Los Angeles Lakers forward LeBron James, #23, during the NBA game between the Los Angeles Clippers and the Los Angeles Lakers at Crypto.com Arena in Los Angeles on January 7, 2024.
Jevone Moore | Sportswire Icon | Getty Images
The American media world was in a hurry – or panicked? — Wednesday to try to understand the ramifications of Disney, Discovery of Warner Bros. And Fox's new joint venture, an unprecedented move to collaborate in the years since media companies launched their own competing streaming platforms.
The service will launch this fall and will be aimed at sports fans who do not subscribe to the traditional cable package. Consumers will have access to all networks owned by the companies that broadcast sports, as well as Disney's ESPN+.
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Some of the companies' motivations are clear, as they look to sports to help drive streaming profits. The other reasons for launching the product are more obscure and specific to the company.
Many media executives are seeking answers about a deal that could have major implications for the industry.
Who is the audience?
At first glance, the company is a major concern for the three largest pay TV operators, charter, Comcast and DirecTV.
But we don't know exactly what they stand to lose. A person associated with the new venture's launch told CNBC that the platform would be “a monster” and massively disrupt cable television.
It's possible. A certain percentage of people who end up signing up for the sports package will cancel traditional cable in favor of the new, cheaper alternative. Pricing for the new product hasn't been determined, but sources told CNBC it will be upwards of $30. One person said $45 to $50 per month seemed to make sense after the discounted introductory deals expired.
A product around $40 per month is much cheaper than the $72.99 per month of YouTube TV, which is now a growing alternative to cable for sports fans.
But it's also possible that the platform simply doesn't have a large audience. There's a reason tens of millions of Americans have canceled cable. Many simply do not want access to the sport and the costs associated with it.
Lachlan Murdoch, CEO of Fox said Wednesday that the product is aimed at people who never signed up for cable. But it's a leap of faith to assume that many of these people want to spend around $40 every month on live sports.
Spokespeople for Charter, Comcast and DirecTV all declined to comment on the new deal.
Charter and Comcast haven't really cared about video defections for years. Broadband is a much more profitable product. Cable TV has been relegated to an add-on that allows people to subscribe to high-speed Internet.
But broadband subscriber growth has stalled for Comcast and Charter, as Verizon, T Mobile And AT&T have deployed 5G home and fixed wireless broadband products. This makes the additional loss of video subscribers potentially more damaging to businesses.
Satellite TV providers DirecTV and Dish, which don't offer broadband products at all, are potentially more at risk, as are virtual distributors of linear networks, such as Googleis YouTube TV, FuboTV and Hulu with Live TV, which is owned by Disney.
The Disney, Warner Bros. service and Fox does not offer a complete sports offering. That doesn't include NBC or CBS, both of which broadcast many sports, including the all-important National Football League. Certainly, NBC and CBS are free over the air with a digital antenna, and both offer streaming services – NBC's Peacock and CBS' Paramount+ – that already include sports.
Yet the more consumers feel the need to add this service, the more the cost and hassle increases, and the less attractive it becomes.
Now that the joint venture exists, distributors may eventually be able to have more flexibility to offer similar bundles.
There is another dynamic at play: ESPN still plans to launch a full direct-to-consumer offering in fall 2025, CEO Bob Iger said Wednesday. This product will also have an audience.
It remains to be seen how many people will subscribe to the new platform. Maybe this is a game changer, maybe not.
Traditional pay television still has around 70 million subscribers. This includes so-called “virtual MVPDs,” like the just-announced YouTube TV. has more than eight million subscribers.
The cable package has largely survived because it still contains exclusive live news and sports.
There is now a cheaper way to access most sports, and that doesn't include cable news networks like Fox News, CNN, MSNBC, and CNBC. This change could pose a threat to these channels, which now risk losing subscribers.
Could the information networks come together to offer a small information package, like the new sports package? Or will the new sports venture be a catalyst for news bundles, a concept that CNBC has written about for many years, but has yet to happen? Could Fox News consolidate with other conservative-leaning publications? Could CNBC partner with the Wall Street Journal or Financial Times to offer a combination of print and video?
These are hypotheses, but the sports program could force leaders to think differently.
Rich Greenfield, media analyst at LightShed called the new sports platform “the winners’ pack.” To a certain extent, he is right. Customers of this new platform will continue to pay Disney, Warner Bros. and Fox for content, and they won't pay NBCUniversal and Paramount Global.
But it also brings risks for Warner Bros. and Disney.
Warner Bros. unbundled TNT, TBS and TruTV from the rest of its networks with the skinny package. That could prompt pay-TV distributors to demand that they only pay for the same package, putting many legacy Discovery networks, including HGTV, Animal Planet, TLC and Discovery Channel, at risk. These are profitable and inexpensive channels for Warner Bros.
Those who want Discovery networks can still subscribe to Max. All the content is already there.
Fox faces fewer risks. Cable companies will likely still need Fox News to appease the network's rabid fan base.
Disney's flagship ESPN streaming service now feels muted by this new sports offering. Previously, the only way for cord cutters to get ESPN out of the cable bundle would have been this upcoming service. Now the new platform will also give cord-cutters a cheaper way to get ESPN.
THE the joint venture will require Disney to share revenue with two other companies. Disney's direct-to-consumer offering is all Disney. The platform's launch appears to be at best a cover-up and at worst a criticism of the potential popularity of an expensive ESPN-only streaming product.
One possible way Disney could add some juice to its own direct-to-consumer product is if the three-company sports platform offers limited or no on-demand options. But if true, it could diminish the attractiveness of the joint venture.
David Zaslav's merger campaign
Part of the rationale for this announcement is competitive dynamics. There has never been a love lost between Disney and Comcast.
It probably shouldn't be surprising that the product isn't a shared venture between these two companies after years of disagreements over Hulu's direction. Product ownership is always shared between companies, because Valuation discussions are progressing to make the service fully owned by Disney.
The structure can also be seen as a not-so-subtle attack on Paramount Global and NBCUniversal from Warner Bros. CEO David Zaslav, who may have an interest in merging with one or both companies.
The message it sends to Paramount Global and NBCUniversal is clear: you are no longer strong enough on your own. Not inviting either company to the sports platform party is a signal that Iger and Zaslav believe programming from NBCUniversal and Paramount Global simply isn't necessary.
If the joint venture turns out to be a “monster”, Zaslav may have just gained some influence in future merger discussions.
Disclosure: Comcast's NBCUniversal is the parent company of CNBC.
WATCH: ESPN Should Have Been Part of Sports Package 'From the Start,' Says Lightshed's Rich Greenfield
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