What the ESPN, Fox and WBD sports streaming services will do to media and television

Published 7:44 am Thursday, February 8, 2024

: mics

On Tuesday afternoon, the media world was shaken by a massive joint venture. ESPN, Warner Bros. Discovery and Fox announced that they would be teaming up to launch a new sports streaming service.

The deal brings together all the networks of the three companies under one direct-to-consumer platform that will include ESPN, ESPN2, ESPN+, Fox, Fs1, TNT, and TBS.

According to the announcement, each company will own a third of the venture and have equal representation on the board. It will be named under a different brand and have an “independent management team.”

The companies also don’t seem like they will limit their sports streaming plans to this venture. Bob Iger, CEO of ESPN’s parent company Walt Disney (DIS) , told CNBC on Wednesday that ESPN is still planning to launch a flagship DTC service in August or the fall of 2025. Warner Bros. (WBD) still has its streamer, Max, where it already airs sports like its NBA and NHL broadcasts.

But the joint venture comes as consumers continue to cut the cord and move away from cable and satellite television channels. But while the number of households with access to ESPN has been cut from 100 million to about 70 million in the last decade, sports continues to lead many to streaming.

Tech giants like Amazon (AMZN) and Apple (AAPL) have seen early success with their streaming platforms through aggressively acquiring the media rights to the likes of NFL’s “Thursday Night Football” and Major League Soccer, respectively. NBC’s Peacock gained a few million followers after it exclusively aired an NFL playoff game last month.

Just two weeks ago, Netflix (NFLX) entered the realm of live sports through a deal with the WWE which had some experts concerned for the future of ESPN. WBD had also been in a bind as of late, while Fox did not dabble into streaming services unlike its other competitors like NBC’s “Peacock.”

This move consolidates the sports rights of all three services into one place, giving more incentive for fans to shell out some money for the service. The price and launch date is unclear — though it would make sense for this come out in 2025, which is when ESPN’s Bob Iger said in the past that it was targeting a release of a DTC service.

But is this a good deal for the three companies who are looking to solidify their place in streaming? And what does this deal mean for the future of the industry?

TheStreet spoke to Mark Douglas, CEO of advertising software company MNTN and Joe Favorito, Columbia University sports management professor — both were a little skeptical about the newly-announced venture.

“I think it’s more ‘see-where-this-is-going’ versus an amazing thing,” Favorito told TheStreet.

Is this a good deal for the three companies?

This deal allows for three companies with tons of sports rights to combined their content into one DTC platform. This includes major sports like the NFL through ESPN and Fox, and the NBA through ESPN and Turner. But there are also some massive events on the PGA Tour, ATP and WTA Tour, and Formula 1 that will be on this service.

But Favorito and Douglas are both taking a wait-and-see approach because of the market’s fatigue for streaming services.

“I’m sure you have a lot of people just rolling your eyes saying, ‘Here comes another streaming bundle, what are we supposed to do now?” Favorito said.

For Douglas, he viewed Netflix’s recent deal with WWE as a “slam dunk” because the massive distribution and accessibility of Netflix gives more visibility to the product. But he doesn’t necessarily see a new motivation for consumers to sign up for this bundle nor for these companies to create one.

“I think it’s a toss up,” Douglas told TheStreet. “If you truly get a critical mass of exclusive games that matter to people, then you might be able to pull this off. But I think most sports subscriptions have not worked that well with the exception of like NFL Sunday package.”

It seems the world where this works for the three companies is one where they provide unique value for the customers, and do it in a way that isn’t going to be difficult for them to absorb both financially and logistically.

“If this is economies of scale at work and if they can share content and it’s easy for people to find — which is a big problem right now — then it works out really well,” Favorito said.

What does it mean for the future of media?

These three companies banding together will present a challenge to the other major players, but Douglas said they shouldn’t be too concerned.

For Amazon, he thinks it is monetizing on their platform better than any of these major media outlets because of the advertisers and clients on its e-commerce platform and other services. That will deepen their pockets to make them a player in this space regardless of the consolidation around them.

“If Amazon truly is monetizing sports content better than everyone else by a long shot, and I think they are, there’s potentially no limit to the sports rights they decide to get,” Douglas said.

Douglas isn’t as bullish about Apple, but he also doesn’t believe they are as much of a major player in the space as it would currently seem.

Favorito also believes similarly that these competitors shouldn’t worry too much, believing that they had probably already expected something like this to happen in the first place. He expects their to be bidding for rights, but nothing too drastic will change.

“Everybody’s talking amongst each other,” Favorito said. “I think everyone’s just going to figure out when the rights deals come up if they’re in the best position to obtain those rights … you have to present yourself to the rights holders with the best possible position across the most platforms that you possibly can.”

As a consumer, what does this mean for me moving forward?

The price of this new streaming service has yet to be revealed, but regardless of the number, the service presents another monthly subscription for which consumers will have to budget.

Favorito believes this could still be advantageous to the smart consumer.

“They get to sit back everyday and say, ‘Where’s what I want to watch? How do I watch it? How much am I spending for it?” Favorito said.

Ultimately, the ability to pick and choose birthed the direct-to-consumer model, so this is all a by-product of that behavior. It’s likely not disappearing anytime soon, so consumers will need to be smarter in how they evaluate their streaming purchases as the entire space continues to evolve.