ESPN/WBD/Fox Sports Streaming JV Seen Further Hammering Linear TV

An ESPN/Warner Bros. Discovery/Fox partnership creating a sports streaming platform is a further nail in the coffin of the traditional video programming bundle, video industry experts say. GlobalData analyst Tammy Parker said Tuesday it is "a blockbuster deal that will further decimate the traditional US pay-TV sector."

The joint venture's streaming platform launches this fall, the programmers said. They said the plan is to utilize the three sports networks, some direct-to-consumer sports services and sports rights, with content from all the major pro sports leagues and college sports. Each programmer would have a one-third stake and the platform would have a new brand and independent management. The deal comes as live sports programming's continual move to streaming poses a challenge to traditional pay TV (see 2401300062).

In a call with analysts Wednesday as Fox Corp. announced its latest quarterly earnings, CEO Lachlan Murdoch said the streaming service is aimed at the roughly 60 million households outside the traditional MVPD and pay-TV universe. "We think it's a tremendous opportunity," noting work on the JV was underway for several months. Murdoch said the JV is low risk for Fox because its focus is on "cord nevers."

"This is a long overdue repackaging of linear’s core content that strips out the bloat of non-exclusive content found cheaper elsewhere," MoffettNathanson's Michael Nathanson wrote. It's likely Disney will still pursue having ESPN as a stand-alone streaming service, he said, saying how Disney handles having two competing products remains to be seen. The deal also raises questions about how big an incentive any of the three programmers has to bid aggressively on sports rights in the future, he said.

Having ESPN, Fox and Warner Bros. Discovery bundling sports content "will make sports fans think twice about subscribing to pricey linear programming bundles offered by cable and satellite TV providers," GlobalData's Parker said. It also could siphon subscribers from sports-oriented streaming services like FuboTV, she said. The pricing of the service could be a challenge given how expensive sports rights are, Parker said, but bundling the service with Disney+, Hulu and/or Max could mitigate that through discounted value pricing.

The three programmers haven't discussed pricing. LightShed Management's Rich Greenfield expects $35 per month, escalating to $40 in a year or two. In a note Wednesday, he said the service faces potential hurdles, including pushback from existing MVPDs and virtual MVPDs. "Every existing distributor should be apoplectic that the companies they pay billions to want to offer something every distributor has always wanted to create for years but have been told they are not allowed," he said. Future carriage negotiations "will be incredibly difficult if Disney, Fox and WBD are not offering distributors packages they make available to their own joint-venture." Moreover, Greenfield questioned whether the JV might face antitrust scrutiny from DOJ and the FTC. City University of New York journalism professor Jeff Jarvis raised the same issue in a post on X: "Uh, antitrust?"

Potential Impact

The bundle reportedly will cost less than YouTube TV, so $50, perhaps ranging up to about $65, is a likely figure they'll aim for, emailed former ESPN anchor Anthony Amey, now a Virginia Tech assistant professor of practice-sports media and analytics. He said it's likely pricing will start at the low end of that range to attract subscribers, then rise over time. It's uncertain how viewers feel about paying for the JV bundle plus other sports content because the JV bundle won't include NBC or CBS, he said. "The NFL has now shown that it plans to air playoff games on NBC-owned Peacock. CBS' streaming service for sports (and more) is Paramount+," Amey said. "And then you still have Amazon, which will air NFL games and quite possibly NBA games once that new deal is made."

House Communications Subcommittee ranking member Doris Matsui, D-Calif., told us she’s “not surprised” ESPN, Warner Bros. Discovery and Fox are joining forces for streaming but will withhold judgment until she can find out more. “I think Republicans and Democrats are going to look closely at” how the streaming service affects the marketplace because sports programming has universal appeal, Matsui told us. She cited the House Communications’ hearing last week on the sports programming market (see 2401300078), where subpanel members in both parties were concerned about rising prices and fragmented access to games.

The deal shows that sports licensing packages and partnerships with streaming platforms “are the new front line with TV groups and digital players like Netflix [and] Amazon launching different services,” said BIA Advisory Services Managing Director Rick Ducey in an email. The bundle “could be a good thing for consumers trying to figure out how to best get access to their preferred sports content and offer both scale and audience targeting for advertisers that might be more efficient than current alternatives,” Ducey said.

The bundle is expected to prompt more MVPD subscribers to cut the cord, which in turn would affect retransmission dollars collected by network affiliate broadcasters, attorneys told us. The looming JV is likely to lead to further pressure on the FCC to act on calls from congressional leaders and broadcasters to reopen the long dormant proceeding on reclassifying streaming services as MVPDs, broadcast attorneys said in interviews with us. FCC Chairwoman Jessica Rosenworcel has said the agency lacks the authority to reclassify streaming services.

Broadcasters might also seek to raise the concern at the FCC by suggesting the arrangement is intended to evade the dual network rule, which bars TV stations from affiliating with an entity that owns more than one of the four major networks, an attorney told us. DOJ took an interest in Hulu and the ownership arrangements among Comcast, Fox and Disney. It could also scrutinize this joint venture, attorneys told us. "Allowing the biggest media players to join forces -- while locking out traditional linear cable providers from offering the same package at the same price -- only gives even more power and leverage to the Goliaths to extract more money" from MVPD customers, ACA Connects President Grant Spellmeyer said in a release Wednesday. "This clearly isn’t a functioning free market. With customers facing higher prices and fewer affordable choices, there needs to be a level playing field.”