ESPN, Fox, Warner Bros. Discovery to launch sports streaming service
ESPN, Fox and Warner Bros. Discovery announced Tuesday that they will launch a new streaming service this fall that will combine their many sports broadcast rights, offering everything from the NFL to the World Cup.
The service does not yet have a name or a price, but it is the greatest move to date toward sports content being available outside of the cable bundle. Each outlet will own one-third of the new venture, the final terms of which remain under negotiation.
Any sports content that appears on the outlets’ linear or streaming properties would be available on the new service. That includes, among many other events, the entire MLB postseason, the College Football Playoff, the NBA Finals, the Stanley Cup finals, the World Cup and in some years the Super Bowl.
The service essentially will function like a streaming bundle — think YouTube TV — but will be geared toward sports fans and cost less than the $72.99 YouTube charges. It will offer subscribers full access to a suite of linear channels: ESPN, ESPN2, ESPNU, SEC Network, ACC Network, ESPNews, ABC, Fox, Fox Sports 1, Fox Sports 2, Big Ten Network, TNT, TBS and truTV, as well as streaming outlet ESPN Plus. Consumers will be able to bundle the product with other streaming services, but cable operators will not be able to sell the service to their customers.
According to a person with knowledge of the agreement, each channel will receive the same fee from subscribers that it receives from cable operators, which means ESPN would receive more revenue per customer than the other companies. ESPN is the most expensive channel in the cable bundle, receiving roughly $10 per customer. ESPN still plans to offer its own direct-to-consumer product, likely to arrive next year, at a lower price than that of this service.
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Warner Bros. Discovery has begun to offer some of its sports offerings on its streaming service, Max. Fox had notably stayed out of the streaming business, keeping all of its rights on broadcast TV or cable until now.
On an earnings calls with investors Wednesday morning, CEO of Fox Corporation Lachlan Murdoch said that the service was not looking for additional partners right now, meaning CBS and NBC--and their properties including the Olympics, NFL and March Madness--will not be part of the offerings.
“This had to happen because bundling is part of the future, even if it can’t look like the old bundle,” said Pat Crakes, a former Fox Sports executive who is now an industry consultant. “I worry about the direct-to-consumer stand-alone ESPN not being enough content, even though it’s a ton.”
Over the past decade, the cable bundle has lost some 30 million customers as Americans cut the cord or never signed up for a cable package. Media companies have responded by launching streaming services to try to recapture some of those missing customers, though they mostly have been money-losing ventures. Of the 125 million households in America, around 60 million do not have have cable or pay TV. They are the target audience of the new product, Murdoch said.
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In a note to investors, research firm MoffettNathanson wrote, “Our initial first take is to view this announcement by Disney, Fox and Warner Bros. Discovery as the ultimate play to take ownership of their own sports destinies, forgoing their reliance on the current distribution system.”
The note wondered if the joint venture could evolve into a different form that eventually bids as a combined entity for sports rights: “Will the new structure ensure that each competing stand-alone company is still incentivized to go as big on their next set of sports rights?”
Murdoch said that the companies, though together in this venture, will remain competitive.
“We will be aggressively competing in the sports market for sports rights,” he said. “The primary business and value in Fox Sports is competing both for every subscriber in the traditional pay TV bundle and advertisers.”
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