The UK faces two years of momentous change for pay TV and premium streaming, as three US media giants make decisions that will have big implications for subscribers.
- Current Warner Bros Discovery (WBD) deal with Sky covering HBO content will finally cease at the end of next year.
- WBD then free to launch full version of Max in the UK, but only has just over 2 1/2 years to take full control of TNT/Eurosport UK joint venture
- Paramount and WBD mull a possible tie-up, which could leave Comcast-owned Sky out in the cold.
- Linear channels under threat of closure as advertising downturn continues and businesses push streaming.
Signed in a very different media era, Sky’s long-running deal with HBO will be over in 24 months’ time. With it, Sky will lose a large content library that it has used to stock up Sky Atlantic , Sky Crime, Sky Documentaries and its on-demand service.
Subscribers tempted to take up any 24 month contract with Sky, such a 24 month Sky Glass+TV+Netflix bundle need to know that there could be some quite significant changes during that time. Some content may switch providers and no longer be included in the subscription.
What happens after the Sky-HBO deal ends?
The Sky-HBO deal was originally rumoured to expire at the end of 2024, but as HBO became part of Warner Bros Discovery, and it became clear the Sky deal was a roadblock for WBD to expand its streaming service, Sky clarified the HBO content would go nowhere until 2025. In the autumn, Sky clarified this even further, naming the end of 2025 as the end date of the HBO deal.
To fill the content gap, Sky is banking on its new state-of-the-art studio complex in Elstree to start churning out a pipeline of new and original content.
WBD content, which includes Succession, House of the Dragon and The Last of Us is set to migrate to WBD’s own streaming platform within two years.
WBD’s UK streaming platform is Discovery+, but this is expected to change to “Max”, to coincide with the end of the Sky deal.
Sky currently offers access to Discovery+ at no extra cost, but the complementary access doesn’t include the recently launched premium tier. As a result, viewers may be asked to pay extra to access the type of content included through Sky as standard at the moment.
What’s WBD up to in the meantime?
While WBD waits for the deal to end, it will seek to complete the transformation of its sports channels.
The sports channels, currently part of a joint venture with BT, saw the BT Sport rebrand replaced by TNT Sports last year. But it is yet to fully integrate Eurosport.
At the time of announcing the TNT Sports rebrand, WBD promised that Eurosport would be “rolled into the new brand at some point in the future”, widely expected to be after the 2024 Olympics. This is likely to affect how current pay TV viewers access Eurosport content and how much it costs. Currently, Eurosport is not seen as a premium service and is available on cheaper subscription tiers.
Under the terms of the joint venture, through which BT and WBD’s UK sport channel businesses were merged, WBD only has until September 2026 to exercise its right to take full control of the business, buying BT out.
WBD merger could change the face of premium TV and streaming
However, WBD already has its eyes out for another potential merger. Just before Christmas, a meeting between the bosses of WBD and Paramount opened up the possibility of a mega-merger of the two companies.
WBD can’t legally begin any talks until the spring, because of terms linked the merger that created the company in the first place. Wall Street investors aren’t keen on the idea. It’s also likely to face major regulatory hurdles. Other investors say Sky’s owner Comcast should step forward to take over or merge with Paramount or WBD.
And there’s good reason why Comcast might want to consider its options. In the UK, a tie-up between WBD and Paramount would be complementary, with WBD strong in factual, lifestyle and sports content, and Paramount strong in entertainment. But internationally, the move would leave Comcast out in the cold. Comcast, through Sky is in the process of rolling out a joint venture streaming service with Paramount called Sky Showtime. A merger would force another rethink at Comcast, with Sky facing yet another countdown with a partner eager for the exit.
In the meantime, WBD prepares to launch streaming service Max across much of Europe, before heading to the UK, Ireland, Austria, Germany and Italy. As is now clear, thanks to Sky clarifying the end date, the full Max service is still nearly two years away from being able to launch in these five countries.
Traditional TV channels under threat
At the same time, WBD will be counting down legacy channel carriage deals it has with Sky and other pay TV platforms in the UK as the advertising downturn puts pressure on its legacy TV channels.
WBD has just in the past week culled Discovery Science across most of Central and Eastern Europe. The channel is one of many niche services created in early days of digital TV, which look particularly vulnerable once current carriage contracts expire.
It also has heavy duplication in the women’s lifestyle segment, with Really, TLC and Quest Red all chasing similar viewers in a declining market.
And the UK is one of the few places left where children’s channel Boomerang continues to broadcast. Internationally, Boomerang has been replaced by Cartoonito.
Will any content remain on Sky?
The good news for Sky is that investors aren’t impressed with the streaming strategies of the big media giants.
To ensure their streaming services contain exclusive content, companies like Disney have previously pulled out of providing linear channels and licensing content to third-parties like Sky.
But that has stripped them of a valuable revenue source and the ability to leave the marketing of content to local platform operators.
Instead, they now bear the cost of running a streaming service in each country. This may also include adhering to various local regulations and in some countries, a requirement to include locally produced content or content in a local language. Adding adverts and raising prices makes them vulnerable to cost cutting consumers and the wider downturn in the TV advertising market.
As companies struggle to reduce losses, some including Disney, are turning back to licensing some content to third-parties. Even Sky isn’t immune to U-turns, as recently experienced with Peacock.
As a result, Sky could in the future benefit if it can buy back or acquire new rights to third-party content to complement its programme library. Already, Sky’s CEO Dana Strong has gone on the record at the 2023 Cambridge TV Festival as being “optimistic” that it can secure a deal with WBD.
Additionally, as more companies seek to merge, willingness to continue licensing content to third-parties may act as sweetener to regulatory authorities. That could be good news for Sky & co.
But a reduction in linear channels is a certainty. As the channel offer declines, Sky will avoid committing to too much satellite capacity. It currently has a deal in place with satellite operator SES until 2028. It will want to see how adoption of its Stream platform and developments in the broadcast industry go before committing to any extension.
What about Virgin Media?
As an agregator of content, Virgin Media will be affected by future mergers and changes.
Subscribers can expect Virgin Media to try and maintain its current deals with pay TV and streaming services. But as media giants grow, they may drive a hard bargain with increased prices.
Unlike Sky and its owner Comcast, Virgin Media doesn’t make its own content, so it’s limited as to what it could offer media giants in return for better terms. Contrast this to the BT-WBD-Sky deal that saw BT / EE retain ongoing access to Sky services through NOW. In return, Sky secured access to TNT Sports in a deal to run for nearly a decade.
Marc Thornham