MoffettNathansen says traditional pay TV is being crushed by overlapping “doom loops.” We look at how sports, news, and entertainment are locked in the loops too.
Top news items this week (1:20)
Traditional Pay TV Doom Loops (14:00)
MoffettNathanson captured two dynamics that have combined to accelerate the decline in the traditional pay TV industry. Colorfully dubbed the twin “Doom Loops,” they show how cord-cutting simultaneously:
- · Drives TV programmers to disinvest in traditional TV and invest more in their streaming services, which fuels cord cutting
- · Forces fewer subscribers to shoulder the burden of sports licenses, which leads to increased subscription fees and more cord-cutting.
However, more Doom Loops are at work dragging the traditional TV market down. For example, cord-cutters’ flight to Internet TV boosts ad and subscription revenue, which allows SVODs and FASTs to invest in more and better content, which drives more cord-cutting.
Doom loops and sports (18:20)
The artificial world of traditional pay TV resulted in valuations for sports disconnected from how a more open market would value them. We discuss how this fact might impact sports valuations. In the case of ESPN, the problem seems to go much deeper. The stock-in-trade of the channel – sports commentary – has been usurped in the online world by YouTube and social media, where direct connection to the leagues, teams, and players can easily be found.
The timeline for the collapse of the pay TV bundle (24:30)
The Doom Loops describe how the decline in pay TV is accelerating. The acceleration makes us question the common belief that pay TV will unravel over decades. For example, traditional pay TV’s penetration of US households in the US fell below 50% for the first time in decades. Fox believes properties like sports and news are still best consumed on pay TV and stands behind the distribution medium with its news properties. However, the company seems to be swimming against the tide as everyone else scrambles for their place in streaming.
