No-Sports TV? Viacom, AMC, Discovery Said Eyeing Web Bundle

  • Entertainment-only packages could cost less than $20 a month
  • At least four distributors weigh online bundles without sports

AMC, Discovery and Viacom Said to Be Eyeing Web Bundle

Cable programmers including Viacom Inc., Discovery Communications Inc. and AMC Networks Inc. are in talks with pay-TV distributors about creating new online TV services for consumers who don’t want to pay for sports, according to people familiar with the situation.

The media companies have explored offering entertainment-only packages over the internet with four to six pay-TV providers, said one of the people, who asked not to be identified discussing the private negotiations. The talks are at various stages, but at least one service could be introduced this year, the person said.

Channel owners hurt by subscriber losses want to be part of new web-based video services as people drop pricey pay-TV packages for cheaper options, yet some have been left out of new “skinny” bundles. Viacom and Discovery, for example, aren’t part of YouTube’s live TV service or Hulu’s upcoming package. While sports is the most popular live programming, it’s also the most expensive.

Sports-free TV would cost less than $20 a month, according to one person. That’s about half the expected price of Hulu’s upcoming live TV service and YouTube’s new TV package, which came out last week. Both YouTube and Hulu are offering or looking to offer about 40 channels, including ESPN and broadcasters like NBC, Fox and CBS that rely heavily on sports. YouTube CEO Susan Wojcicki said the service was designed “to be great for sports lovers.”

Discovery, AMC and Viacom, which airs the popular VH1 series “Love & Hip Hop Atlanta,” don’t carry sports in the U.S. They have popular programming, like AMC’s “The Walking Dead” and Discovery’s “Shark Week.” At one point, several cable network owners discussed creating their own online service, like Hulu, one of the people said.

Possible Backlash

Efforts to create sports-free packages with distributors could trigger a backlash from companies like Walt Disney Co., the owner of ESPN. Two years ago, Verizon tried to sell such a bundle called Custom TV and was sued by Disney for alleged contract violations. Verizon later introduced two low-cost bundles -- one with sports channels and one without.

New online entertainment-only TV packages could violate deals that major media companies like Disney and 21st Century Fox Inc. have with cable and satellite providers, according to Michael Nathanson, an analyst at MoffettNathanson LLC. Those pacts require that their networks be part of the most popular bundles or that a certain share of subscribers must receive their programming. Such terms could cap how many people are allowed to sign up for sports-free TV.

“It’s meant to dissuade distributors from doing something like this,” Nathanson said. “The issue is how many subscribers they can have before the legal questions appear.”

Who’s Asking?

It’s also unclear whether consumers even want TV without sports. Many viewers pay $80 a month or more so they can watch sports, which are carried by broadcasters like Fox, CBS, NBC and ABC, as well as cable outlets such as ESPN, Fox Sports 1 and Time Warner Inc.’s TNT.

So far, new online TV providers -- from Dish’s Sling TV to YouTube TV and Sony’s PlayStation Vue -- have said live sports are a big draw for their packages.

But in a December hearing on Capitol Hill, AT&T Inc. Chief Executive Officer Randall Stephenson said, “there is a huge segment of our market that wants a bundle that doesn’t involve sports.” The company’s DirecTV unit offers a $50-a-month package that includes the major broadcast outlets and excludes all-sports channels like ESPN, Fox Sports 1 and the NBC Sports Network. Based on sign-ups for DirecTV Now, AT&T’s streaming service, Stephenson said on Bloomberg Television that he expects a big market for a 100-channel bundle for $35 month that doesn’t include sports.

And at an investor conference last month, Viacom CEO Bob Bakish pointed to the success of Sky, a pay-TV provider in Britain, in selling sports-free TV.

“You could certainly take a range of companies, ourselves included and some others, aggregate them together and put together a consumer offering,” Bakish said.

Analysts say new “skinny” bundles yield little, if any, profit because the prices are too low given programming costs that include channels like ESPN, the costliest network in the bundle. Bakish said a sports-free service could produce a 30 percent profit margin for distributors.

“It feels like an inevitable outcome and that will be a good thing,” Bakish said.

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