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Caught In The Undertow

Tim Hanlon

Cassie Matias/Unsplash

Much digital ink and social media snark has been devoted to last month's surprise announcement by Disney/ESPN, Fox and Warner Bros. Discovery to create their "Hulu for sports" streaming bundle joint venture - and various debates rage about whether it will be comprehensive enough to convince sports fans to cut the pay TV cord, back-breaking enough to end linear pay TV altogether, lucrative enough for the partners involved - or even legal.

For local TV stations, however, the shock potential of this new sports-centric virtual MVPD (vMVPD) brings something more immediately existential to light - especially for the independently-owned affiliates of the ABC and Fox networks that (ostensibly) will sit inside it.  

Generally speaking, local broadcasters and the groups that own them are already mightily miffed at their network patrons, whose corporate parents are obsessively focused on building national direct-to-consumer (DTC) premium streaming platforms (e.g., Hulu, Disney+, Peacock, Paramount+, ViX+, etc.) - to the detriment of the local TV affiliates. 

With formerly affiliate-exclusive linear prime and early/late access programming increasingly available directly on network subscription streamers (some even live-simulcasted), it's not surprising that stations see the arrival of a potential "Spulu" as a threat to their last major defense against cord-cutting - live sports. 

Given that increasingly expensive sports rights (looking at you, NFL) comprise the lion's share of the retransmission consent fees (aka "retrans") station groups command from traditional MVPD distributors (like cable, satellite and telco TV) - and that affiliate stations are expected to, in turn, "reverse compensate" their networks for the privilege of carrying said sports - local broadcasters have to wonder just how exactly they will benefit from a new skinny sports streaming bundle, if at all.  

Despite vague assurances by Fox and Disney that their broadcast stations will be "included," it's clear that the offering as it currently stands will weaken live sports’ value in those networks' linear TV retrans economics, and further undermine the already-precarious nature of both Fox and ABC network-affiliate relations. (You can bet that stations aligned with the not-included NBC and CBS are taking notes, too.)

Exacerbating matters more is how stations secure carriage on vMVPDs (think: Sling, FuboTV, YouTubeTV, Philo, etc.) - a distribution platform which is regulated differently from traditional pay TV. 

Specifically, station affiliates cannot negotiate directly for retrans payments as they do with traditional MVPDs; instead, they must allow the networks to negotiate those deals collectively on their behalf. The arrival of a new sports-centric vMVPD actually owned by some of the networks themselves only heightens distrust and fears of disintermediation.

How the specifics of this joint-venture sports streaming service plays out is, of course, still very much TBD.

But amidst a churning sea of industry change, one thing is certain - the future of local broadcasting could get caught in the undertow without bolder strategic action.

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