Welcome to What I’m Hearing+, live from Brooklyn before a month-long trip through L.A., Las Vegas, and New Orleans. If you’re there and would like to grab a coffee, send me an email.

Today, a look at Warner Bros. Discovery’s foray into streaming sports with the (terribly named) Bleacher Report Sports Add-On package, which will bring the NBA and NHL, among others, to Max. The elephant in the room: How do the cable carriers feel about it?

But first…

• A.I.’s Real Threat To Hollywood: I received some great feedback last week from my piece about bullshit “view” metrics and their impact on streaming ad revenue. At the heart was an underlying observation: while the past decade has been about disruption in content distribution, the next decade will usher in actual format and content disruption.

  Two tech industry stories from the past few weeks have stuck with me: 1) Due to powerful processing capabilities, Apple’s new iPhone 15 Pro series can operate fully-fledged video games with relatively minor hiccups; and 2) YouTube is introducing generative A.I. tools to help its creators upgrade and professionalize their product.

  Of course, as new tools facilitate editing and production, there’s a pervasive fear in Hollywood that A.I. will replace jobs. And yes it will, regardless of what the unions and AMPTP agree to—that’s capitalism, and it’s the reality for publicly traded companies that, with the notable exception of Netflix, are under profound economic duress.

  But A.I.’s more insidious impact will be the way its next generation of tools will loosen professional entertainment’s vice grip on consumers. The vast chasm between a D.I.Y. YouTube video and an original Netflix production won’t disappear, but it will shrink. Years ago, Reed Hastings signaled that Netflix’s top competition, among other streamers, was Fortnite. That’s still true, but the company will also increasingly be fighting for mindshare with TikTok, YouTube, Snap, and Instagram, which will all benefit from A.I. features. With these latest product developments, Apple and Google are trying to get ahead of the curve, recognizing that whoever can retain user attention during this period of disruption, across a suite of products, will have a competitive edge.

For a generation, the linear sports industrial complex was in total and fully-monetized alignment: cable networks paid gargantuan fees for sports rights, which they monetized via advertising and hefty carriage fees from the cable and satellite providers, which extracted hefty fees from consumers who, frankly, had no other options. (Of course, the beauty of this model was that it was paid for by people who had zero interest in live sports. But that’s a story for another time…) It was inelegant but it was profitable and, importantly, simple.

Now, it seems, everyone is on their own: the content providers are trying to retrofit their rights packages for streaming, which helps them boost subscribership but inevitably frustrates the cable operators (who get less bang for their buck), the leagues (who don’t want to see viewership decline), and audiences (who have to remember how to watch their favorite teams). It’s impossible to imagine this transition without a few cracked eggs, as the recent Disney-Charter dispute illustrated. Rather than alignment, it’s dealmaking vulcan chess.

Nevertheless, Disney’s settlement to placate Charter—allowing cable subscribers access to the D+ bundle at a lower price point—suggests there are opportunities for creative dealmaking in this cross-pressured environment. With more data about how customers are behaving, the roadmap for each of these players becomes a little more clear.

Higher average revenue per user for the sports package could support the broader content offering, too. Unlike the cable bundle, where practically everyone paid for sports regardless of whether they watched, Bleacher Report Sports is an add-on. But it will presumably help to subsidize the more general entertainment content that Max needs to keep its other customers happy and reduce churn.

Right now, WBD derives the second highest revenue from its DTC products (behind Disney), but still sees nearly 50 percent of its total revenue come from relics of the cable-era model: affiliate revenue (27 percent) and linear advertising (20 percent), according to MoffettNathanson. WBD can’t walk away from linear, and it isn’t doing so. On the flip side, Max also has the second lowest percentage of customers signing up for its ad-supported streaming tier, according to Antenna, with only 21 percent of customers choosing that option so far this year. Sports could generate both new subscribers and higher ad revenue to the platform.

WBD, facing linear subscriber declines, also has to figure out how many subs it will need on the sports tier to continue meeting rights demands. Right now, WBD pays billions per year for access to some of its sports (including the big aforementioned three), and opening a new, non-exclusive channel for these games may increase the payment fee sought by the leagues. Moreover, not being exclusive to cable may decrease the amount that Charter or Comcast want to pay in carriage fees.

So why, exactly, are the providers putting up with this? Well, C.E.O. David Zaslav is walking a very tight rope. If the cable providers protest, could he find an off-ramp à la Bob Iger, by offering that subset of subscribers a lower-priced, ad-supported version of its streaming product? After all, WBD is the least focused on existing solely as a streaming company when it comes to distribution, and almost everything is up for grabs if it generates the revenue needed to pay down its whopping $47.5 billion in debt. Zaslav is perhaps the C.E.O. set on bringing in the most money, using any content, and by any means necessary. He understands he needs the carriers now, and in the future, and isn’t willing to throw everything in one basket while neglecting the other. It’s a strategy that Barry Diller would be glad to see for non-Netflix players, even as competitors like Disney start telling shareholders to prepare for a world where that’s no longer the case.

There’s no immediate clear-cut reason but we can make some educated guesses, including payments potentially being made from the content networks to the carriers to split the costs, input from the leagues and, perhaps most obviously, a desire to keep some form of relationship going as new rights deals come up and the carriers become aware they’re looking at a smaller share of the games. Having most of everything, even not exclusively, is better than having nothing and watching customers drop. The networks need the carriers, too.

Right now, the vast majority of cable network revenue still comes from affiliate fees. This lifeline is especially poignant for sports networks like ESPN that can charge a significant per-household fee regardless of whether customers actively watch the channel. Of course, the weaker the overall Pay TV package becomes, the less affiliate revenue there is for the cable network to collect per subscriber. At the same time, as more people cut the cord, sports actually becomes even more valuable as an anchor for the remaining cable subscribers, many of whom keep paying in order to watch their favorite local team and would struggle to find coverage of those games elsewhere.

Indeed, as cable executives well know, there are three categories of sports fans: hardcore fans of local teams, hardcore fans of all sports, and casual fans. The latter two categories might be served by the Bleacher Report Sports add-on, which will have enough of a lot to satisfy the sports itch. The former category, however, is still mostly tied to the cable system for now. There are some direct-to-consumer options (like YES Network for Yankees fans) and some teams are going over-the-air to reach fans (like the Phoenix Suns, who are also giving out free antennas to boost viewership), but the vast majority are tucked into speciality sports packages that remain accessible only on cable.

As I’ve noted in the past, these hardcore fans aren’t interested in paying multiple streaming platforms $10-$25 a month, each, for access to sports, because they already get all of it within their cable plan. They also get it conveniently in one place. This audience, I’ve been told by executives at various networks, is unlikely to jump ship. The carriers may therefore see the upside in playing to the core base where the cable package is still stronger than anything streaming can offer, at least for now. Meanwhile, the networks get to generate revenue from two lanes—linear and D.T.C.—and both hardcore fans and casual cord cutters’ needs are satisfied.

Some leagues do offer their own D.T.C. streaming products, such as LeaguePass for NBA fans, but these are costly and are still largely tailored to the same hardcore fan cohort that isn’t cutting the cord. Anyway, the NBA has one of the youngest fandoms of any of the leagues: its audience isn’t signing up for Pay TV. Something like Bleacher Report Sports might help significantly—and is something that Zaz is sure to bring up in their next negotiations.

The quintessential issue facing the leagues is one of reach vs revenue—which is really a proxy for short-term economics versus long-term growth. The three non-NFL leagues are trying to figure out a way to reach and monetize younger fans while also staring down the looming collapse of the Pay TV bundle. They want to be in streaming because that’s where the fans of tomorrow are going, but they need to figure out how to properly monetize the fans of today. It’s no easy feat. Which is why Sunday Ticket moved to YouTube TV, and game packages are available on Bleacher Report Sports or ESPN+ or Prime Video, at the same time that games are also being kept on CBS, NBC, ABC, and TNT.

Fortunately for all involved, it appears that no one is willing to give up on the others just yet. The fact that WBD is moving forward with its add-on feature suggests that the carriers are willing to negotiate—something we saw happen with CNN’s plans to bring a simulcast of primetime to Max, and with ESPN moving certain games entirely to ESPN+. The fact that Disney and WBD are keeping games on cable reflects that they still need that revenue, reach, and safety of more than 60 million customers. Eventually, Disney will launch ESPN over the top and WBD will bring some games exclusively to its Bleacher Report Sports Max service. But don’t expect everything to suddenly change overnight. There’s simply too much at stake. No one wants to be the one to cause a total cataclysmic catastrophe in their own backyard.