ESPN, Fox and Warner Bros. Discovery make streaming headlines
By Rick Alessandri, Managing Director at TurnkeyZRG
On February 6th, three of the major players in sports programming, announced plans to create a joint venture and launch a streaming service this fall. I’ve learned that a separate team is being planned for and that a CEO to run the venture has been identified.
ESPN, Fox and Warner Bros. Discovery are teaming up to create a service which 1) should alleviate a major pain for fans by helping them to find which platform a particular game is on, although it’s still not clear what games/programming each respective partner will direct to the new offering 2) will likely become the single DTC sports service (think Hulu for Sports) with the most available events across professional and collegiate sports with ESPN likely providing the most content given it has such “tonnage” of live sports rights and 3) might cause rightsowners concern given the power this triumvirate might have to dictate rights fees negotiations. Streaming service Fubo blasted the deal last Thursday in a statement, “The underlying motives and implication of this joint venture also command our scrutiny. Every consumer in America should be concerned about the intent behind this joint venture and its impact on fair market competition. This joint venture spotlights a concerning trend where an alliance with significant market share, reportedly controlling 60-85% of all sports content, could dictate market terms in a manner that may not serve the broader interests of consumers. We believe our robust programming and quality product experience cannot be duplicated by what is likely to emerge from this joint venture.”
The new streaming offering, which hasn’t indicated pricing yet, will potentially bring 14 linear networks together in a package that could be bundled with Max, Hulu and ESPN+. Fox CEO Lachlan Murdoch posited during Fox’s quarterly earnings call that the new venture will be additive and not threaten Fox’s existing pay-TV business as he believes the opportunity is focused on those fans who have subscribed to a pay-TV bundle. Murdoch said there’s tens of millions of those types of potential consumers presenting a large and lucrative opportunity without undermining the traditional bundle.
My opinion is that if you’re a true sports fan, and you’re one of the current 70M ESPN households (as of Dec ’23) paying for your pay-tv bundle for access to ESPN, Fox Sports and Warner Bros. Discovery networks and your local team’s regional sports network, you’re more than likely to finally cut the cord. I likely will…actually, drop the likely, I’m gone (if priced right). I’ll take my broadband service coupled with key DTC services like this one being launched in six months as well as a few others.
There’s clearly still a lot of questions tied to last week’s announcement which referenced all three companies CEOs showcasing the importance of such a launch. For instance,
How will this service be priced compared to ESPN and Warner Bros. Discovery’s existing services?
Will discounts be offered should you subscribe to the new DTC offering and one of the partner’s other services?
Do the existing agreements between the leagues like the NBA, NFL, MLB and NHL allow each respective media partner to essentially sub-license their games to the new service or will those deals need to be reworked?
How will the economics work? Will the entity providing the most games share revenue at a different rate?
Won’t these partners keep the “best” product for their own streaming service? In the early days of ESPN2 launch, we use to move the best college games to E2 putting pressure on affiliate partners to ensure E2’s distribution grew.
Will Paramount and Comcast join the party at some point?
In addition, a day later, February 7th, ESPN announced that they will be launching a stand-alone direct-to-consumer offering providing full access to it full daily schedule of programming by fall 2025. The Disney-owned sports media giant currently offers its ESPN+ subscription service – which dropped slightly last quarter to 25.2M subs – as a complement to its linear programming thereby ensuring its distribution partners have something differentiated. That all changes next year.
As the cable universe has declined in the tens of millions over the last 10 years due to cord-cutters and cord-nevers moving towards broadband subscription services, ESPN’s affiliate fees from cable and satellite distributors have declined significantly. The pay TV households in 2013 were 100.5M and is forecasted to be approximately 56.6M by the end of 2024 according to Statista. The erosion of basic cable subs impacts ESPN significantly as the company currently receives a reported $9.42 per subscriber from its distribution partners for exclusive access to certain ESPN programming. If ESPN is now going to be competing with its linear distribution partners, won’t those partners be seeking either a reduction in fees or outright dropping the network(s).
This has truly been a fascinating week in terms of all the moving parts.
One thing is clear, the need for talented leadership in the DTC space continues its torrid pace and companies are seeking executives who have both the IQ and EQ to move quickly and efficiently to drive growth and build high-performing teams. Vetting candidates in these areas is vital in ensuring you get it right the first time. At TurnkeyZRG we have numerous tools and proprietary assessments, like the Taylor Assessment, to understand how candidates will fit in with an organization’s culture.
The Taylor Assessment, built by our colleagues from “Walking the Talk” who have over 30 years’ experience in understanding behaviors which are critical to the culture companies want to build inside their organizations. The Taylor Assessment analyzes peoples’ potential contributions within their work environment and if they’ll be accretive to the culture of the organization. NO OTHER FIRM HAS SUCH AN ASSESSMENT TOOL AVAILABLE. The speed at which this market operates and continues to evolve necessitates that you must get the people part right. We can help ensure you get it right the first time.
ESPN to launch stand-alone streaming service in 2025 (Feb 2024)
FOX CEO Lachlan Murdoch on new streaming service (Feb 2024)
Fubo blasts new sports streamer (Feb 2024)
ESPN eyes stand-alone streaming service (May 2023)
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