ViacomCBS’s stock has had a monster month, shooting up 60%. I keep thinking back to a quote from Chris McCarthy, President of Entertainment & Youth Brands, ViacomCBS Domestic Media Networks, in the ViacomCBS Streaming Event last month:
Now, we've come a long way since The Real World and as you heard from [CEO Bob Bakish], we dominate the reality category today with over 5,000 episodes of some of the biggest hits. But what you might not know is how important reality is to sports fans.
So guess what sports fans are watching when they're not watching the biggest game. That's right. It's reality TV. And as you heard from [George Cheeks, President and CEO, CBS Entertainment Group] sports is a key differentiator for us. And so reality will help drive new subs and it will help us to retain the existing service that sports helps to bring in.
The data point is a fascinating one, and McCarthy frames it as a library-related advantage for Paramount+: users will come to Paramount+ for a proprietary mix of sports and reality TV content.
But in streaming, this correlation is arguably more valuable as a User Experience and User Interface (UX/UI)-related advantage. Meaning, Paramount+ software making personalized post-game or post-match recommendations to sports viewers from its library of reality TV shows is a powerful, Netflix or Hulu-like value proposition. But, there was almost zero discussion of the Paramount+ UX/UI during the streaming event.
So, we have no idea whether ViacomCBS weights the correlation between reality TV and sports viewing as a library-related advantage, only, or a UX/UI-related advantage, too. In the latter case, it would be a powerful Netflix or Hulu-like advantage on top of Paramount+’s library that would result in noticeably lower churn.
Two announcements from Disney last week suggest that it sees similar value in the correlation between reality TV and sports viewing:
- First, it announced that ESPN+ is now integrated into Hulu in the form of a portal, similar to Hulu’s existing FX section; and
- Second, it announced a $2.8B, seven-year deal with the NHL, which will include 1,100 out-of-market matchups on ESPN+ that were formerly on NHL.TV, and 75 exclusive regular season games on ESPN+ and Hulu.
The clear takeaway is that Disney is betting more heavily on Hulu’s personalized UI/UX to drive sports viewing than on ESPN+’s non-personalized UX (it offers a “Like/Dislike” option for sports events, which is not offered on ESPN+).¹
As for reality TV, we learned on Disney’s Investor Day that Hulu is also betting heavily on The Kardashian-Jenner family for reality content. It announced a multi-year deal to produce “new global content” which will stream exclusively on Hulu in the U.S. and on Disney’s Star platform worldwide. Hulu also has a deep library of reality content from Discovery, NBCU, and ViacomCBS from contracts signed before the launch of discovery+, Peacock, and Paramount+.²
In short, similar to ViacomCBS Paramount+, Disney sees a future in Hulu built upon a correlation between reality TV and sports viewing. The key difference is the UX/UI: of the two services primed to deliver the best possible sports and reality recommendations to users, Hulu is substantially better positioned than Paramount+ because of both its personalization software and the scale at which it operates (at 40MM, it is 4x+ the size of Paramount+’s base at launch).
Hulu and Paramount+ seem to be shaping up to be a fascinating, unintentional A/B test across two services on whether the correlation between reality TV and sports viewing is (A) a library-related advantage, only, or (B) both library-related and UX/UI-related advantages.
