Could An Amazon With Sports Be Pay TV's Waterloo?

For a long time, we’ve been rolling our eyes at the whole cord cutting myth, at the gullibility of mainstream journalists who insist on repeating the canard about the “tidal wave of cord cutting” that is allegedly tearing apart the television industry. [NB: It’s not. Actual stats—versus specious surveys—have cord cutting rates at just under one percent a year.]

As per our 2019 Fearless Predictions, we think that’s going to change this year with the introduction of the Three New Flixes (Disney, Warner and Apple), with rates increasing to around six to seven percent. We also predict that many of those cord cutters will ultimately be seeking a way back in, as they realize they miss having traditional news and sports programming.

One way to get them back (sort of) would be for the vMVPDs, who have now largely become mesomorph bundles, with over 80 channels on the base package, to morph back into skinny bundles focused on news and sports. Given the cost of that sort of programming—sports in particular—these bundles would not be cheap, but they would deliver all the major RSNs and news networks, properties that still remain quite popular.

The Amazon Factor

There’s an alternative to that though and its name is Freedive.

Freedive is Amazon’s new free ad-supported channel that it’s launching via IMDb. As we noted last week, it has “a bunch of hit older movies most people won’t mind watching again and a bunch of TV shows reruns that could make effective background noise.”

It’s very similar to (and competitive with) the Roku Channel, as well as TubiTV, XumoTV, PlutoTV and others that we’ve been calling the FASTS (Free Ad-supported Streaming TV Services.)

But here’s the twist: The Roku Channel already has some news programming from services like Cheddar, ABC News, People TV and Newsy.

It’s likely Amazon’s Freedive will strike similar deals.

That may well be enough news for many of those who’ve left pay TV to subsist on, especially if they live in an area where at least one of the local broadcast station maintains its own ad-supported OTT app, which would allow them to get their local news fix as well.

That then leaves sports.

Until now, the leagues and RSNs have been pretty loyal to the traditional pay-TV providers, but that’s starting to change—most of them have signed on with at least one vMVPD (FuboTV in particular has done a stellar job of signing them up) and so they may well be lured over to Amazon, especially if Mr. Bezos waves a few extra zeroes in front of them. (Roku could conceivably strike similar deals, but we’re not sure they have as many extra zeroes to wave.)

Amazon would likely sign up a bunch of the RSNs as part of Freedive, paying the RSNs enough to get around the lack of subscription fees. (Amazon would have to decide that the data and new Prime subscribers they got in return were worth all those extra zeroes.)

The various leagues (NBA, NFL, MLB) are another story, as in reality, they will be much harder for the likes of Amazon to get, for a host of legal, financial and sentimental reasons.

But let’s suppose that Amazon is able to sign up a number of RSNs and offer them, for free, as part of ad-supported Freedive.

That could change everything.

At least for a lot of viewers.

We have a theory you’ve likely heard before that TV viewing circa 2019 can be broken into two categories.

There’s “lean forward” viewing, the types of shows that people binge watch and specifically set aside time to watch, the types of shows where they’re annoyed if someone starts talking to them while the show is on.

Then there’s “lean back” viewing, which is what you put on when you’re cooking dinner or answering your emails. Something that’s mostly background noise, and if your kid comes in to ask for help with their homework, you’re okay with putting it on pause or just turning it off.

The former is what the Flixes all have on offer. They also have a decent amount of the latter (Hulu, in particular, has a very large library) but clearly there’s a need/desire for more "lean back" programming, since the various FASTS all seem to be growing like wildfire.

And if you can get your “lean forward” programming from some combination of the six Flixes (eight, if you count in CBS All Access and the newly announced NBCU app) and your “lean back” programming, plus news and sports from Amazon or Roku, that may well prove to be enough.

At least for some people.

And at least for now, until the Great Rebundling begins in earnest. (More on that later this month.)

But “some people” is the key here. It’s not going to be like the music industry, where it all seemingly comes tumbling down overnight. TV, especially traditional pay TV is well entrenched and most of the people still watching it are not unhappy with it.

We often hear observers snidely remark that traditional TV viewers are all over 50, which may well be true, but it’s not as if we’re living in some version of Logan’s Run and they’re all going to be dead tomorrow. Or even ten years from now. (And who knows what the world will look like in 2030, let alone 2040.)

But back here in 2019, if Amazon is able to offer free TV plus news and sports and Roku and others can offer free news (not everyone is a sports fan) that six-to-seven percent prediction we offered may creep up to ten-to-twelve percent, a figure that will start to disrupt the traditional pay TV industry, especially those networks without a strong fan base, identity or value proposition.

And we say “may” because it’s important to remember that TV is more of an art than a science.

Meaning that in order for cord cutting to hit those numbers, the Flixes will have to so completely dominate viewers "lean forward" viewing that they say to themselves “why am I paying for a cable/vMVPD subscription when I never watch anything other than the Flixes and the FASTS?”

And so even with $15 billion worth of original content on tap, that’s a likely outcome but nowhere near a slam dunk.