unit ESPN. Under the ESPN package, users will be able to view games through one of Disney’s streaming services ESPN+.
Also, the new broadcast agreement does not include a potential acquisition of the NFL Sunday Ticket. However, it could end up that way, as WFan’s Craig Carton reported last week that NFL Sunday Ticket will head to ESPN+. But nothing yet has been confirmed by Disney or ESPN. Currently, satellite service provider DirecTV, owned by telecommunications giant AT&T (NYSE: T), holds exclusive rights to Sunday Ticket through 2022, paying $1.5 billion a year.
The obvious loser in the new NFL deal will be Fox Corp. (Nasdaq: FOX), which will be stripped of its Thursday Night Football package thanks to Amazon.
All together Disney, Fox, Comcast's NBC, and ViacomCBS (Nasdaq: VIAC) will collectively pay the NFL more than $100 billion over 11 years for the new media right agreement, which will take first take effect in 2023.
Disney’s Big Opportunity to Help Grow the NHL
Meanwhile, Disney isn’t stopping with the NFL; the media conglomerate scored a deal with the National Hockey League (NHL) to bring the sport back to its platforms for the first time since 2004. The deal has been estimated to be worth in the range of $2.8 billion over seven years, according to reports in the media.
The deal will include 25 regular-season games on ESPN or ABC, early-round post-season series’, and one conference final each year. Also, Disney will have the right to broadcast opening night each year, all-star games, as well as other special events. More than 1,000 games each year will be available to stream through ESPN+.
In addition, ABC will broadcast four Stanley Cup final series'.
But the NHL deal could turn out to be a hat trick if ESPN/ABC can bring back legendary broadcaster Gary Thorne, whose name was trending on Twitter when the deal was first announced earlier this month. In an interview with The Athletic, the 72-year-old said “I’d love to talk to them about it,” when asked earlier this month if he’d be interested in coming back to ESPN.
While this could be a big opportunity for the NHL to grow the Candian-made game on Disney’s platforms, it could hurt Comcast (Nasdaq: CMCSA), which owns NBC. NBC, which has now served as the NHL’s exclusive broadcast partner for more than a decade, will lose all-star games to ESPN and likely Olympic and some regular-season coverage.
But Disney’s agreement with the NHL isn’t just an exclusive one and should allow other networks to strike a broadcasting deal with the NHL. If NBC fails to score an agreement with the NHL then the current 10 year deal to nationally broadcast games would expire at the end of this season. Under the current deal, NBC pays the NHL $200 million per season.
Last week, CNBC reported that talks between the NHL and NBC are ongoing. A new deal could be valued in the range of $185 million to $225 million per year, according to Dan Cohen, senior vice president of Octagon’s Global Media Rights Consulting division. The deal would include games on NBC’s video streaming service Peacock.
“NBC doesn’t invest over the last decade into the NHL and let it go especially when they need live sports, and they need weeknight programming,” Cohen said, as cited by CNBC.
He added, “NHL fans are accustomed to finding NHL content on NBC and it has invested a ton of marketing and promotion. I would be surprised to see them exit as a NHL partner.”
If the two sides part ways then Fox could jump in. Currently, the NHL has a partnership with FOX Sports Regional Networks to air 12 teams but does not control nationally televised games. Also, the NHL and Fox had a TV agreement from 1994-1999, but then parted ways after the contract expired. Fox currently has national TV deals with two major sports leagues including a seven-year $5.1 billion contract it signed with the MLB in 2018.
There Will be Other Winners Along with Disney and Amazon
As the need for cable continues to plummet, Disney will look to come out a big winner in expanding on live sports streaming. Thursday Night Football should also be interesting for Amazon, which had more than 150 million users on its Prime Video streaming service, as of January 2020.
Both stocks will be solid long-term buys at their current levels.
But there will be other winners that will benefit from live sports transitioning streaming, and that’s streaming providers themselves. In a note earlier this week, Deutsche Bank analyst Jeffrey Rand said that Roku (Nasdaq: ROKU) and the whole connected-TV space will benefit from Amazon’s deal with the NFL. In the fourth quarter, Roku had 51.2 million monthly active users.
Last month, Rand kept his buy rating on the stock and boosted his target to $500, representing 57% upside from Roku’s current trading levels.
But an even better bet might be fuboTV (NYSE: FUBO), which models itself as a “sports-focused” live TV streaming service. Now when compared with Roku, fuboTV is much smaller in terms of market capitalization. However, fuboTV is also experiencing rapid growth even with its smaller valuation. At the end of 2020, fuboTV had 548,000 subscribers, an increase of 73% from the previous year. Also, Its revenues nearly doubled in the fourth quarter to $105.1 million.
Lately, however, investors have been concerned over whether a collaboration between Dish Network (Nasdaq: DISH) and DraftKings (Nasdaq: DKNG) would challenge fuboTV’s plans of moving into sports betting. But more than anything else, this is probably an overreaction by Wall Street, which has sold many growth stocks on fears of rising interest rates.
Now, with shares down 49% since the beginning of February, I would buy fuboTV at the dip and add this stock to your long-term portfolio. Even with its recent slump, the fast-growing sports streamer is still up more than double from its IPO price of $10.
But Amazon, Disney, and fuboTV should all be wise bets amid the demise of pay-TV.