YouTube’s Sports Takeover & More ’26 Predictions

0:00The Varsity Podcast is brought to you by the American Gaming Association. ensuring legal, regulated casino gaming and sports betting thrives.

0:13Congratulations! You made the varsity for the podcast. My name is John Aranda and I am Puck's sports correspondent and the host of this pod. And today, my old friend Michael Nathanson joins the pod. Michael is a top media analyst, the top media analyst for a firm that bears his name, Moffitt Nathanson. So I asked Michael to join the varsity today to preview 2026 in sports media. 2025 was defined by the continued migration of sports to streaming. Is this a trend that'll continue or will good old fashioned television stage a comeback? But before we get to Michael Nathanson, today is New Year's Eve, Wednesday, December 31st.

0:53And here's what I'm watching. This upcoming year is going to be a big one in the regional sports network space. MLB is preparing to go to market in 2028 with its media rights, and Rob Manfred certainly hopes that he can be in the market with a package of his team's local streaming rights. It's going to be hard to convince big market teams like the Dodgers, Yankees, and Red Sox to allow the league to take control of those rights, but that's all part of a negotiation that's already going on. It's the same story in the NBA with Adam Silver, who is in the process of figuring out what to do with his team's local rights right now.

1:29Local sports rights have become an issue because the business behind the regional sports networks that carry them have gone from cash cow to, well, what's the opposite of cash cow? Problematic? Distressed? Take Main Street Sports, for example. The Wall Street Journal recently reported that the company was in what it called advanced negotiations to sell a majority stake to DAZN, the London-based streamer that's been trying for the better part of a decade to grow the U.S. market. The thing is that Main Street Sports' future could rest on whether this deal happens or not. If the deal is reached, it'll happen in January.

2:04If not, well, the worst-case scenario is that the company shuts down, something that would happen later this spring once the NBA and NHL regular seasons are completed. The problem is that 2028 is rapidly approaching, and we all know the league wants more control over those local rights, so watch this space. Okay, now let's get to Michael Nathanson. Michael Nathanson, it's always great to have you on the pod. You're here, the first pod guest wearing a hat. What's that hat of? What's the logo on the hat right there? I don't know. A friend of mine gave it. It's a golf brand with a dog on it. I have a new puppy, John, so it was in honor of my new puppy.

2:46Yeah, I'm wearing a hat and a hoodie because I was old school with you. We always did these conversations, just audio, but I didn't realize I didn't get dressed up for you this time. The varsity has gone high tech. I can't believe it. Like, you know, where's John's basement? Look, we've been talking. How long have you and I known each other for decades? I want to say 15 years. It has been. And every time we talk, we have seen the height of cable. We've seen the decline of cable. And one of our favorite conversations is talking about where the floor is, like the cord cutting is happening, how far until we get the floor.

3:31And most recent time that I had you on the pod, we were talking about that. And we both were very pessimistic. Maybe there is no floor. Maybe it's going to keep going down. But you had a really interesting report just a couple of weeks ago that looked into cable subscriptions. And by cable now, the cable guys that are listening to this are going to scream at me because YouTube TV is not cable and Hulu Plus Live TV is not cable. But it is a bundled cable subscription. And you saw that there was a bounce, that cable was starting to come back a little bit. The drop had been – it had stopped for some time.

4:13What do you make of that? What's happening here? The third quarter, shockingly, was the best quarter we've seen in like four or five years. We actually added PayTV homes, right? So there are two factors. One is Charter has come up with something I think is pro-consumer, right? Which is a bundle of bringing in all the video products you have. So bundling in your channels, your subscription channels, Paramount +, Peacock, with your overall PayTV bundle, creating one package. And then YouTube has done a really, really good job in YouTube TV is adding subs almost every quarter. So they're growing continually.

4:54And now Charter is coming with a new offering that has stopped their decline or improved their loss rate. So taken together, we've seen a positive quarter, which hopefully other distributors will pay attention to and come up with similar types of products. well in my private email i did i had the question is that what we call the dead cat bounce or or or is it is it something where it's a it's an anomaly and cord cutting is still going to continue to happen and the idea of these bundled um uh services just are they're not as popular as they were certainly in the 90s or aughts okay so let that's that's the right question right so we've done historically we've done survey work more than a decade ago and the survey work showed that people wanted 50 channels 40 channels max broadcast and sports and news for 50 to 60 bucks and no one has come out with a product that address that need going forward YouTube TV is going to have a product we don't know what it looks like yet that's more you know broadcast plus sports so yeah the The answer is no one wants 90 channel, 100 channel product for a hundred bucks.

6:09That's what we've learned. No one wants a channel package where you have to spend all night trying to figure out where your favorite content's on. The integrated approach makes sense. So I am hopeful that in 26, you have a blend coming from YouTube TV of fewer channels, more sports, more broadcasts, more news with some add on streaming packages as part of my subscription. right so i think we're we're never gonna go back 200 channels but can we stop the bleeding yes if people listen to consumers and make senior packages with more sports more news at cheaper prices i was surprised to hear you when you first answered this question if i were answering this question first the first thing i would mention is youtube and i would still be talking about youtube tv you've you opened with charter why is that yeah because charter went to war with all the programmers over the past couple of years to come up with a different product.

7:07Right now, their charter is going to be the savior. They don't have enough homes in their footprint to turn tide. But, you know, to offer consumers a value proposition of all your streaming products connected to your your pay TV bundle, as it were, at a lower price, you know, stops some of the erosion we've seen. Right. Satellite's not going to turn. We know that Comcast, you know, and Craig Kerr's Comcast with the life of me. I can't understand why they've not been more forward thinking to follow Charter down the same path, right? So, again, you're not going to stop the bleeding in satellite, but can you slow down the rate of erosion in cable?

7:46And can YouTube TV streaming first come up with something cheaper and more fundamentally attractive than what we've seen? But, yeah, Charter gets credit for being really aggressive here, trying to rethink their model. I give them kudos for trying to come up with something that consumers want. Right. Which isn't more channels for higher prices. They've come with something different. The whole history of the of the cable bundle is it's it's not really a copycat industry. It's more of a MFN industry, most favorite nation industry. So one company sets one deal and every other company sort of drafts off of that deal.

8:23And all of the cable companies had, you know, you've had Viacom. You can't just buy CBS and CBS Sportsnet. You also had to get MTV and MTV Latino and VH1 Classic and all of those cable channels. Same thing with Fox. You couldn't just buy Fox News and Fox Broadcast Network. At the time, you had to get FX before they sold it to Disney and that Geo channel and all those other channels. Now, YouTube TV has come out and convinced these big programming companies, we want a skinny bundle. We want a bundle that's primarily live sports and news, and we're going to sell it more cheaply. It's only a matter of time before Comcast, or really even DirecTV is starting to put out skinny bundles, I guess, but more Comcast.

9:16It's only a matter of time before they come on board, right? You were thinking now with Comcast spinning out Versant, right, they have even less of a corporate rationale to push big channels, right? And the irony here is that I went to find over Warners and Warners has all these channels and many of them are not really sports channels and their ratings are falling 20, 25 percent. Right. So it's ironic that you have a big battle brewing over Warners and the heart of their cash flow are cable networks. Right. So, yeah, John, I think we're we're getting great evidence that the model is changing and that 26 is going to with YouTube TV push for even more change.

9:56Right. So I think you're right. You don't want to miss hands forever, though. And the speed of change has been so pathetically slow. But consumers want to watch live sports, live news and broadcast. That's what they want. They don't want that long tail of useless content that was built in a world of 95 million PTV homes. That's the that's such an antiquated model that it took charter and hopefully now YouTube and hopefully fast followers will change it. Most analysts that I've read believe that YouTube TV within the next two years, maybe even within the next year, is going to become the biggest multi-channel video distributor.

10:40I'm assuming that you also see that, right? Yeah, we've been tracking it for years. I cover Alphabet. We think YouTube is the most valuable company, the most valuable media company. If it stood alone, YouTube would be now more valuable than Netflix. So, yeah, I mean, we'll get to over, let's say we're 10, 10.5 million now. We should be 12 million two years' time. Why are they into the multi-channel video business? It seems like such an antiquated business for Alphabet or for Google or for YouTube to be a part of. I'm glad we have video because you see me smiling, so could your audience, right?

11:22Yeah, it's a question we've asked many times because Craig Moffitt, my partner, would tell you that video is a very low margin business, not very attractive. But I think what YouTube in the long run sees, it's a gateway into even greater control over the streaming world, right? So the channel selling pay TV bundles then lets you sell channels of subscriptions that attracts premium advertisers. And then, as you know, they had their first live NFL game this year. We know there were competitors for the last NBA contract. And they have, of course, Sunday ticket. It lets them layer on top of it more and more sports, which is the most valuable type of content, as you and I know, in the world.

12:09So I just think it's a pathway for them to just move even deeper into sports, premium advertising, and get more control over the streaming world. Right now, the biggest streaming service, as you know, they have more viewership than Netflix. People always were amazed with that. Now it's common knowledge. But I just think they see it as a way to kind of gain more control over our living room. The distribution deal that they just signed with Disney, winners and losers. YouTube certainly emerged as a huge winner of that, right? Is there any other way to look at that? Or is that too basic? No, I'm waiting to look to see what are, I'm looking forward to seeing what 26 brings us in terms of the first bundle from YouTube TV, right?

12:56Let's see how they price it. Let's see what's in it. And then we could actually do a post-mortem, right? So it's weird because it's being teased. I'm a YouTube TV subscriber. They've sent me emails saying, hey, in 26, look what's coming. But like, let me get to see what the deal looks like and then we'll do a post-mortem, right? But it's hard not to see YouTube TV winning. They had to have won. At the same time, going dark is a little bit harder than it is in the past because I realized within a couple of days that I can switch over to Hulu Live. So I actually cut YouTube TV for a month. I'm like, what's the point of having to pick up these a la carte bundles of Disney products?

13:36My wife wanted to watch Golden Bachelor, to tell you the truth. Of course. Within it, you know, within a night or dance with stars, my colleague James, his fiancee, won her watch dance with stars. So they did the same thing. So it's not like the old days where you go dark and consumers stick with you. So I'm waiting again to do a postmortem when we see the fullness of this new offer, this new offer, see what the price looks like, right? So it wasn't completely different. That is so true, by the way. You just go online and you click a box, basically, and you desubscribe. You don't have to call and get a cable truck to come out and stay online with Comcast for an hour.

14:15You know, as they keep trying to resell you. Boxes. I lived in a cable vision neighborhood in the old days. I would have to find my boxes, bring it into that stupid cable vision store in Mount Vernon. Like it was a terrible waste of my day. Now it's clicking. So the power is not as strong as it used to be. everyone says YouTube TV won because that's what because it looks like they had more clout but let's see again what these bundles look like and you know Disney did not guide down after YouTube TV there was no massive you know spot on Disney's earnings that said oh this is where the you know the collapse except for ratings you know in terms of advertising definitely saw it but there was a guide that look next year's gonna be worse for espn because of this blackout you know yeah but could you imagine i mean you've been covering the cable business for so long espn went dark with the cowboys on monday night football before they were eliminated from the playoffs the college football going all all saturday uh imagine how long comcast could have lasted without espn back in the day or or charter back in the day exactly yeah the idea that youtube was able to last through that and move forward.

15:32It's a totally new horizon right now. Right, because one of your questions to me was why they end this business. We look at the size of Alphabet, right? This is a rounding error. This is, at the end of the day, it doesn't matter to me, the Alphabet analyst, what happens at YouTube TV. It doesn't matter at all when you have a$220 billion search business, right? And you have a cloud business growing 35%. It just doesn't matter. So in the old days, the guys who were fighting it out in the trenches, this was their core business. They had to hold on. They had to get it done right. Here, YouTube TV could have gone on for a long time.

16:12It just didn't matter to them until they got the deal they wanted. Here's my getaway question on this topic. The floor. Do you have a sense of where the floor is? Have we already seen the floor and we're going back up? It's an impossible question to answer. I know. I know. I used to always tell you 50 to 60 million was my floor. Right. But that's when we thought the world would be rational. That was always my answer. That if as long as premium sports rights stay exclusively in the bundle and in the bundle only, we thought the size of the pay TV base that was sports driven was like a 50 million floor personal homes.

16:53now because of the fragmentation of exclusivity I don't have a floor anymore because I used to think consumers are getting smarter I've said to you in the past that even though I love YouTube TV once I get out of the NFL season why am I painting 90 bucks you know for 90 channels on a lot with you know very limited amounts of sports that's exclusive there so you know I don't want we you We want to, I don't know, we don't have a new floor, but I'd say 25, 30 million, half of what we thought previously is not a crazy number with all the rights leaking over the top, right? And that's why you need to come up with a skinnier bundle, sports news and broadcast for$50,$60 to stop that, you know, the kind of the basic consumer from leaving the bundle.

17:41People like me don't have to be here anymore. here's a silver lining if i'm part of the business is uh the amount of criticism i saw leveled at the nfl last weekend where if you wanted to watch the nfl last weekend you had to have a subscription to netflix you had to have a subscription to cable because nfl network had an exclusive game as as did espn you had to have a subscription to peacock which had a game on on saturday night in addition to all of the broadcast channels, at some point, consumers are going to say, the bundle actually did work. Something that you and I have said for 15 years now, the bundle is a pretty good service and it actually did work if you have enough sports that are contained within the bundle, which is the deal that YouTube has been making with, I don't want to pick on ESPN, they've made it with Fox and they made it with NBC and with ESPN Now as well.

18:38No, you're totally right, John. It's become terrible, hasn't it? Ask yourself, where's the game tonight? But it speaks to the power of the NFL that ratings are not down throughout this whole process. They're still up. Speaks to the power of sports gambling, fantasy football, cold weather. But yeah, can you imagine what would happen to NFL ratings if it was easier to actually find these games than it's been? let's take a quick break and then we will talk about some of the trends of 2025 with regards to Netflix with the ESPN app and everything and try to spin that forward to 2026.

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19:59He the Call covers every game, every storyline, everything that matters, and we have fun. No fake hot takes, just entertaining football talk from your favorite buds at the bar. Wait, Mark, which bar? Well, like the typical neighborhood bar where the witty sports guys at a place like that. Ah, I like that. Follow and listen to He the Call wherever you get your podcasts. Michael, you're in Miami right now. I was there just about a week and a half ago for the big Jake Paul fight. Anthony Joshua, Jake Paul fight. I wanted to see Netflix in their eventizing firsthand. 2025 for me was, you know, Netflix, they did more than put their toe in the water.

20:44They have the NFL deal. They just did a baseball deal. They surprised everybody by doing the Women's World Cup deal, continuing to roll out some of these big events. If you're a sports league, how serious should you take Netflix and their interest in live sports? It's interesting you say that. We've always had this line about, don't listen to what Netflix says. Watch what they do. right so they also said in the past year they had no interest in NFL sports right and getting more getting more NFL let's back up no interest in getting an NFL contract right I would think I would take them very seriously about looking at the biggest marquee event where they actually you know build that event that they're they're talking of so I would not you listen to what they're telling you i would basically go in there with a package of something really really interesting something big some event and uh and test the waters right and i even think if you're the nfl do you come up with a package of like the eight to ten best games of the season uh in any given year and say look we want to sell you the eight to ten marquee games not amc nfc but just the best matchups and guys have the rights to the eight to ten best games right so i think if this seriously put them in the conversation every time you have a new package and like trying to come up with a way to to build a you know product that they want to to buy right you can't sell them because every amc game every week that's not going to work for them but yeah i would take them incredibly seriously um by the way i couldn't agree with you more on that because i got that these packages of program, like let's, let's stick with the NFL because you brought them up.

22:42These packages of programming that the NFL sells were, they were created back in the 1970s and 1960s. Like this was made for broadcast TV and broadcast TV still matters to them, but why not take a look at Netflix, which still has the, the documentary series, the pro the quarterback documentary series, just say, we will give you, you know, the top quarterbacks. It's the top quarterback matchups every week. So you'll get Patrick Mahomes versus Drake May or whatever. Exactly. And I almost said Dak Prescott, but I didn't want to get hate mail. How about Jackson? There you go. Lamar Jackson. But you can pick it out, and they're able to do something around that.

23:31I mean, there are so many different ways to cut up some of these packages that look totally different than what we're used to, I think. Oh, that adapts, John. Like if you're a league and the NBA has the NBA Cup and the NHL has their outdoor series, why wouldn't I try to make the outdoor series of the NHL, which is going to be Miami, which is going to be odd, Miami, Rangers versus Panthers. But come with three or four. Remember the Four Nations last, you know, it was this year? That was so well done. That was a great, great contest. So come up with something special for them. that can really burst through.

24:08And that's why I would approach it. And again, I'm making one of my top stops along the way. I do believe, though, Michael, that Netflix has zero interest in a regular season package of games from the NBA or the NHL. Yeah, without a doubt. Yeah, without a doubt. I think they have no interest in that at all. But again, it's up to you, the league owner, the league rights owner, come up with something to get their attention, right? And again, that Women's World Cup surprised everyone, right? People did not expect them to be the winning bid for it. And they did. But at the same time, UFC went to Paramount Plus, and I think Netflix showed great discipline.

24:51So you're not going to walk in and find a sucker at Netflix to buy just anything at any price, right? They're going to be disciplined. But they're going to find, like, I think the Christmas Day games were smart in terms of coming up with a package that works for them. I'm surprised that Amazon didn't buy it because it would have been great for Amazon for Christmas Day and the next set of deals. But they have Black Friday, which worked out great for them. So I think, yeah, you need to be creative and work with them. But they're going to be here forever. They're not going anywhere. They're going to get stronger and stronger.

25:26I have to say, that's been my biggest surprise. I'm so glad you brought that up because that's been my biggest surprise in the last two years. is I keep talking about these streaming companies, which are so much bigger than the linear TV media companies that we typically cover. And I was describing them as having deep pockets, but Amazon, you don't see them really overpaying to get in. They do remain, maybe they overpay, but they come up with a number and they don't deviate from that number. If they don't get it, they don't get it. We saw that with Netflix as well. I think they certainly paid more than anybody else for the Women's World Cup, but you know they had a number and and kind of stuck with it uh and and i i think that that's been a really unique part of watching these tech companies these streaming companies come into the sports world yeah you know every year we do a trip to hollywood uh or the studios for like you know three days with our clients and we go and sit down with them and no one has ever said to us you know these guys are the dumb money they're not when they buy content they they don't overpay Look how Netflix has built their programming strategy by buying out the back end.

26:35Amazon bought MGM. Wasn't a great deal, but since then, they've really been really disciplined about what they're doing on programming. And Apple, you know, Apple, which everyone thinks will be the one to buy the next studio, the next sports package. They themselves have been incredibly disciplined as well, which is totally counter given the size of the company and their need to kind of break through. or maybe they don't have a need to break through in streaming, right? So it's totally counter to what people would have thought a decade ago. These guys would come in and be the top buyer of everything.

27:09They just haven't, you know, in sports, that is, at this point. Let's stick with the streamers. And by streamers, I mean ESPN Unlimited that's out there. That's an ESPN app that just launched at the end of August. Give us a report card on that. Well, the fact you had to explain it, John, says a lot right it's explaining what it is folks yeah it's been our contention from the beginning i know we have competitors or analysts we have like huge numbers for espn unlimited we never did uh because sports fans like you and i john and your listeners have gotten espn traditionally through a bundled product right because if you're a fan of almost every sport you need other programmers to help you round out your entire viewing except for the SEC let's say an ACC you need other other programmers right so we never had a huge number in our model for this and we never thought they'd price it at a bargain basement price to disrupt the industry so it's kind of been what we thought which is it's fine it's not groundbreaking it's not record setting it's an add-on product I think one of the bigger challenges that I see in the business is that people are password sharing youtube tv more and more um and so you have i don't know how many i want to say three or four family sharers right and i think if you go through uh younger people's apartments and homes and ask them where they're getting their espn from more and more they are sharing their other people's passwords right so i think until you clamp down of password sharing in the streaming world in terms of you know youtube tv i don't think espn unlimited has a wide audience right because people are getting it through a bundle product but again i'm looking forward to seeing in 26 if anyone follows that netflix playbook from a couple years ago of clamping down a password sharing it's helped netflix tremendously you see the growth in the us we thought they were top tapped out a few years ago it hasn't been the case um but i think I just don't see the consumer need of this product, given what the bundle offers at this point in time and given the pricing of ESPN Unlimited.

29:22That was a conversation at Christmas dinner, Michael. My 26-year-old son was bemoaning the fact that he had to pay for Netflix because they weren't allowing him to go off his parents' subscription anymore. And my 24-year-old daughter said the same thing. The horror of having to do that. I think Netflix, again, it's not really copycat. It's sort of like things that happen and other people sort of draft on that. I'm pretty certain people are looking at what happened with Netflix and deciding, like, okay, let's go that route. I mean, what's your take on ESPN Unlimited? Like, it's fine, but you're not solving a consumer need, right?

30:02Because sports is so massively fragmented, right? That's been my issue all along. Yeah, you know, you gave such a good answer to when I asked you who won the YouTube TV Disney fight where you said we just have to wait to see what the bundle is. And we have to wait and see. Let's wait and see how many. Because they said originally I didn't believe him, but I believe him now. They said that they were not going after people in the bundle and trying to get them to de-subscribe from the bundle. They're going after cord nevers and they're going after cord cutters. and that appears to be what's happening.

30:39Let's see what kind of numbers they get. Let's see if the bundle that they actually do have with Hulu and with Disney Plus works out. I'm curious to see how many people are doing the Fox 1 ESPN bundle, because that's a unique bundle, because all of a sudden you get a lot of sports involved with that bundle as well. But I do think that moving forward, it's the great rebundling that you and I have talked about for years now. The bundle is going to come back into vogue, and sort of how ESPN navigates that with this app is going to determine whether it's successful or not. The brilliance of the old bundle was it was a churn mitigator, right?

31:23So churn is everyone's biggest enemy. People come and they go and they switch on and off and trying to find them again to reattach them is time-consuming and expensive. The old bundle had churn rates of like 1 % to 2 % monthly, which was extraordinary. It's because every programmer put their best content into a bundle and everyone drafted off of each other. Here, a la carte services, X and Netflix, have churn rates that are like 5, 6, 7 times higher than the pay TV bundle. So it's a terrible trade in terms of lifetime value of your customer if they're churning with that frequency. So you need to find ways to partner with other people.