January 26, 2021

Betwixt and Between

Comcast Shutters NBC Sports Network

Greetings, TDG readers. Interesting news this week that NBC is shuttering the NBC Sports Network at the end of 2021, with future events to be divided between the flagship NBC broadcast channel, USA Network, and the Peacock streaming service. Sports remains one of our basic cultural touchstones and the 2020 Olympics may even show up via time machine this summer in Tokyo. So why couldn’t NBCSN make it?

Three thoughts…

1. Channels Naturally Fragment and Multiply
Remember the 2016 Summer Olympics in Rio? Seems like a hundred years ago, doesn’t it? While I can barely remember any of the specific sporting events, I do remember that Comcast attempted to distribute Olympic content across all of its far-flung broadcast and pay-TV channels.
The result was a confusing, fragmented mess. Why was volleyball suddenly on CNBC? Why were early-round basketball games on the USA Network, which I had never associated with basketball in my entire life? And what the heck was NBCSN, anyway? Even with a DVR, most people (including me) found it frustrating to the point of being totally incomprehensible.

While the Olympics may have seemed like an extreme example of content confusion, the basic business model of pay-TV naturally produces this result. The decades-old carriage model between MVPDs and content providers (in which content providers charge MVPDs a monthly per-subscriber fee to carry a particular channel) led to a situation where content providers were strongly incentivized to grow revenue over time by adding more channels. The MVPDs, likewise, had an equally strong incentive to add more channels, as that was a simple way to create higher price tiers for the consumer. Add these two incentives together and you get 500 channels, even though TDG’s research has long shown that people could not process this many choices and actually only watched a handful of different channels in the course of a typical day or week.

2. Apps Naturally Consolidate and Converge
Apps are different. While critics of the TV-as-an-app model focus on the plethora of apps available in the app stores, something very different is going on within large content providers. The subscription content model demands scale, both in terms of users and in terms of a broad content offering. Services need a lot of users to support original content and vice versa.

Both of these pressures mean that providers are strongly incentivized to bring all of the subscribers and all of the content under one giant tent (ideally appended with a “+”). This is obviously what the Big-3 SVOD providers (Netflix, Prime Video, and Hulu) have been doing for years, but also describes the strategies of newer offerings such as Apple TV+, Disney+, Paramount+, HBO Max, and even Comcast’s own Peacock.

This is why the number of successful streaming services is likely to remain lower than the number of channels that existed at the peak of the pay-TV era.

3. The “Mushy Middle” is Gone
The pay-TV era produced an inordinate number of fuzzy channel brands. What was the difference between TBS and TNT? Who knows? How about ESPN and ESPN2? You got me. USA Network has been an enigma wrapped in a riddle for decades. NBCSN, despite its seemingly simple name, suffered from terminal fuzziness. Was NBCSN the exclusive home for sports within the NBC family? Nope. Did NBCSN have the biggest sports events within the NBC family? Strike two. The brand was neither fish nor fowl, and while that may have worked in an era where NBCU was pushing a fat bundle of channels on MVPDs, it doesn’t work anymore.

So where do NBC sports offerings go from here? My prediction is that the highest-profile content (i.e., the NFL and the Olympics) will continue to live on both NBC and Peacock. Niche sports like the NHL and English Premiere League Soccer, by contrast, will be offered exclusively on Peacock to try and build the subscriber base, as CBS has successfully done by granting All Access exclusive U.S. rights for the European Soccer Champions League.

The streaming wars are heating up, and weaker pay-TV brands & channels will either be swallowed up or shot down in the crossfire. And while NBCSN never had a chance, Comcast’s Peacock experiment will prove much more interesting.

Stick with TDG and stay ahead of the curve.

Joel Espelien is a Senior Advisor for TDG. He is also Executive Director of the Corum Group where he advises technology companies on M&A transactions. He lives near Seattle, WA.

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