While some reactions to plans by ESPN, Fox and Warner Brothers Discovery to launch a massive new sports streaming service have focused on how it will accelerate cord cutting, Fox Corporation executive chair and CEO Lachlan Murdoch is stressing that the new venture is targeted to cord nevers outside the pay TV market and that the pay TV market “will remain our dominant customer base for some time to come.”
Muroch's Feb. 7 comments were made during Fox’s fiscal Q2 2024 earnings call and are notable because they provide the first detailed look at how the companies involved in the JV are approaching the platform and its potential impact on their declining traditional linear TV business.
Speaking to analysts on the earnings call Murdoch said: “This new and unique digital distribution platform is focused on sports fans outside of existing paid TV offerings. Upon launch in the fall of 2024, the platform will offer a broad suite of sports, including those from a combined 14 linear networks that broadcast sports today.”
“The inclusion of our networks in the platform is consistent with our strategy, being proudly consumer first and distribution agnostic,” Murdoch said. “Across the distribution ecosystem, our traditional Pay TV market will remain our dominant customer base for some time to come. As such, we remain committed to our existing distribution partners, where our strong portfolio of leadership sports, news and entertainment brands thrive in their bundled offerings. This unique new platform opens up a new market for us, one that we at Fox have not accessed before and that we're excited to participate in.”
Later in the call, Murdoch noted that, “the opportunity is huge. And that's really because this sports focused platform is focused entirely on cord -- not cord cutters, but cord nevers. So if you look at the American market, roughly, say, 125 million households in America, and roughly half of those are not within the traditional bundled cable ecosystem. And so the target for this product…is really that universe of, call it, 60 million odd households that currently don't participate in the bundled cable and pay television ecosystem. So we think it's a tremendous opportunity.”
Murdoch also explained that currently the joint venture partners are not looking for additional partners and that they would not have done the deal if they thought it would accelerate the decline of the pay TV bundle.
“We've been working on this for several months,” he said. “We've done lots of sensitivity analysis, and we would not be launching this product if we thought it was going to significantly affect our pay TV affiliate partners, and that's very important to us. We remain, I think, the biggest supporters of the traditional pay TV bundle. We think there's tremendous value in the pay TV bundle for the consumer who wants to get it all at an affordable price. The big bundle is still the best way to get that programming and those brands. So we are confident that this product will be additive and will give us incremental subscribers and not affect significantly the traditional bundle.”
In terms of “the openness to add partners, that's not something that we're considering at this stage,” Murdoch said. “We think that the 14 linear networks that this service offers gives people a tremendous amount of content between ABC affiliates, Fox affiliates, ESPN, ESPN2, ESPN News, the SEC Network, Fox affiliates, Fox Sports 1 and 2, the Big Ten Network, TNT, TBS and others. It's a tremendous offering that covers the majority of the key sports in this country: NFL, NBA, WNBA, Major League Baseball, NHL, et cetera, college, obviously NASCAR and so on. So we think it's an incredibly strong offering and at this stage, we're not contemplating adding partners to it.”
Murdoch also denied that they are seeing any impact of Netflix’s move into sports with the WWE deal: “There’s no impact [from] the Netflix, WWE deal at all. So I don't think that plays a factor in this. And in fact, in how we approach our portfolio of sports rights, we will be aggressively competing in the sports market for sports rights that nothing has changed there. The primary business and value in Fox Sports is competing both for every subscriber in the traditional cable -- pay TV bundle and advertiser viewer and ultimately advertiser. So sports remains a competitive business, which, we -- frankly, we thrive in, and we don't see any difference to that.”
