Is it too soon to pan the new sports streaming consortium? I should probably wait until it’s launched, or at least named. Internally, the project is known as Raptor. We can only guess at the final product name: Dunkopoly? BallControl? Sports OPEC? I’m not ruling out FanSqueeze.
This isn’t to suggest that the new service will resemble an oligopoly—a state of limited competition that occurs when there are few producers or sellers. A closer fit here is the similar-sounding oligopsony, where there are few buyers, but we’ll only get one of those if the participants ultimately bid together on sports rights. It’s unclear whether that would be OK. Also, it’s unclear whether any of this is OK.
On Tuesday, The Wall Street Journal broke the news that ESPN, Fox, and
Warner Bros. Discovery
will team up to create a pro and college sports streaming service. In a press release, ESPN parent
Walt Disney
confirmed that it will launch this fall as a new app, with bundling options for Disney+, Hulu, and Max subscribers. The three partners will split ownership equally.
Essentially, subscribers will get a skinny, sporty, channel bundle that includes ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, local ABC and FOX stations, FS1, FS2, BTN, TNT, TBS, truTV, and the ESPN+ streaming service. Compared with a virtual cable bundle like YouTube TV, Skinny Sporty subscribers won’t get scripted shows, but those are typically available on other streaming services. They won’t get live news. They also won’t get
CBS
or NBC sports, which is a bigger problem, especially for fans of the NFL, easily the biggest draw on television.
Pricing for Skinny Sporty is expected to come in somewhere above the $30 a month charged by some regional sports networks and below the $73 a month for YouTube TV. A price of $40 to $50 a month would allow subscribers to add Peacock and Paramount+ for $6 each a month to get CBS and NBC sports, and still come in below the cost of YouTube TV. They’d just have to flip between multiple services and remember what’s playing where, but for their $11 or more in monthly savings they could invest in a white board with colored markers for diagraming their viewing plans.
Media analyst Rich Greenfield at Lightshed Partners estimates an introductory price of $35 a month, rising to $40 in year two. The partners would collect carriage fees for their channels from the joint venture. Greenfield estimates that Disney will receive $20 a month, Fox $8, and Warner $4. The partnership arrangement, he notes, could allow participants to book this income, but not related costs, on their earnings reports. “While each company needs to fund 1/3 of the expected substantial losses of the joint venture, that is simply cash off the balance sheet, rather than operating expense,” he wrote in a Wednesday note to investors.
There are many questions here, starting with how many sports fans are willing to pay $40 a month for a bundle that’s less sporty than cable, and whether the availability of such a bundle will hasten cable’s already considerable subscriber losses. Disney will begin addressing its biggest problem, which is shoring up ESPN’s hefty but threatened cash flow. For Fox and Warner, the deal isn’t quite as sweet—every viewer that switches from cable to Skinny Sporty is one who no longer pays for Fox News and CNN. For Paramount,
Comcast,
AMC Networks,
and other network owners that aren’t in on the deal, Skinny Sporty is a big threat.
Cable bundlers are likely to cry foul. If they’re not allowed to distribute the new bundle, they will argue that the three network owners are working together against them. If they fail in this argument, it will raise the question of whether the bundlers themselves can join forces, too, to better negotiate with networks over cable fees. Sports leagues will watch this warily. A Skinny Sporty bundle threatens to reduce the audience for their media arms, like the NFL Network. Also, the new joint venture could make each participant less willing to pay any price to preserve all of their sports rights.
The leagues might turn increasingly to nontraditional sports bidders like
Amazon
and
Netflix
to keep competition among buyers robust. If not, sports rights costs could cool over time, perhaps even dampening team values. Billionaire Mark Cuban’s superpower seems to be selling assets at inflated prices to overeager buyers—at the height of the dot-com bubble, he got $5.7 billion from Yahoo! for a now-defunct internet radio service with a trickle of sports. Last year, he unloaded majority ownership in the Dallas Mavericks basketball team for $3.5 billion to the widow of casino magnate Sheldon Adelson and related buyers.
LightShed’s Greenfield, who doubts that Skinny Sporty, or whatever it’s called, will launch on time, expects it to nonetheless send shock waves through the media world. “We are not exactly sure what happens next,” he writes, “but we expect the noise level to be very loud in the days and weeks to come.”
Write to Jack Hough at [email protected]. Follow him on X and subscribe to his Barron’s Streetwise podcast.
Read the full article here