ESPN, Fox, Warner Bros. Discovery strike sports streaming JV

In a move that's sure to alter the pay-TV landscape even further, ESPN, Fox and Warner Bros. Discovery (WBD) have forged a joint venture that will develop and launch a streaming sports service that features content from all major sports leagues.

Set to launch this fall, the new offering will be offered through a new standalone app. Subscribers will also have the option to bundle the sports-focused streaming service with Disney's Disney+ and Hulu service and/or WBD's Max streaming service. There's no word yet if traditional pay-TV operators, such as Comcast and Charter Communications, will have an opportunity to sell and distribute the new offering as well.

The offering is coming together as traditional media companies seek ways for direct-to-consumer (DTC) streaming services to help offset the financial impact of rampant pay-TV cord-cutting. The JV is also entering the picture as tech giants such as Apple and Amazon gobble up sports rights for their respective streaming services/platforms. Netflix recently got into the game with a deal to stream WWE's "Raw" exclusively in the US, Canada, UK and Latin America, starting in January 2025.

Each party will own one-third of the JV, have equal board representation and license their sports content to the JV on a non-exclusive basis.

The media giants have yet to announce a brand for the new service/platform, who will comprise the JV's independent management team, or reveal how the new service will be priced on a standalone basis or within a bundle.

The analysts at LightShed Partners estimate in a blog post (registration required) the new offering will carry an initial price of $35 per month, "escalating to $40 in year two," with Disney receiving about $20 per sub in carriage fees, compared to $8 for Fox and $4 for WBD (Turner).

The new service will provide access to an array of linear sports networks, including ESPN, ESPN2, SECN, ACCN, ESPNews, ABC, Fox, FS1, FS2, BTN, TNT, TBS, truTV, as well as ESPN+, the Disney-owned premium, direct-to-consumer (DTC) streaming service.

Live events from major sports leagues, including the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Major League Soccer, LaLiga, and Bundesliga, will be tied into the new platform. Coverage will also extend to the College Football Playoff, the PGA Tour, The Masters and several grand slam tennis tournaments, including Wimbledon, the US Open and Australian Open.

The new service is set to cover about 55% of US sports rights, the Wall Street Journal reported, citing data from from Citi.

Not seeking additional partners, for now

For now, Comcast's NBCU and Paramount Global, entities that also hold significant sports rights, are on the outside looking in.

Adding more partners to the JV is "not something we're considering at this stage," Fox Corp. CEO Lachlan Murdoch said today on the company's fiscal Q2 earnings call. "We think that the 14 linear networks that this service offers gives people a tremendous amount of content."

Sports long has been viewed as the glue that's keeping the pay-TV bundle together. Murdoch believes that the new offering doesn't diminish the value of the traditional pay-TV bundle, but will help to serve consumers who want sports content outside of it.

"It's a new market where there’s no product serving the sports fans that are not within the cable TV bundle," he said. "We would not be launching this product if we thought it was going to significantly affect our affiliate partners."

Sports-focused 'skinny bundle'

Notably, Disney, Fox and WBD have thus far refrained from "cheating" the linear TV ecosystem by leaking their best content to DTC, MoffettNathanson analyst Michael Nathanson explained in a research note (registration required).

"With live feeds of most of the critical networks for a sports fan, this is in a sense a version of the 'skinny bundle' that kicks out all the cheaters that we have long been calling for," Nathanson wrote. "The big caveat here, however, is that this bundle also excludes each of the company's news and general entertainment networks."

While pricing on the new bundle has not been announced, the new offering is a "long overdue repackaging of linear's core content that strips out the bloat of non-exclusive content found cheaper elsewhere."

Media world 'shockwaves'

LightShed expects the formation of the JV to "send shockwaves through the entire media world," but also sees some potential roadblocks ahead.  

"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. Take everything or you lose everything," they wrote. "While it is unclear if distributors have legal grounds to demand the same offering be made available to them or to offer similar bundles of their own construction, we have to imagine 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."

Others say it's too early to call the new offering a game-changer.

Streaming media analyst Dan Rayburn listed several questions he has about the JV in this LinkedIn post. Among them: Will the JV try to bring regional sports networks into the streaming bundle, and will there be enough sports during the year to keep churn in check?

Disney still looking to offer ESPN as a DTC service

Outside of the JV, Disney is also working on a plan to offer the flagship ESPN service on a direct-to-consumer basis and is reportedly seeking a potential strategic partner or investor for such an offering.

Offering ESPN under the DTC model "is not a matter of if, but when," Disney CEO Bob Iger said last August. "The team is hard at work looking at all components of this decision, including pricing and timing."

Disney is scheduled to announce quarterly earnings later today.