Outspoken sports journalist Bill Simmons was unceremoniously dumped by ESPN in May.
Wednesday, he announced he was joining HBO exclusively for TV. He will have his own talk show on the network and it sounds like he'll basically restart something like 30 for 30 on HBO.
What are the takeaways from this announcement for investors?
1. Cable channels need reasons for you to keep subscribing to them in an over-the-top world. It didn't matter that HBO and Turner Sports were all under the same parent in Time Warner (TWC). HBO went to war to get an exclusive with Simmons. Therefore, he won't be chiming in to TNT's NBA coverage. If you don't have stars, hit shows or the best sports events, no one cares in today's world. Nobody will keep subscribing to HBO because of The Sopranos. A majority of HBO subscribers probably don't even remember The Sopranos.
2. ESPN let Simmons go as a cost-cut measure because their cable subs are under pressure. This wasn't some moral decision about what Simmons said. It was a way to dump salary. With ESPN being such a key cog in the Disney (DIS) machine, investors should worry about what if ESPN subs keep dropping. ESPN has bellied up to the bar for major television rights commitments for the next five to nine years. It won't work if subs keep dropping.
3. OTT missed out on a potentially breakout star if Simmons had gone it alone. It could have been a moment in bringing mainstream legitimacy to the space. Glenn Beck is a great example, but OTT needs someone like a Simmons or a Jon Stewart to come in. The moment of legitimacy will come, but it will have to wait.
4. Other cable players like Fox, Time Warner's channels, Discovery, etc., are all going to start feeling the same cost-cutting pinches that have started at ESPN.
5. Could we be on the verge of the end of the cable bundle? The cable companies are well-positioned no matter what happens because they control the pipes and can hike the price of their Internet services if they have to. They won't be killed by the end of the cable bundle: It will be the pure-play cable channels who have gotten fat on Euro-socialism subsidies for their channels.