It was recently announced that Sam Toles (chief content officer), Alex Vargas (chief operations officer) and Miguel DeAvila (SVP of engineering) are all leaving Bleacher Report—the latest in a series of high-profile layoffs and exits from the once high-flying digital media company. The roster moves were described as part of a greater restructuring effort within the Turner Sports and Bleacher Report portfolios to create efficiencies and facilitate broader integrations between the brands. The desire to cut costs also presumably played into the decision, as the vacated roles will not be filled. The turbulent period follows the company’s surprising June decision to opt out of its UEFA Champions League contract (arguably the most valuable exclusive live rights package on the B/R Live platform).
The uncertainty surrounding the sports- and youth culture-focused brand comes at a time when the transition from linear TV to livestreaming services is picking up steam. Rich Greenfield (TMT analyst, LightShed Partners) said the desire to stay ahead of that trend has AT&T-owned WarnerMedia “shifting focus away from their cable network portfolio and towards HBO Max.” But with no immediate plans to integrate sports programming into HBO Max’s OTT service, it’s reasonable to wonder how Bleacher Report and Turner Sports fit in to the greater WarnerMedia content strategy.
Our Take: Former AT&T CEO Randall Stephenson spoke openly about programming sports on HBO Max prior to the company’s launch in May. But Stephenson has since stepped down and his replacement, John Stankey, has yet to confirm whether the plan to integrate live sports within the direct-to-consumer streaming service remains intact. (We’re hearing it is still part of the long-term plan.) In the interim, Greenfield pondered, “To the extent the cable networks are not the future or where [WarnerMedia] is putting their investment dollars, does [the company] need as many sports [rights packages as it currently has]?” Presumably, the answer is no.
It appears as if that is the conclusion WarnerMedia has also come to. Greenfield noted, “DirecTV feels like it’s on its way out. The NFL Sunday Ticket contract is obviously not being renewed. [And Turner opted out of its UEFA Champions League contract.] So, sports definitely looks like it is dropping in importance [within the WarnerMedia ecosystem].”
The question becomes, if sports continues to lose prominence within the company over time, is there a better home for Bleacher Report? We say “over time” because sports programming remains a critical component of the still-viable linear television business, and as Lee Berke (president, LHB Sports, Entertainment and Media) said, “[WarnerMedia] is definitely interested in continuing to protect Turner.” The cable network has the rights to NBA games for at least the next five seasons (through 2024-2025), March Madness through the 2032 tournament and a new deal that will keep MLB games on the network through the 2028 season (at a +65% price increase). As long as Turner is carrying those events, “there is still going to be value to Bleacher Report [for WarnerMedia],” Greenfield said.
B/R currently plays a pivotal role for WarnerMedia, serving as the company’s 24/7 sports destination; remember, the parent company doesn’t have a linear network that fulfills that purpose. But Berke said the recent cost-cutting measures show the company is “putting less of a strategic emphasis on Bleacher Report. When you’re seeing layoffs, when you’re seeing consolidation, it sure seems as if they’re heading to subsume [B/R and B/R Live] in some way between Turner and HBO Max.” If WarnerMedia ends up moving B/R content to Turner (or HBO Max if/when it decides to add sports), Berke said, “you have to wonder what the long-term future of [the digital media company] is.”
There has been consistent speculation that Bleacher Report could be on the move—including a rumor that DraftKings was interested back in April. (The two companies have since aligned on a sports betting partnership.) For the record, insiders say the company is not for sale and that there are no plans to unload it.
Just because sports aren’t currently included within the HBO Max lineup doesn’t mean they won’t be in the future. As Greenfield noted, “It’s very possible there could be a sports angle [on the platform]—especially as they integrate advertising next year.” Considering the competition has sports programming and charges less for a subscription (think: Peacock, Paramount Plus), WarnerMedia may have little choice but to follow suit. “Part of [the decision-making process] is going to be what content do they put on [HBO Max] to justify the [higher] price point and drive subscriptions. Well, one of the ways to [rationalize the price point] would be by adding sports,” Berke explained.
It’s possible WarnerMedia could move on the digital rights to one of the major sports properties coming up for renegotiation (NFL’s current deals expire in ‘22, B1G’s expire following the 2022-23 season). Doing so would signal the company’s intent to follow the same premium sports strategy used to bring Turner to prominence with HBO Max. But if WarnerMedia remains on the sidelines, we may not learn about how sports fits into the company’s long-term future until the next round of NBA rights negotiations begins in 2023. Viewed as the most valuable sports property within the company’s portfolio, failure to retain the NBA could spell doom for Turner Sports (and sports programming within WarnerMedia). Should it become clear that sports are not a part of HBO Max’s future, Greenfield said, “It’s hard to imagine [the company] won’t seek to reduce their exposure to sports and to harvest cash out of [its] cable network portfolio.” Remember, AT&T has said publicly it would like to reduce its debt load.