1. Fox Still Hearts The Cable Bundle

You know how I keep banging on about the massive sums of money that broadcast and cable networks will no longer get from carriage and retrans fees when they make the switch to streaming?

Well here’s a sobering number: Fox made $1.77 billion from those fees in Q2 2023 alone. Those numbers (up from $1.73 billion in Q1) made up well over half (58%) of the $3.03 billion in revenue the company earned in total last quarter.  

Think about that one for a minute. 

Close to two billion dollars in a single quarter. 

And that’s just Fox.

This is a huge number to make up on subscriptions and advertising alone and it seems like most of the networks had never really thought this through, relying instead on random promises that streaming would bring about “fewer, better-targeted ads that brands would pay more money for” without really considering the fact that brands would need to pay an absurd amount more for those ads in order for the networks to come anywhere close to breaking even.

So there’s that, and it’s why Fox seemingly made the very prescient decision to keep their sports properties on broadcast and cable for now: the money is still just too good.

Why It Matters

While all of the other major media companies took the streaming bait, Fox held firm. Not going full in on streaming might not have seemed like the hip and forward-thinking thing to do, but I’m guessing that’s not a big concern for Lachlan Murdoch.

Curiously, or perhaps not so curiously, they did buy a FAST service, Tubi, which is (a) currently the most watched FAST service, as per Nielsen’s The Gauge, and (b) a source of great confusion for those who think FAST is only about linear channels.

But back to Fox and their decision to be the anti-Greenfields and declare “it is our good luck to have bundles with which we can monetize our sports properties.”

They’re not wrong.

At least right now.

Because, if you recall, the other thing we’ve been banging on about is how there’s still a whole lot of life left in the cable bundle. Not forever and maybe not even this decade, but for now, cable penetration is still well over 50%. As per Leichtman, 73.7 million households still subscribe to some form of pay TV as of Q1 this year. 

Now granted, 2.2 million people cut the cord in Q1, but that’s only around 2.9% of all subscribers. So a significant number, but nowhere near the “massive wave” you keep reading about, meaning cable isn’t going anywhere in the next year or two.

Similarly, while many people subscribe to a subscription streaming service, they don’t all subscribe to the same one. Or, in the case of Tubi, even have it downloaded on their TV.  Meaning that 73.7 million subscriber universe is going to be hard to replicate for now.

What’s more, given their fear of cord-cutting, the MVPDs are going to pay top dollar for Fox’s sports properties, NFL games in particular, because they know that keeps people tied into those two year bundle deals. 

And to repeat an earlier point, $1.77 billion in carriage and retrans fees is not something to sneeze at.

What You Need To Do About It

If you’re Fox, well done. Bucking trends is not always easy, but math is math, and while there are benefits to putting sports on streaming (well, for the leagues, anyway) the amount of money you’re going to be getting from Team Pay TV makes any other decision sort of foolish.

I mean it’s not as if Tubi isn’t going to be there when those numbers no longer make sense and you need to stream NFL games. Or that not putting your games on streaming this year is going to impact the number of people who sign on when it finally happens in 2029.

If you’re all the other media companies, definitely pay some attention to where Fox nets out. Sports are all over the place now, especially Major League Baseball, with teams landing everywhere from over the air to their own streaming apps. 

It’s a tricky road: streaming is most definitely the future and it’s where everything is heading. It’s just that TV is a business where nothing changes very quickly. Which is why the real winners are the ones who can successfully “surf the wave” and wind up making their shifts at the exact right moment.

Easier said than done.

2. Disney Raises Prices And Loses Subscribers

Disney, whose recent setbacks have resulted in a spate of “you know this streaming thing isn’t all it's cracked up to be” articles in the mainstream press by people whose primary experience with TV seems to be as viewers, recently raised eyebrows yet again as they announced that they had both lost subscribers and raised prices.

Now granted neither scenario is as grim as say, a wicked witch handing you a poisoned apple, as there does, in fact, seem to be some silver lining in these clouds. (This is Disney, after all.)

To begin with, revenues were up 4 percent. Second, the subscriber loss for Disney+ was pretty minimal—just 1 percent, and Hulu gained 300K subs overall (though their Hulu Plus Live TV vMVPD lost 100K.)

Mostly though it seems that Disney is doing that thing that Warner Bros Discovery is also doing, which is to cut costs on things that don’t make them much money while trying to raise prices on things that do, like subscriptions and advertising.

The latter seems to be doing okay as well, with CEO Bob Iger reporting that over 40 percent of new Disney+ subs are choosing the ad supported version. (If you’re wondering how there could be “new subs” in a quarter where they lost subs, one word: churn.)

Why It Matters

Disney has a whole lot of moving pieces, which may make it hard for Iger to completely slay all the dragons. There are theme parks and cruise ships and movies and merchandise in addition to the various TV pieces, TV and linear.

It’s a lot.

There’s also Hulu, which is going to cost them dearly when Comcast sends out the invoice. 

On the upside, Hulu’s ad-supported business is booming and they have way more ad-supported subs than any other SVOD service. On the other (and it blows me away how many people seem to forget this) they started out ad-supported. This meant you had to actively go in and change your subscription to ad-free. That’s a very different proposition than the one facing Netflix or even Disney+ where the ask is to agree to watch ads for a relatively minor cost savings.

Disney was clever in the way they introduced their ad-supported tier. If you recall, the ad-free tier was very low priced to begin with, just $7/month, and so when the ad-supported tier came out, they made that $7/month.  So you had to actively choose to stay ad-free while moving to a higher price point, a price point that is now going to be $14/month. Which is still slightly lower than Max or Netflix, but I doubt many people are making an “either/or” decision on that—Disney+ content is just too different.

Which brings us to our hero’s Final Obstacle To Overcome: the content. Disney+ is known as home to kids shows and a certain kind of franchise IP (comic books and science fiction.) So if you’re not into either of those, you have no use for Disney+. 

Which is why they really need Hulu, but that’s another column.

What You Need To Do About It

If you’re Bob Iger, realize there’s no Fast Path to success this time out and that victories will be incremental and slow. But you seem to be on the right path—cutting costs and looking to raise revenue. (There’s a song in there somewhere…)

If you’re the ad industry, Disney’s unique audiences mean you can rely more on context than on actually finding “people in the market for children’s clothing” or similar. It’s a good way to get some incremental reach without relying on often-specious data sets.

If you’re the rest of the industry, don’t draw too many conclusions from Disney. They are a unique property with unique issues, though their rush to embrace streaming while ignoring the massive cash flow they get from carriage and retrans fees is a cautionary tale for the ages.