Does Anyone Benefit From the ESPN-Fox-Warner Sports Streaming Venture? It’s Doubtful.

Will Ashworth - Barchart - Wed Feb 7, 1:08PM CST

On Tuesday, the owners of ESPN, Fox Sports, and Warner Sports announced they were setting up a joint venture streaming service to feature content from their various sports networks.

At first glance, it sounds like a home run for all three organizations. After all, sports are the only things that have a loyal viewership. In 2023, 93 of the top 100 TV broadcasts were NFL games.

In April 2021, The Ringer published Live Sports Are the Next Great Battle of the Streaming Wars. In July 2022, The New York Times went with Why Big Tech Is Making a Big Play for Live Sports, and in August 2023, The Current discussed Why sports are the next frontier in streaming dominance.

About the only thing that's easily monetizable these days in television are live sports events -- 30- second Super Bowl ads this coming Sunday are$7 million, an almost three-fold increase from 20 years ago -- so it’s understandable that Bob Iger, Lachlan Murdoch, and David Zaslav are willing to put their sports programming into one big, seemingly profitable pot.

They say the best deals are those where all parties simultaneously win and lose something. Yesterday’s announcement doesn’t come close to reaching that standard.

Here’s why.

Disney’s Take

Walt Disney (DIS) CEO Bob Iger has spent the last year exploring leveraging ESPN's strong brand name to gain a foothold in sports streaming. In July 2023, Mickey Mouse and company began negotiating with potential minority partners such as the NFL and NBA for a stake in ESPN.

The joint venture announcement suggests that either the leagues or Iger balked at moving forward with further negotiations on terms and price. However, I’m just an interested bystander, so don’t take my words as gospel. It’s merely an opinion.

Iger said the following in Disney’s press release:

“The launch of this new streaming sports service is a significant moment for Disney and ESPN, a major win for sports fans, and an important step forward for the media business,” Iger stated.

“This means the full suite of ESPN channels will be available to consumers alongside the sports programming of other industry leaders as part of a differentiated sports-centric service. I’m grateful to Jimmy Pitaro and the team at ESPN, who are at the forefront of innovating on behalf of consumers to create new offerings with more choice and greater value.”

Reading between the lines, Iger and the board decided that the safer route ahead was to partner up with Fox Sports and Warner Bros. Discovery’s sports properties, including TBS, Eurosport, and TNT Sports.

Some comments at The Athletic suggest consumers aren’t buying Iger’s claim that the platform creates more choice and greater value. If anything, it muddies the water, possibly alienating these loyal viewers.

In addition, the fact that it didn’t stay on its road to a sports streaming solution suggests it didn’t have enough confidence in ESPN and ESPN+ to deliver for consumers and shareholders. But again, I’m merely speculating.

As has been reported, all of the content is non-exclusive to the platform, so there won’t be any content created by it; it would merely be another venue for the content to be shown. The CEO of the platform will be at the beck and call of Iger, Murdoch, and Zaslav.

Ultimately, if Disney finds minority partners for a stand-alone ESPN direct-to-consumer product, I don’t see how this joint venture holds up.

Fox and WBD Ought to Be Very Happy

Fox Corporation (FOX)(FOXA) has been anything but enthusiastic about streaming its sports product. A joint venture allows it to dip its toe into streaming services without spending much money.

“Lachlan Murdoch, Executive Chair and Chief Executive Officer of FOX said, ‘We’re pumped to bring the FOX Sports portfolio to this new and exciting platform. We believe the service will provide passionate fans outside of the traditional bundle an array of amazing sports content all in one place.’”

You couldn’t be more non-committal if you tried.

Over at Warner Bros. Discovery (WBD) CEO David Zaslav has got to be happy to take the focus off his company’s poorly performing stock, down 37% over the past year.

I’m the first to admit that I have no love for the man. He’s overpaid and overrated as a media executive. His value destruction for shareholders dates back to 2008 when he took Discovery Communications public.

However, as it relates to this particular deal, I think it’s brilliant. The company’s various sports networks get an elevated position with sports fans thanks to ESPN, and that helps it showcase its talent at a minimal cost to the company and its shareholders.

What the Future Should Look Like for Sports Streaming

The biggest issue facing companies with legacy TV assets and fledgling streaming services under one roof is how to bridge the transition without losing oodles of money, both in terms of revenues and profits.

It’s much like the car companies’ current dilemma with electric vehicles. Yes, the writing is on the wall, but how do you get to the other side without bankrupting your business?

Based on this comparison, I see the joint venture as a sign media executives are terrified about the future of TV. It’s a very timid plan, not nearly as “innovative” as Iger wants us to believe. Teenagers are creating impressive apps these days. It shouldn’t be too hard for three multi-billion-dollar companies.

If it were up to me, I’d create a platform that allows sports fans to add as many sports-based streaming services as they want, paying a flat fee per service per month. They would then be billed based on hours of usage for each service.

So, let’s say you have ESPN (20 hours per month), Fox (10 hours), and Warner Bros. Discovery (5 hours) streaming services. You pay $5 each per month. You then pay $1.50 an hour for usage. In this instance, you’d pay $67.50 for the three. Maybe reduce the hourly usage fee to 75 cents or $1 per hour after 20 hours a month for each service.

Then, it becomes an array of choices with the consumer deciding where they allocate their monthly spend, and the media companies are left to market the heck out of their product to ensure they get the lion’s share of the hourly usage fees.

That would separate the men/women from the boys/girls while adding real value.

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On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.