There’s been a lot of speculation about the future of Venu, or its lack thereof, since a federal judge issued a preliminary injunction preventing its launch. Given the snail’s pace of the appeals process, there is virtually no chance the product will be available this football season. It’s a massive setback, no matter how you slice it. The appeal could drag out for a year, which some analysts predict would be a death sentence. At a minimum, what was probably a long shot to begin with just got a whole lot longer.
WBD, Fox and especially Disney have taken a lot of heat about Venu since it was first announced. Not from me. I’ve been a fan of the idea from the beginning and applauded Bob Iger and the other executives behind Venu for at least trying to improve the sports viewing experience for fans.
Let’s be honest – watching sports has gotten worse in the age of streaming. Yes, there are now more sports on television than ever before. But you need subscriptions to a dozen different services if you want access to all the major events. Finding the games you want to watch isn’t easy or cheap. The emergence of the tech streamers like Netflix, Amazon and Apple as customers for media rights has been incredibly lucrative for the owners and players, but a costly hit to the wallets of fans.
Making your product harder to access and more expensive isn’t normally a winning consumer strategy. Yet sports have thrived, despite the disregard by the powers-that-be for the fans who pay the bills.
Venu entered the arena intent on addressing these challenges with a pure-play DTC bundle of sports content. Yes, it had some serious flaws, but at least someone in a position to effect change was trying to make things better.
The court agreed with Fubo’s contention that Disney, Fox and WBD were engaging in unfair business practices by granting Venu more favorable terms than they offered to other distributors.
For years, the cable and satellite providers, as well as companies like Fubo, wanted the opportunity to offer their customers a sports-focused product at scale. Yet Disney, Fox and WBD leveraged their highly valuable sports networks to force distributors to carry all their channels, despite the steep decline in ratings and overall viewer interest. They refused to budge, until they came up with Venu and decided to become sports distributors themselves.
The rising cost of sports content, driven by the leverage play I just described, is the primary culprit behind the collapse of the traditional cable/broadcast distribution ecosystem. Yes, the cable and satellite companies didn’t help themselves with poor customer service and sub-standard products. (Who didn’t hate their cable box or no-show service appointments?)
But survey after survey reveals that the number one driver for people cutting the cord, or never considering cable at all, is the cost. By forcing hefty price increases and a bunch of channels very few wanted down the throats of distributors and consumers, the major media companies slowly but surely suffocated their biggest source of revenue.
Venu’s very existence is validation that the traditional model is broken. In fact, the entire legal debacle begs a simple question – why don’t Disney, Fox and WBD offer the traditional distributors the same terms they were willing to give themselves with Venu? And if you’re willing to consider that option the next question is obvious: why even create your own service in the first place?
Standing up a direct-to-consumer distribution platform is both very hard and very expensive, as the major media companies and Wall Street have learned in recent years. I get the allure of owning the consumer transaction and relationship, but the market for streaming video is very crowded. And while a sports offering including all the networks of ESPN, WBD and Fox is differentiating and would generate some appeal, it has significant drawbacks. CBS and NBC/Peacock are not included and in the time since Venu was announced WBD’s sports portfolio has eroded significantly with the pending loss of the NBA.
The better, long term play is giving the existing distributors the same opportunity to sell sports-specific packages. The networks can reap the benefits of pent-up consumer demand for a simpler, more cost-effective way to view sports content without any of the hassles of standing up marketing, customer service, tech support, billing and all the other infrastructure required to distribute video. None of which is core to their business anyway. And despite all the cord cutting and audience erosion, still nothing beats the reach of the traditional cable/broadcast bundle.
Yes, such a move could threaten the balance sheets of the smaller, entertainment networks, some of which are on life support right now. But any network that relies on content it doesn’t air to survive isn’t much of a business in the first place. Also, one could make the argument that by giving distributors more flexibility to package, it could entice millions of cord-nevers to sign-up and persuade cord-cutters to come back.
The owners of Venu initially projected five million subscribers, mostly among cord-nevers. That would be a good start; and almost certainly a low ball number. My guess is that their best projections are much higher. Granted there would be some cannibalization from the traditional ecosystem but given the rate people are dropping their packages the potential benefits seem to outweigh the risks. It’s hard not to see Venu as a clear acknowledgement of this reality by the major media companies.
According to press reports, Disney, WBD and Fox are seeking to expedite the appeal. Part of me understands their impulse to fight for Venu. They’ve invested a lot in it and folding before the thing ever gets off the ground would be embarrassing.
Having said that, often the greatest triumphs come from the most stinging defeats. A better long-term strategy would be to embrace the ruling and finally accept that the traditional bundle is broken. Disney and the others should work with the traditional partners that helped build the sports business as we know it today.
The time for the change everyone in the business knew was coming is now. Give the fans the content they want on the platforms that still offer the broadest reach and cleanest viewing experience. Make it both easier for them to find the games and, hopefully, a bit more affordable. If that’s the outcome of this entire episode Venu, despite its short, stillborn existence, will go down as one of the most consequential initiatives in the history of television.
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