Government might be urged to scrutinize new sports streaming JV – analyst

A new sports streaming bundle from ESPN, Fox and Warner Bros. Discovery is unlikely to cause Congress or the FCC to act independently, but the responses of those "hurt" by the agreement "may ultimately lead to a government reaction," a top industry analyst surmised.

In a research note for New Street Research, Blair Levin said he's skeptical that the new joint venture, announced last week, will be blocked on antitrust grounds. But the JV could still spur a government reaction "particularly to ensure that local sports remain available for free."

Expected to launch this fall, the new service from the JV will be offered through a standalone app along with options to bundle it with Disney's Disney+ and Hulu streaming service and/or WBD's Max streaming service. The new service, which will effectively be a sports-focused virtual multichannel video programming distributor (vMVPD), will feature more than a dozen linear networks, including ESPN, ESPN2, SECN, ACCN, ESPNews, ABC, Fox, FS1, FS2, BTN, TNT, TBS and truTV, as well as ESPN+.

A price has not been announced, but analysts and industry watchers suggest it could sell for $35 to $40 per month. The JV also has not assigned a brand to the new offering (Wolfe Research analyst Peter Supino's tongue-in-cheek name for it is "Spulu" – short for "Sports Hulu").

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JV could get a reaction from Comcast, Paramount and sports leagues

Levin, a former FCC official, suggests that the new JV could prompt reactions from several parties, including Comcast, Paramount Global, the sports leagues, other bidders for sports rights and network affiliates. Individuals within that group could look at whether (and how) they could either block the JV or forge a deal of their own to "regain lost leverage," he added.

The government reaction will depend on how these parties behave, Levin said. However, he doesn't expect Congress or the FCC to act purely on their own. He said the lack of an immediate reaction from the FCC is telling.

"The deal does not appear to require any approval from the FCC, nor is the FCC likely to do anything related to the deal," Levin explained. "The deal has large implications for the underlying economics of the FCC media ownership rules, but the FCC is unlikely to address in the near term ... They [the FCC] may have a reaction eventually, but lack of an instant reaction suggests to us the leadership is not that interested in addressing these issues and has not thought about the implications for their current rules."

Antitrust represents JV's 'greatest risk'

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

Levin views potential antitrust as the "greatest risk" faced by the JV, but he is skeptical the Department of Justice would step in because the JV, from a consumer perspective, does not reduce competition since it's a rebundling of content already available in various other types of video service packages.

But he does not rule out that the parties referenced above might urge the DoJ to give it a closer look.

Update: ACA Connects, an organization that represents independent operators, does have concerns. ACA Connects CEO Grant Spellmeyer commented on LinkedIn: "ACA Connects members have serious concerns and will continue to pressure the Justice Department to intervene." That effectively echoes what he told Bloomberg.

FuboTV, a sports-focused vMVPD, has already spelled out some of its concerns and believes the motives of the JV should come under scrutiny.

"Every consumer in America should be concerned about the intent behind this joint venture and its impact on fair market competition," FuboTV said in a statement issued last week. "This joint venture spotlights a concerning trend where an alliance with significant market share, reportedly controlling 60-85% of all sports content, could dictate market terms in a manner that may not serve the broader interests of consumers."

Related:ESPN streaming service to debut in fall of 2025

Spectrum scrutiny?

Levin speculates that the formation of the sports streaming JV could cause the government to take a fresh look at how spectrum is used to deliver broadcast TV.

"[W]e think the deal accelerates the day when the market starts to look at the value of broadcast television spectrum used to deliver legacy linear packages and wonder whether that bandwidth has a more profitable use case elsewhere," he wrote.