Streaming platforms are increasingly relying on live sports to boost their subscriber rolls, but one major media group believes streaming is not the right medium for this high-value content.

That lone exception is Fox Corp. The company has refrained from putting live sports on its free-ad supported TV service Tubi, and it does not offer a subscription-based video-on-demand streaming service.

Meanwhile, Walt Disney Co., Paramount Global, NBCUniversal Media LLC, Amazon.com Inc.'s Prime Video, Apple Inc.'s Apple TV+ and Google LLC's YouTube have all signed extensive and expensive rights packages that enable them to put live sports coverage on their various streaming platforms. Most recently, for instance, Major League Baseball renewed a pact with YouTube and signed new deals with Apple TV+ and Peacock that will put three streaming packages in play during its 2022 season. Kicking off the next year, the newly minted Warner Bros. Discovery Inc. is also expected to enter the streaming sports arena in the U.S.

Fox, by contrast, is leveraging its robust sports portfolio — the National Football League, college football, MLB, NASCAR and World Cup soccer — in the linear realm to generate higher retransmission-consent fees.

Macquarie analyst Tim Nollen called the game plan not only "counterintuitive, but shrewd." Still, Nollen and other analysts wonder how long Fox can afford to remain on the streaming sidelines, especially if it hopes to retain its sports rights.

Sitting this inning out

"We do not see Tubi becoming a distributor of our premium live sports content in the foreseeable future. The majority of sports viewing still occurs on linear today, and therefore is best monetized for all parties through the pay TV bundle," a Fox spokesperson told S&P Global Market Intelligence.

The comments come after Fox Chairperson and CEO Lachlan Murdoch said in March that he was happy to be sitting in the bleachers watching "gladiatorial kind of bloodshed" as companies spend billions pursuing the fourth spot in the streaming ranks behind Netflix Inc., Prime Video and Disney+.

"We think live sports on broadcast TV is still the greatest opportunity for us to monetize that engagement," Murdoch said, noting that Fox is using its sports rights to drive higher retrans fees — payments that distributors make to broadcasters in exchange for permission to carry stations' local signals.

During the fourth quarter of 2021, Fox- and My Network TV-owned stations scored a 14.7% rise in average monthly retransmission-consent fee per subscriber to $3.69 on an owner/market basis, according to estimates from Kagan, a media research group within Market Intelligence. The Fox stations account for over $3 of that total, said Kagan analyst Justin Nielson.

"News and sports remain its linear calling card," Nielson said of Fox.

Affiliate fee revenue in the television segment — representing largely retrans fees — has continued growing in recent years to reach $2.44 billion in fiscal year 2021, representing a larger share of total television revenue.

With only 5% of its base renewed this past year, deals representing 70% of its affiliate footprint are coming up in 2023 and 2024. Coinciding with rights to a pair of Super Bowls, and with the next presidential election cycle, the timing should translate into retrans pricing gains for Fox.

To read about streaming plans for regional sports networks, click here: Sinclair RSN streaming service prepares to get off the bench this summer

NFL for life

While the decision to keep sports on its linear networks may lead to higher retrans fees in the next several years, analysts believe that market and secular forces could ultimately steer Fox Sports toward a streaming play.

Cord-cutting, where customers drop their pay TV packages, continues, with Kagan projecting that multichannel video households will fall from 92.9 million in 2019 to 72.4 million by 2024. The smaller pay TV universe ultimately hurts retrans fees, which are paid on a per-subscriber basis.

Fox will be "fine with what it's doing for a while. It's a smaller company now. The question is: What's it going to do down the road?" said Lee Berke, principal of consultancy LHB Sports Entertainment & Media Inc.

The NFL, for instance, could decide it would prefer a partner that can offer linear and streaming coverage of all of its games. Come 2029, the NFL can opt out of its rights deals that run into 2033.

"The NFL is the master at this. Maybe it doesn't opt out but extracts additional value for not doing so," said Berke. "Whatever happens, the clause is another tool for the NFL to evaluate streaming."

The league has already shown an interest in experimenting with the viewership — and the rights fees — that deep-pocketed streaming platforms can offer. Amazon will become the first digital company to hold a primary NFL package with "Thursday Night Football" in the 2022-23 season, after Fox punted on the rights package for "TNF" a year early.

NBA and NASCAR

Beyond football, Fox Sports' lack of premium streaming service could be a factor in its upcoming renewal discussions with NASCAR, said Curt Pires, founder of sports program management and distribution company CAP Sports. Although the stock car racing audience matches up well with Fox's station footprint, Pires said the group may want an enhanced streaming component as well.

Fox and NBC Sports, which holds NASCAR rights during the second half of the year, reportedly have exclusive negotiation periods early in 2023.

Additionally, National Basketball Association Commissioner Adam Silver has indicated streaming will be a key component in its next rights deal, tipping off with the 2025-26 season, Berke said. That could prevent Fox Sports from becoming a potential bidder.

Given Turner Sports' long-standing relationship with the professional basketball league, Warner Bros. Discovery figures to be a leading contender for a package, both in the U.S. and Europe.

Fox's future gambits

Even as streaming grows, sports continue to play a critical role for broadcasters, which derive 55% of their viewership from news and sports, according to Berke.

He expects it will take three to five years for ESPN Inc.'s top sports properties to be available on all screens as the traditional pay TV universe unwinds. Others expect the transition to take longer.

Fox's focus on news and sports should generate good, if not double-digit, distribution fee growth though the end of the decade, Kagan's Nielson said.

But as pay TV penetration continues to decline and perhaps settles in the 50% range of all U.S. households, Fox may have to supplement its reliance on distribution fees with other revenues sources. That could manifest via more sports betting advertising and revenue from its equity position with sports betting operator Flutter Entertainment PLC as well as a potential aggregate streaming service.

"Fox has a bold strategy that’s working for now. But it's risky in the long run," said Nollen.