How Netflix, Amazon Could Really Disrupt Legacy Networks: Buy Sports Rights

TheGrill 2017: “Sports is the only thing that people watch the same day — there’s huge value in that,” ICM’s Chris Silbermann says

We’ve already seen cord-cutting, the rise of digitally focused tech companies in the entertainment content space and a wave of mega-mergers.

But according to experts who have been studying the business of Hollywood, the digital disruption may soon extend to the last remaining example of appointment TV: live sports.

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“If you want to destabilize the entire entertainment ecosystem and you were Google, Facebook or Amazon, the best way to do it is to suck sports out of the legacy ecosystem,” Rich Greenfield, a managing director at BTIG, told moderator Mike Slade of Second Avenue Partners on Tuesday at TheWrap’s annual media conference, TheGrill.

Greenfield believe it’s only a matter of time before traditional broadcasters, increasingly under pressure from Wall Street, decide they no longer want to pony up even larger amounts to carry games from the major sports leagues. “You’re going to see meaningful sports rights acquired by non-legacy players,” he predicted.

“Sports is the only thing that people watch the same day,” said Chris Silberman, the managing partner at ICM Partners. “There’s huge value in that.”

The panelists said that with the proliferation of dozens of streaming services — and established content owners increasingly making their shows and movies available on demand — cable and broadcast companies can’t count on a regular audience, to their detriment.

“Now you have this almost infinite choice of what you could do tonight,” Greenfield said. “Whether it’s ‘Monday Night Football’ or catching up on ‘Game of Thrones,’ the choice is yours. It really screws up the legacy ecosystem of you watching the show at 8 o’clock, sitting through ads, and doing the same next week.”

“There have been some big changes because of this explosion of choices,” Ross Gerber, the president and CEO of Gerber Kawasaki Wealth Management, said. “It’s just the beginning of the consolidation of the legacy players.”

With a nearly unimaginable amount of options available to anyone with an internet connection, there’s not as much must-see TV. And what does exist, like HBO’s “Game of Thrones,” is in high demand, which is why AT&T wanted to lock it down by buying parent company Time Warner for $85 billion. And incumbent distributors have to step up their game or risk being left behind — or buy someone else.

However, tech companies have largely tried to start up their own things. Greenfield said the reason companies like Apple and Amazon haven’t tried to buy old-school content owners like Disney is that they’d inherit a dependence on the pay-TV model.

“The problem that these legacy media companies have is they’re wedded to the cable model,” he said. “They can’t do things like no commercials.”

However, Gerber said that while cable providers have shed tens of millions of subscribers, that business is hardly in a death spiral.

“The death of cable is greatly exaggerated,” Gerber said. “The cable companies are just too greedy.”

Gerber said if cable companies lowered their price a little bit, consumers would stick with them out of the ease of having one login versus a variety of individual apps. And TV delivered over the existing pipes remains more reliable than internet TV — as millions of people who ordered the Floyd Mayweather – Conor McGregor fight online can attest.

“The internet is a disaster too,” Gerber said. “Who knows if we can handle everybody streaming in 4K at the same time? I bet we can’t.”

After praising Netflix’s international rights strategy, the panelists discussed how increasingly ambitious TV shows and a continued proliferation of streaming services have strained the movie business.

“The theaters are gone, the theaters are Blockbuster [Video],” Gerber said.

Greenfield said one of the defining moments of this year was when three major movie stars, Reese Witherspoon, Laura Dern and Nicole Kidman, decided to do “Big Little Lies,” a miniseries on HBO.

“There’s not a lot of roles for them in ‘The Avengers,'” said Susan Williams, the deputy chair of Loeb & Loeb’s entertainment practice, needling Hollywood’s reliance on superhero blockbusters.

“The conversation about how much we love television is at the expense of the movies,” Chris Silbermann, the managing director of ICM Partners, said.

And with Netflix and Amazon — and now Apple and Facebook — dedicating real resources to original video content, there is even more pressure on legacy content owners to keep their top talent.

“You now see Shonda Rhimes go over to Netflix for a record deal,” Williams said. “You look at what Apple is trying to build. Amazon is doing the same thing.”