Fox Corporation recently announced it entered into an agreement to purchase Roku in a deal that placed a $22bn enterprise value on the connected TV platform.

Casual media observers have suggested the acquisition is Fox’s answer to the streaming wars. But that’s old-world thinking.

Savvy media executives are now focused on discovery. They see Roku as an audience-creation engine that can increase engagement with the company's long-form content (think: live sports) and make that programming more valuable.

“The thing about live is the viewer knows what he or she wants to watch. They just need to know where it is,” JohnWallStreet Media Consigliere Patrick Crakes said. “And social or discovery platforms get content to viewers.”

JWS’ Analysis: Distribution used to be the scarcest resource during the pay TV bundle era (as all the fans were inside of it). Today, any sports property can affordably stream its product.

The greater challenge is creating an audience and driving meaningful interaction with that product in a fragmented media landscape.

There are three programming genres in the new world: live, discovery, and library. Each is distributed, found, and monetized differently and should be viewed through its own strategic lens.

“Social media platforms are really content discovery engines now,” Crakes said. Rights owners will “do an event, but all the video that gets knocked on afterwards creates awareness, engagement, understanding, and reinforces where to watch live games.”

SVOD platforms should be viewed as homes for library content, while live programming, distributed across broadcast, pay TV, and OTT streaming services is in its own category.

Live and discovery content are complementary to one another. When a user opens a social platform, relevant programming ––including a path back to the event–– organically pops up within the feed to consume.

Platforms that exclusively offer library content are, by contrast, threatened by this new world order (see: Netflix’s share price down 37% YoY).

That is because “discovery platforms, where millennials and younger demos are spending more time, have solved the ‘what to watch’ problem that continues to plague SVOD,” Crakes said.

Those dynamics have put library and discovery platforms in direct competition with one another, and discovery is increasingly winning the battle for attention.

Library content isn’t going to disappear. It’s simply going to become less relevant than it used to be.

That should free up some additional economics for broadcasters to invest in sports. Some of those dollars may flow into live rights.

But they’ll also end up “in things like venues and fan-engagement activities,” Crakes said. “Most importantly, rights owners will increasingly capture revenues from general market fans who may not watch a .500 team in August but will interact with the team through discovery platforms.”

Fox had taken a cautious approach to streaming up until this point, largely limiting its moves to the Tubi acquisition and the launch of Fox One. The company understood it could not compete with the dollars the tech companies were investing in creating entertainment content, particularly at a time when the pay TV bundle was under pressure.

“Rupert Murdoch ended up being right. He couldn't predict it perfectly, but he knew enough to know streaming was going to be a mess, there would be opportunities in the wake it left, and that he would have all this cash to pursue them when the time was right,” Crakes said.

Fox sees Roku as a mature platform that can advance its discovery motives and help grow audiences.

“It’s going to make it easier for the folks that are on CTV devices all the time to jump in and find Fox’s sports content. That should help increase reach, which will in turn probably increase circulation,” Crakes said.

While Roku isn’t a true discovery platform in the social sense, it is easy to imagine the content distributor evolving in that direction. But even if it doesn’t, that remains beside the point.

Fox now has itself “an aggregator for distribution that's compatible with all those content discovery platforms,” Crakes said (think: TikTok, Facebook).

The beauty of discovery platforms is that they’re not zero-sum. Rights owners can take advantage of all of them.

While shareholders have questioned the acquisition (see: FOX shares down ~25% since the announcement), rights owners should view it more favorably.

Fox is going to “remain in pay TV, which continues to produce most of the economics that underwrite rights deals, and it still owns more broadcast stations than anybody,” Crakes said. “Congress is never going to let broadcast die. It’s going to last forever.”

That does not mean rights owners should expect them to begin wildly overpaying for sports rights.

Fox won’t be the last programmer to acquire a discovery platform capable of amplifying its live programming. However, look for those without one to increasingly spend more aggressively on short-form extensions of live events designed to travel through social platforms rather than on more heavily produced long-form video that has traditionally resided inside content libraries.

“That’s the next phase of the distribution evolution,” Crakes said.

Of course, short-form programming isn’t monetizable in the same way that long-form content is. CPMs are typically much lower.

“But it resonates super well and builds up the live programming. So, it helps strengthen the ecosystem,” Crakes said. “And by the way, advertisers have nowhere else to go beyond live sports. This is the future for them too.”

In the latest episode, The Sports Advisors talk sports betting: whether the pre-legalization viewership narrative was overstated, how gaming operators’ sponsorship priorities have shifted, what rights owners should be asking for in their next round of sports betting partnership deals, whether leagues, teams, and conferences are properly pricing the integrity and reputational risk that comes with the category, and more.

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