The dearth of live sport in recent months has been a painful experience for US broadcasters. Despite the return of several major properties, almost every media organisation in the country has cited a downturn in subscription and advertising spend during the coronavirus shutdown.
However, not every broadcaster recorded earnings deficits during the second quarter of 2020. Between April and June, for example, Sinclair Broadcast Group attributed a substantial increase in quarterly revenues to the acquisition of its regional sports networks (RSN) from Disney last year.
Naturally, Amazon Prime Video and Netflix, the two biggest streaming platforms in the US by subscriber numbers, have prospered during sport’s shutdown. Notably, too, Disney’s direct-to-consumer (DTC) business has surpassed ten million combined digital subscribers, owing largely to the growth of Disney+ since its launch last November.
With broadcasters feeling the pinch, the ongoing process of bringing back live sport in various guises will come as a welcome relief. However, this marks only the start of a long road to recovery as broadcasters seek to make amends for a loss of revenues.
Having seen the height of sport’s hiatus during the second quarter of the 2020 calendar year, SportsPro takes a closer a look at what this means for the US media industry and how its biggest earners are positioning themselves during sport’s restart.
Overview: Amidst the financial perils caused by the shutdown of theme parks, movie theatres and global sporting events, if there was a silver lining to be had for Disney it was that the pandemic saw the company surpass 100 million subscribers across it various offerings during Q3. Meanwhile the return of major league sport in the US will likely spur renewed growth in advertising sales.
Overall, Disney posted a record US$4.71 billion consolidated quarterly earnings deficit, as well as an estimated US$3.5 billion drop in operating income across its parks business. But having aided the return of the National Basketball Association (NBA) and Major League Soccer (MLS) inside the Orlando bubble, in addition to the delayed start of the 2020 Major League Baseball (MLB) season, the company expects many of its cost deferrals to reverse as sport’s revival continues into the second half of 2020.
Q3 results (as of 27th June)
Total revenue: US$11.779 billion – versus US$20.262 billion in Q3 2019 (-41.9%)
Net earnings: US$4.718 billion loss – versus US$1.43 billion profit in Q3 2019 (-429.3%)
Executive view: “Total ESPN advertising revenue was down significantly in the third quarter due to the impact of Covid-19 and the absence of the NBA and other significant live sports programming. Several live sporting events have already returned to ESPN this quarter, including MLS on 8th July, MLB on 23rd July, and the NBA. Assuming the resumption of live sports continues as planned, we expect ESPN’s ad sales in Q4, including the benefit of the 53rd week, to benefit significantly, particularly from the NBA.” Christine McCarthy, Disney’s chief financial officer
Linear: Cable networks revenues for the quarter decreased ten per cent to US$4 billion while operating income increased 50 per cent to US$2.5 billion. The jump in operating income was due to increases at ESPN relating to lower programming and production costs, as well as the deferral of rights payments to the NBA and MLB.
Digital: Average monthly revenue per paid subscriber for ESPN+ decreased from US$5.33 to US$4.18 due to the introduction in November 2019 of a bundled subscription package that saw the sports streaming service combined with Disney+ and Hulu.
Disney+: 57.5 million paid subscribers (up from 33.5 million in Q2)
ESPN+: 8.5 million (up from 7.9 million in Q2)
Hulu: 35.5 million (up from 32.1 million in Q2)
Los Angeles Clippers head coach Doc Rivers speaks to an ESPN reporter inside the NBA's bubble
Sinclair Broadcast Group
Overview: Substantial gains to the Sinclair Broadcast Group’s business were largely owed to the acquisition of 21 regional sports networks (RSN) and the Fox College Sports channel from Disney in August 2019. However, due to the NBA’s suspension in March, Sinclair anticipates paying US$124 million worth of rebates to distributors tied to minimum game guarantees before the end of 2020. Those payments, though, will be partially offset by lower sports rights payments and rebates from NBA teams.
Q2 results (as of 30th June)
Total revenue: US$1.283 billion – versus US$771 million in Q2 2019 (+66.4%)
Net earnings: US$252 million profit – versus US$42 million profit in Q2 2019 (+500%)
Executive view: “The pandemic dampened advertising spending and resulted in the continued postponement of major sports league games. Advertising trends, however, did improve throughout the quarter, with the decline in June’s advertising revenue versus the prior year period being roughly half the decline experienced in April. July trends showed further improvement throughout the month. Like many across the country, we are happy to see the return of sports.” Christopher Ripley, Sinclair chief executive
Linear: In July, the company entered into a multi-year content carriage agreement with Comcast for the inclusion of all Sinclair television stations and regional sports networks (RSN) in Comcast’s cable footprint, including the Marquee Sports Network and YES Network, as well as continued distribution of Tennis Channel.
Digital: “There's a lot of work going on in DTC right now. It’s definitely going to be an important part of the future for the RSN, for tennis and also for broadcast. And it's too early right now to give specific guidance, but we are busy adding that feature to our new digital reboot which will come out next year. And it will be complementary to the MVPD product that we have today.” Christopher Ripley, Sinclair chief executive
Overview: While Comcast’s second quarter results were better than forecast. NBCUniversal’s parent company confirmed during its quarterly earnings call in July that it will be offering rebates to its American cable subscribers due to the lack of live sport since March. Comcast plans to use cash it is due to receive back from US sports leagues to help offset those customer refunds.
Q2 results (as of 30th June)
Total revenue: US$23.715 billion – versus US$26.858 billion in Q2 2019 (-11.7%)
Net earnings: US$2.988 billion profit – versus US$3.125 billion profit in Q2 2019 (-4.3%)
Executive view: “Considering that NBCU and Sky are facing certain pressures that are momentary and unique to some of their businesses, I think we are performing incredibly well. Despite theme park and theatre closures and most sports having been paused, we continue to transact. And more importantly, we are innovating as we position these businesses for continued market leadership and the return to strong, long-term growth.” Brian Roberts, Comcast chief executive
Linear: Cable revenue decreased 14.7 per cent to US$2.5 billion in the second quarter of 2020, partially offset by higher content licensing contracts. With a reduced number of live match broadcasts on its RSNs due to Covid-19 and a decline in subscribers, distribution revenue decreased 14.8 per cent, although this was partially offset by contractual rate increases. Advertising revenue decreased 27 per cent.
Digital: The launch of NBC’s Peacock streaming platform was the most notable development in the second quarter. Facilitated by an early launch for Xfinity cable and broadband customers in April, the platform surpassed ten million signups following its nationwide roll out on 15th July, despite losing a key part of its content offering with the postponement of Tokyo 2020.
Comcast rolled out its Peacock streaming platform in July
Overview: With the conclusion to the 2019/20 Uefa Champions League and Uefa Europa League campaigns now complete, the decision by Turner to opt out of its deal in June meant CBS began its upcoming US broadcast partnership with Europe’s top club soccer competitions a year earlier than planned, a move that could prove pivotal in its push to capture audiences.
As part of its efforts, the network made every match from the conclusion to the Champions League available via its CBS All Access subscription streaming service throughout August, in addition to select matches from the month-long National Women’s Soccer League (NWSL) Challenge Cup between June and July.
Q2 results (as of 30th June)
Total revenue: US$6.275 billion – versus US$7.143 billion in Q2 2019 (-12.1%)
Net earnings: US$478 million profit – versus US$971 million profit in Q2 2019 (-50.8%)
Executive view: “It goes without saying that there is tremendous pent-up demand for live sports. Ratings for the [PGA Tour’s] Charles Schwab Challenge, the Travelers Championship and the Rocket Mortgage Classic have all been very strong. In fact, since returning to live golf, CBS Sports' overall viewership is up 25 per cent from comparable events last year. And building on that, we're excited to have Bellator and Showtime Boxing back on air, along with Uefa soccer premiering on CBS and CBS All Access.” Robert Bakish, ViacomCBS chief executive
Linear: TV revenue increased two per cent, though that was hampered by a 26 per cent year-on-year fall in advertising income, as well as lower affiliate revenue, which decreased by six per cent. Overall, the company’s linear subscriber declined.
Digital: Aided in part by the return of PGA Tour golf, domestic streaming and digital video revenue rose to US$489 million, up 25 per cent year-on-year, largely driven by 52 per cent growth in streaming subscription revenue. US-based subscribers to its streaming services reached 16.2 million, up 74 per cent year-on-year. Showtime OTT delivered its best ever quarter in signups, streams and minutes watched, driven by original programming. Meanwhile, Pluto TV maintained its position as the number one ad-supported streaming service in the US, with its domestic monthly active users (MAUs) growing to 26.5 million, up 61 per cent compared to Q2 2019.
21st Century Fox
Overview: With Nascar becoming the first major US sport to return in mid-May, Fox benefitted from the Real Heroes 400 at Darlington Raceway on 17th May delivering an average audience of 6.32 million viewers, up 38 per cent on the FanShield 500 in Phoenix before sport’s shutdown in March. Overall, Fox’s revenues decreased 22 per cent due to lower local advertising income related to live sport, as well as fewer hours of scripted programming at Fox Entertainment.
Q4 results (as of 30th June)
Total revenue: US$2.42 billion – versus US$2.51 billion in Q2 2019 (-3.6%)
Net earnings: US$145 million profit – versus US$465 million profit in Q2 2019 (-68.8%)
Executive view: “Looking specifically [ahead to 2021] Q1, the combined effect of comparability in Covid is expected to reduce advertising revenue by roughly US$250 million as compared to Q1 in fiscal 2020. While we will enjoy the benefits from political advertising, a greater volume of MLB regular season games and Nascar races, along with the acquisition of Tubi, these will be more than offset by lower base advertising at our local stations, a reduced slate of fresh entertainment programming, fewer National Football League (NFL) and college football games in our Q1 schedule and the absence of the World Cup, Emmys and the MLB All-Star game.” Steve Tomsic, Fox’s chief financial officer
Linear: TV advertising revenues declined 29 per cent, primarily due to the impact of the pandemic on the local advertising market across Fox TV stations and the postponement of the live events usually available on Fox Sports.
Digital: Fox Sports completed the redesign of its mobile app and website ahead of an official launch in in July, with head of digital David Katz describing the new platforms as the start of a “new era”. Bidding to cater for a personalised experience for the ‘modern sports fan’, the digital refurb sees TV subscribers given the ability to live stream Fox Sports’ linear channels, while also watch content using a vertical mobile screen.
Fox Sports head of digital David Katz
Overview: The return of live NBA to Turner Sports’ linear and digital channels will provide a welcome boost in Q3, though the promise of sport’s return inside the Orlando bubble was not enough to encourage an immediate resurgence in advertising spend across the WarnerMedia business.
Nevertheless the NBA’s return will no doubt relieve some pressure. When the basketball league restarted on TNT’s with double-header on 30th July it netted an average of 2.9 million viewers – which represents a 109 per cent increase on Turner’s average viewership before the suspension of play.
Q2 results (as of 30th June)
Total revenue: US$40.95 billion – versus US$44.95 billion in Q2 2019 (-8.9%)
Net earnings: US$1.563 billion profit – versus US$3.974 billion profit in Q2 2019 (-60.7%)
Executive view: “Our solid execution and focus in a challenging environment delivered significant progress in the quarter, most notably the successful launch of HBO Max, resilient free cash flow and a strengthened balance sheet. Our resilient cash from operations continues to support investments in growth areas, dividend payments and debt retirement. We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the centre of everything we do.” John Stankey, AT&T chief executive
Linear: Overall, Turner’s year-on-year operating revenues decreased 12.4 per cent from US$3.41 billion to US$2.99 billion. That makes up close to half of WarnerMedia’s year-on-year revenues which fell by 22.9 per cent, down from US$8.835 billion to US$6.814 billion.
Digital: Despite the sparsity of live sport, the company continues to invest in sports content. Bleacher Report, the Turner-owned digital sports platform, has signed a multi-year deal with Major League Soccer and the US Soccer national governing body for digital content development and distribution, and reportedly worth a low seven-figure sum.
Amazon Prime Video
Overview: Capitalising on increased demand for ecommerce and digital content during the coronavirus lockdown, Amazon’s DTC business appears to also be setting the bar for consumer interaction too, and has been trialling the use of ‘watch party’ style viewing experiences on its Prime Video platform.
Prime Video also expanded its global NFL broadcast partnership in time for the start of the 2020 season on 10th September. Prime Video will add Saturday night games in more than 200 territories as part of a three-year extension of broadcast partnership for Thursday Night Football (TNF) games.
In addition, Amazon’s Twitch streaming platform also secured rights to live stream 24 selected matches during the 2020 NWSL season, globally. The service is also a broadcast partner to the NBA’s G League development competition and the Oceanic National Basketball League (NBL).
Away from the national deals, Amazon has started taking a more regional approach to its media rights acquisitions. Firstly the company took a stake in the New York regional YES Network and announced (now delayed) plans to air a number of Yankees games. More recently it has become the local digital broadcast partner for MLS outfit the Seattle Sounders.
Amazon Q2 results (as of 30th June)
Total revenue: US$88.9 billion – versus US$63.4 billion in Q2 2019 (+40.2%)
Net income: US$5.243 billion profit – versus US$2.625 billion profit in Q2 2019 (+99.7%)
Executive view: “Strong top line performance was driven by increased consumer demand, led by Prime members. We continue to see high Prime member engagement throughout the quarter. Prime members shop more often with larger basket sizes. Worldwide streaming video hours doubled year-over-year driven largely by Prime video.” Brian Olsavsky, Amazon’s chief financial officer
Overview: Since completing a merger with virtual entertainment company Facebank Group amid suspension of live sport in April, the FuboTV streaming service has taken strides in reimagining its content offering to include more news and entertainment programming.
In the second quarter of 2020, the previously sport-centric over-the-top (OTT) service surpassed 286,000 subscribers, up 47 per cent over the previous year. Meanwhile, the company has also seen subscription revenue grow 51 per cent year-on-year to US$39.5 million, contributing to a 53 per cent total second-quarter revenue growth to US$44.2 million.
Overall, the company made a US$99.8 net loss in Q2, though has since added US$46 million in equity funding, including US$26 million from Swiss investment bank Credit Suisse in July. Fubo is also seeing an uptick in advertising revenues, which grew 71 per cent year-on-year in Q2, totalling US$4.3 million.
As of July, the company also entered an expanded distribution agreement with Disney to carry a wide range of the media giant’s news, sports, and entertainment networks, including ESPN, and is sure to aid the platform diversification of content as sport continues to return in Q3 and moving into Q4.
Q2 results (as of 30th June)
Total revenue: US$44.2 million (+53%)
Net income: US$99.8 million loss
Executive view: “We believe consumers will continue to choose streaming over traditional pay television, especially in the current economic climate because of its more personalised, premium viewing experience. Looking ahead to Q3, with the gradual return of sports, we anticipate an increase in subscribers, viewership and that our portion of revenue derived from advertising will grow. At the close of Q3 we expect paid subscribers to reach 340,000-350,000, which will be an increase of 20 per cent year-over-year.” David Gandler, FuboTV’s chief executive
Overview: Although it might feel like a lot of time has past since the finale to ESPN’s The Last Dance in May, the docuseries marks one of Netflix’s highlights from Q2 2020, netting 23.8 million viewers globally. However, despite the success of the ten-part series, it is unlikely that ESPN will partner the streaming platform on other projects.
Nevertheless, a recent deal with Spanish agency Mediapro’s new Téléfoot pay-TV soccer channel in France in Q3 shows the potential – and appeal – to bundle Netflix subscriptions with dedicated sports channels, though it has yet to strike a deal that could see live sport streamed via the service.
In Q2, Netflix revenue grew 25 per cent year-on-year, while quarterly operating income exceeded US$1 billion. Average streaming paid memberships also rose 25 per cent, with Netflix adding 10.1 million subscribers during Q2 2020 versus 2.7 million during the same three-month period last year.
Q2 results (as of 30th June)
US/Canada revenue: US$2.839 billion – versus US$2.501 billion in Q2 2019 (+13.5%)
Total revenue: US$6.148 billion – versus US$4.923 billion in Q2 2019 (+24.9%)
Net earnings: US$720.19 million profit – versus US$270.65 million profit in Q2 2019 (+62.4%)
Total paid subscribers: 192.95 million globally; 72.9 million in the US.
Executive view: “The big motivation to invest in reality and unscripted is not the cost savings of production, but the love that people have for this programming and how important it becomes in people's lives. So if we're trying to be more and more your go-to destination for entertainment – not to ignore an area of programming that kind of dominates broadcast – it would be silly of us. So we've been dabbling in unscripted reality. We kind of got very, very accomplished in the documentary space and then have moved that over and to expand that to unscripted.” Ted Sarandos, Netflix chief content director