Why Fox Is Finally Entering the Streaming Wars

0:00Hey everyone, Danny Heifetz here from the Ringer Fantasy Football Show. We're coming to you multiple times per week to tell you who to draft, who not to draft. Honestly, that's kind of most of it. The Ringer Fantasy Football Show, YouTube, Spotify, wherever you get your podcasts, the Ringer Fantasy Football Show. Adobe Firefly is the all-in-one creative studio with AI-powered image and video editing for today's creative process. Built for creators of every kind, Firefly helps you generate, edit, and experiment fast. because the asks aren't getting smaller, the budgets aren't getting bigger, and the timelines, oh yeah, still tight.

0:36With all the best creative AI models in one place, Firefly brings your ideas to life. Unlock a better way to make with Adobe Firefly. This episode is brought to you by LinkedIn Ads. Ever invest in something that seemed incredible at first but didn't live up to the hype? Marketers know that feeling. They optimize for the numbers that look great, impressions, reach, and reacts. But when they don't show revenue, well, that's a not-so-great conversation with the CFO. LinkedIn has a word for that, bull spend. Instead, why not invest in what looks good to your CFO? LinkedIn Ads generates the highest ROAS of all major ad networks.

1:13Reach the right buyers with LinkedIn Ads. You can target by company, industry, job title, and more. So cut the bull spend. Advertise on LinkedIn, the network that works for you. Spend$250 on your first campaign on LinkedIn ads and get a$250 credit for the next one. Just go to linkedin.com slash the town. That's linkedin.com slash the town. Terms and conditions apply. It is Wednesday, August 20th. Get excited. There's a new streaming service launching this week. No, not ESPN. That's launching as well. I'm talking about Fox One, the long-awaited first foray into streaming from the Murdoch's Fox Corporation, unless you count Fox Nation, which your angry uncle might subscribe to.

1:59Fox One is 20 bucks a month and gets you the Fox Broadcast Network, Fox News, and all of Fox Sports, which includes the NFL Sunday games and the World Series, ton of college football, among other sports, all in one service. Certainly a value to a lot of people, but if that price point seems a bit high, that's kind of the point. I went to a little media presentation last week on the Fox lot, And it was clear that Fox does want this service to catch on with consumers, especially the millions of people in this country who either cut the cord or cord nevers. But Fox doesn't want it to catch on too much to the point where it cannibalizes from its existing customers.

2:36We do not want to lose traditional cable subscribers to Fox One, Lachlan Murdoch said earlier this year. That's because unlike most of the legacy linear television companies, Fox is doing really well on TV. It sold off a bunch of entertainment channels to Disney and now has just news and sports, meaning Fox News, where the ratings are way up and more advertisers are endorsing the content, plus these sports channels. Basically, the things that people still watch on regular TV. For that reason, its share price is up 15 % this year. But it's 2025. The Murdochs know that Linear's days are numbered.

3:11They need a streaming alternative to eventually wean that audience over. And there's real appeal for sports fans who finally have that last piece of the NFL on Sundays available on streaming. To that end, Fox is also bundling Fox One with ESPN for$40, a$10 discount over what you'd pay if they were separate. So it's essentially pay about half what you'd pay for cable and get a lot, but definitely not all the sports. Is that enough? It's a great question. So I wanted to have Pete Distat on the show. Pete is CEO of direct-to-consumer for Fox Corp and in charge of Fox One. He was at Apple for many years, and before Fox 1, he was spearheading Venue, a sports joint venture that got sued and killed before launch.

3:51So today, it's Fox 1 and the streamer that really wants to succeed up to a point. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

4:05Okay, we are here with Pete Distad, who is CEO of Direct to Consumer for Fox Corp and the overseer of the new Fox One streaming app. Welcome, Pete. Thanks, Matt. Great to be here. Appreciate you having me. No problem. So does it feel weird to you a little bit that you're launching a streaming service that your parent company wants to be successful, but doesn't want to be too much of a success? Like they want you to have a hit and get a bunch of people to subscribe, but they don't want it to cannibalize the existing business, which frankly, Fox is kind of killing it in the linear business right now when everyone else is having big trouble.

4:49Yeah, I'll spin it slightly differently. I guess what I would say is we're sort of looking at the whole distribution landscape holistically. And so to the extent that we're successful in bringing more people in that are currently outside of the ecosystem, so whatever that everybody throws around a different number, we'll use 65 million for today. unserved customers. To the extent that we're successful in bringing them in and introducing them to these products, I would say no end in the amount of success that we can have there. I think the concern is we think the pay TV ecosystem is still a healthy place, especially to watch.

5:30It's a great place for consumers to watch sports content. It's aggregated. And so we don't need this. We don't want this to basically take away from that experience for consumers. So I don't think it's that they don't want it to be successful. I think that they just want to be careful to not accelerate what we already think is a great experience. Yeah. I asked a friend of mine who's a top exec in the sports and streaming world, I said, is anybody going to subscribe to this, Fox One? And he said, yes, just nobody you know. I hope that's not true, Matt. No, no, no. But it's a compliment to you. It means that you are going after a market here that is not the people who are obsessed with this and have every service and are already subscribed to a lot of different things.

6:20These are people who are not even in the linear landscape and want to watch NFL on Sunday, but don't want to subscribe to a cable service and never have, and maybe never even thought about it. Yeah, it was interesting. Recently, I was presenting to a group of college students and I asked how many of them, you know, are thinking about getting paid TV and the number of them is really low. But then you ask them, how are you getting your sports today or how are you getting, you know, your news today? And they say, I use YouTube TV or I use Hulu Live. You know that's paid TV, right? So I think - They don't, they don't know that.

6:58Correct. But the next generation and the 20-somethings now that are coming into being able to pay for these types of services, they want choice. They want to be able to select where they want to watch it, and they expect a slightly different experience. And that's really what we're looking to build. But again, I think the way we're looking at the ecosystem is we're sort of indifferent. We're going to create the best experience we can for Fox 1 for those digital customers. And then we're also totally fine with having the existing distributors sell the Fox product, which is the equivalent of Fox, all of our networks today, or even Fox One, because our objective is to really get in the hands of customers wherever they decide they want to buy it and how they want to buy it.

7:40Yeah, it seems like there are two distinct cohorts of people who would be interested in this product. There's the sports people, and then there's the Fox News people. And I think the Venn diagram of those people overlaps a lot. But there are distinct Fox News superfans. And then there are sports It's people who are completists and say, I'm a streaming person. Now, for the first time, I can get every NFL game on streaming. And that's a key thing here. Fox is the last place that had only linear games. And now all linear games for the NFL are available on some streaming service. How are you positioning this product to capture both cohorts there?

8:26The good news is, is we have a full holistic news offering for the news fan, especially news fans that love Fox News. Like they don't need anything else. They don't need to go bundle something together. It's their whole personality. Trust me, I have people like that in my family. And so they're going to be really excited about this. We're going to give them the whole product. So I don't really think we have to solve a fragmentation issue. And I think the overlap of the Fox News fan that is a digital first customer that is probably a sports fan, they've already probably started subscribing to services.

8:58So if they're already outside of the ecosystem and they have those things, we really complete that sort of offering for them from a sports perspective. So that's why when we started the conversation around positioning our expectations modestly, I think it's because the intersection of those two things, we think there's a large audience for it over time. But as an industry, we need to solve the experience for the digital customer? How do you bring these services together, both from an experience perspective, but also how you buy it, how it's packaged? And that's why you're seeing us start to do some of the experiments, like what we're doing with ESPN that we announced last week.

9:36Yeah, I'll get to that bundle. But I want to first talk about the expectations here. You guys have really, I feel like you've lowballed here. What did Lachlan say? Like 3 million, 5 million? What did he say the expectations are? Mid-single digits. Mid-single digits. Okay. Is that success for this product? Like after a few years, two, three years, like will you be satisfied with mid-single digits? I personally would like to aim higher, but again, not at the cost of blowing up the ecosystem. I want to be careful that we're doing this the right way, but serving customers. I think it's really just an element of seeing where the industry goes in the next five years.

10:13And that's what we've built this to support. work. It's almost like a hedge, a hedge against the strong, but obviously challenged linear business. I will absolutely not call it a hedge. I mean, you know what I mean, though, right? Yeah, I do. I do. I mean, it's the numbers are the numbers. There's a lot of people that are sitting outside and we need to have multiple options for them to capture them. The way we're setting it up is give them all the options and let them decide. Yeah. So Bloomberg Intelligence did a survey and they asked whether the launch of Fox's streaming service, Fox One, would be of interest to people.

10:5156 % of the respondents to the survey said that they would be very interested in a product like Fox One, but pricing,$20 a month, only 9 % said they would pay that amount. How did you guys land on the$20 price? As you know, most of the other entrants in this space came in quite low and then basically did continuous price increases. Number one, we want to do that. We wanted to price it at a number that we felt is a great customer proposition and basically a fair return for what the amount of live content that we're putting into the service. So we first looked at it from like, hey, can we create a sustainable business here?

11:31And are we getting paid for what we deserve to be paid for for our content? And then we also looked at it and said, we want to be in a world where we build a sustainable, profitable business here, we don't want to just chase subscriber numbers and then ultimately have to increase prices. So those two things are obviously related to the first point I made. But our goal here is to create something that allows us to basically be able to continue to invest in content profitably, regardless of whether the customer is watching on traditional cable or digital. We're sort of indifferent. And we recognize that some customers won't be willing to pay that, but they also want to watch the NFL and they want the NFL to be healthy, as do we.

12:13We want the leaks to be healthy. So it's a tradeoff. You know, this stuff isn't free. Yeah. Moffitt Nathanson, the analyst firm, put out a research note saying that Fox's strategy for Fox One appears carefully designed to minimize cannibalization risk. And that's the price. If it was too cheap, the adoption might be too much. And you don't necessarily want that. They are saying that a 5 % uptake would yield about 3.5 million users from those 70 million homes outside the pay TV ecosystem and around$800 million in annual revenue. Sound right? Well, I'm not going to get into our financials. Sure, of course.

12:53I don't think we're really looking at it holistically as a cannibalization risk thing. We're basically looking at it and saying we're certainly not going to undercut the pricing that we give to our existing distributors. Right. It'd be unfair to us to come in for the exact same product and sell it for less. It means we've mispriced our product. And we also believe like, hey, we want to like the reason we've been sitting out of this business for as long as we have is like we want to make sure we can enter it profitably and continue to invest in the types of great programming and content that we have been in sports and news and entertainment.

13:26We're okay with not going out publicly and saying we're going to have 100 million subscribers or 50 million subscribers. we want to have a profitable business that enables us to invest. How are the conversations with the NFL about this? I went to your presentation this week on the interface. It looks great. I like the emphasis on live. I like the fact that you can turn it on and it shows you the scores and it feels like a dynamic service. But for the NFL, this is the last element of the required linear bundle subscription that is going away. Now, as I said, all the NFL games are available on streaming, and the NFL is pretty invested in that linear bundle.

14:09Do they express any fears about how this service could be the death knell of the linear bundle or anything like that? Not yet. I mean, we've obviously been in discussions with them and gave them a heads up of what we're up to. But I think they also recognize that they're going through the same challenges we are with the linear ecosystem. them. They want to have as many healthy partners as they can. So I won't speak on their behalf, but my sense is they're supportive. Well, and the NFL has always been about reach, about getting their product in front of as many eyeballs as possible. And this is another option.

14:43I'm sure there are people that just weren't watching the Fox games on Sundays because they are cord nevers, cord cutters, and it wasn't available to them. And now there's an option. Yeah. There's one way to look at it, which is, hey, this wasn't available. There's another way to look at it, which is now these customers can put together a full package and get access to NFL games. Granted, it's not super simple right now because you'd have subscribed to four to five services, but at least it's accessible in a way that it wasn't before. And that gets us to this bundle that you guys did with Disney for the Fox 1 ESPN offering.

15:20For$40, you get Fox 1 and you get the ESPN standalone subscription service, which on its own is$30. So you save$10 if you go with that bundle. I know you can't talk about the split on who gets what of this, but what value do you see in attaching yourselves to a nascent product like ESPN rather than going with some other bundle on an existing service like Peacock or Max or even Netflix or Amazon? Yeah, listen, I think we're sort of open to trying different bundling options for customers to see how they react. And I think the likely customer for this bundle is somebody that may already have Peacock or Paramount Plus.

16:07They're interested in us or they're interested in ESPN. And we're just making it easier and a little bit more cost-effective for them to take that on. I think ultimately the problem that exists out there in sports is the fragmentation, right? So we're just hopefully bringing the customer slightly closer to a non-fragmented sports experience. Slightly. It's still pretty fragmented. It's very, very fragmented. I mean, but we're bringing them, we're at least giving them a little bit more value in the event that provide bull services. I mean, you've seen publicly some of the success that's been noted with the, like the Max bundle.

16:41Yeah, Max and Disney have had success there and it reduces churn too, because the more you're subscribed to, the less likely you are to cancel if you feel that there isn't enough on one of the services. Yeah, we're doing some tests here with them. We're going to continuously looking at other potential bundle partnerships over time. I think ultimately the goal is just simplifying the customer experience and getting closer to something that is giving them a holistic product. And I think our products are quite complementary. When you look at college football, you look at the NFL content, I think we have pretty complimentary products.

17:17This is very similar to Venue, which was, was it Venue or Venue? What's Venue? Venue was the effort by Fox and Disney and Warner Discovery to bundle their sports channels together. And it was sued and ultimately abandoned. But what was interesting to me was that this Fox ESPN bundle is$40, whereas Venue was going to be$43 and include the Warner Discovery content. And my colleague, John Arand at POC has noted that that really tells you all we need to know about what the value of the Warner Discovery sports content was. I don't think I would look at it that way, but I would say that obviously the ESPN products changed quite a bit, even since we were looking at doing Venue.

18:07and that is definitely not how we backed into the pricing. Yeah, okay. And that was when Warner Discovery had the NBA and they don't have that. How do you think the NBA coming into the streaming ecosystem here is gonna change things up? That seems to be the biggest question of the fall and winter is, what is the NBA going to Amazon and the NBA going to Peacock in addition to ESPN? How is that gonna scramble the sports streaming universe here? I think the same challenges that exist today will continue to exist from a fragmentation perspective. It puts more pressure on figuring out how both the pay TV industry and the traditional distributors bundle their content in the digital content.

18:51It also puts pressure on the digital side to figure out how do we simplify the customer experience so they can quickly figure out whether it's on Peacock or whether it's on Prime. And, you know, I think to some extent we can help solve that on the individual apps, but it's also going to be leaning heavily on the platforms to put together experiences that quickly get the customers into the appropriate app and make it seamless. Because I think the apps can only take it so far.

19:20This episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried, and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales. Using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com slash Spotify. This episode is brought to you by Netflix, presenting Beef.

19:57Now nominated for 16 Emmy Awards, including Outstanding Limited or Anthology Series. Esquire raves its hands down the best TV show of the year. From Emmy-nominated creator, writer, and director Lee Sung Jin, starring Emmy-nominated lead actor Oscar Isaac, lead actress Carrie Mulligan, supporting actor Charles Melton, and supporting actors Yoon-ya Jung. IGN hails it a masterpiece. Lee Sung-jin's series remains an untouchable force. Beef, the most nominated limited series of the year. You're also involved with the Tubi group. Tubi, Fox's free ad-supported streamer. How is that going to interact with Fox 1?

20:36You mentioned at the presentation that it might be used to upsell people to Fox 1. That seems smart to me. You use it as kind of a top of funnel. and get people in. Is that the only aspect of intermingling? I mean, obviously we're, we're, we work, you know, Anjali, who I know has been on your show and I work incredibly. Great guests. She's in, she's in the hall of fame, I guess. She was great. Oh boy. That's a high bar. Okay. No, I mean, we work really closely together. Obviously it's a different audience. They're leaning a lot heavier on entertainment. We've done some stuff on sports. That's been incredibly successful on the bar.

21:07They had that pre-show for the Superbowl that I thought was good. I mean, we literally had the whole Super Bowl and the viewership was insane. It was the most streamed Super Bowl ever. That actually was comforting for me as we look to bring on, you know, we're using similar infrastructure. So I would say two things. One is the technology and the foundation of the technology from a streaming perspective, we're sharing, you know, whether it's the back and how we're doing the live streaming, how we look at a lot of the technologies. from a strategy perspective, I primarily do look at it as a funnel.

21:39Like a lot of people ask, why wouldn't you just go integrate this into Tubi? And I think one of the magical things about the Tubi experience is that it's free and there's no paywalls jumping in front of the customer. It's just basically like, it's just content. You just watch it. I think if we were to try to seamlessly go in right now and integrate it, it could have a negative impact on the Tubi engagement and also probably a slightly different audience. So I'm looking at it as a, you know, I think publicly we've said we've exceeded 100 million monthlies on that service. Like I'm looking at it as 100 million people, 60 plus percent of them are cord cutters that I should be talking to at the right times to expose them to this particular product.

22:19And no original content on Fox One. Is that correct? No original content at launch. I mean, the way we're looking at this right now is we've got a lot of, we've got, we're millionly in a live, as we had mentioned to you before, Matt. And like, we've got a lot of great live programming on the news, sports and entertainment front. So we're going to integrate that. We're going to watch the audience. We're going to see what they, how they respond, see what they're centering around. And then the beauty of it is we'll just work with the existing teams to figure out where we make more investments in content and where we don't.

22:50I'm not going to build a huge content organization because it turns out we have a number of them, world-class content organizations at Fox already. Well, that's the thing. And a lot of the Fox broadcast content will go to Fox One, right? Basically all of it. Yeah. Well, what about the stuff that's not owned by Fox? Like obviously the Simpsons is on Disney plus and Family Guy. Those are Fox shows that are owned elsewhere. Anything that is broadcast on the network will also be broadcast live on the service. Oh, so including the Simpsons. Most of the content will have like current season content for that's on entertainment.

23:26And we'll also have the ability for customers to record as they're watching the show. Okay, but not library stuff. You're not having all 30 seasons. Yeah, we will not have all 30 seasons of it. There will be some limited amount of content that we will have prior seasons for, but it'll mostly be live and in-season programming. And what was interesting, I thought, is that you also are working to get the local Fox stations on this app. So if I'm in love with the morning show hosts at the Chicago Fox station, I might be able to watch them via Fox 1 when I wouldn't be able to via Linear because they do not get broadcast to my area.

24:07We are basically following the same rules. So what we'll have at launch is if you're in the Chicago market and you've got a local Fox affiliate, you'll get access to the Linear. Oh, so you won't be able to see out of market. You will not get out of market. That's a bummer. Well, however, we do have a solve for that, that we will be bringing in the future. We do create in all of these markets a fast channel. Oh, right. For each of the local markets that we do make available. And our plan over time is to integrate those into the product. We'll have a solve for that. It's just going to take a period of time for us to get it put in the product.

24:42So big picture here. Are we any closer to a unified experience of sports viewing in the digital landscape that will someday rival the convenience and accessibility of the cable bundle? Are we any closer? Well, tomorrow we'll be a step closer. If this works, we are a step closer. Yes, we are a step closer because for the first time you will basically between us and our friends in Bristol, all of this content will now be available to these customers. Now we just need to solve the user experience challenges on how you subscribe to it, how it gets bundled, how it gets brought together. And as you know, there's a lot of people spending time on that, trying to figure it out.