ESPN, Fox, WBD sports streaming JV poses another strike for pay TV

With Tuesday’s announcement that ESPN, Fox and Warner Bros. Discovery are forming a joint venture to launch an all-in-one sports streaming app that combines linear channels, DTC services and sports rights, industry analysts and executives say questions remain, but the move could pose risks to traditional pay TV and sports-focused vMVPD Fubo.

Much is still unknown about the service (including cost) and some think the unnamed app will be pricey, with potential for confusion in a fragmented sports rights ecosystem, as well as marking yet another offering amid subscription fatigue consumers already deal with.

In terms of the three entities joining forces, Kevin Krim, CEO of ad measurement company EDO, thinks that the partners could be seeking to replicate earlier efforts with Hulu.

“Knowing the people involved, my sense is they’re looking at the original Hulu concept and thinking a similar playbook might also be successful for live sports streaming,” he told StreamTV insider via email. “The joint venture will also make it easier for consumers to avoid a guessing game of where their favorite live sports will air.”

For traditional pay TV, however, the service could mark another strike as live sports have long been seen as the linchpin keeping cord-cutting holdouts within the MVPD ecosystem – although some say it’s too early to gauge real impacts the new app might have. It could also pose a risk to virtual MVPD’s that offer cable-like lineups – in particular sports-focused vMVPD Fubo, according to Global Data Principal Analyst of Global Telecom Consumer Services Tammy Parker.

Pay TV could feel the pain

“This is a blockbuster deal that will further decimate the traditional US pay-TV sector,” said Parker in commentary released Wednesday.

GlobalData’s latest US Pay TV forecast found pay TV continues to decline rapidly from a heyday in 2009-2010 when penetration was above 85%, with the firm forecasting that to drop to around 32% in 2028.

“For many viewers, sports has been the thread keeping them attached to pay-TV, but that thread frays a bit more every time a streaming video provider gains control of popular live sports programming. Having ESPN, Fox, and Warner Bros. Discovery combine their vast portfolios of sports content into a single streaming service will make sports fans think twice about subscribing to pricey linear programming bundles offered by cable and satellite TV providers,” Parker continued.  

The JV’s streaming service promises to cover a wide array of sports including linear networks and DTC apps, with rights that span pro football, basketball, baseball, hockey and thousands of college sports, among other events. More details here.

But as noted in a Tuesday column on STV by industry analyst Dan Rayburn, it won’t have everything. On the NFL front, he pointed out it won’t have the league’s football games from CBS and Paramount, Sunday Night Football which is on NBC and Peacock, or Thursday Night Football that airs on Prime Video.

Among potential impacts to pay TV, there’s also the question of Fubo, where live sports underpin the vMVPD’s value proposition for subscribers as it aims to be the ultimate sports aggregator with its streaming pay TV lineup. Fubo’s stock dropped more than 21% Wednesday following news of the JV.

“The new sports service will be positioned to build a healthy subscriber base quickly,” Parker commented. Along with stealing subscribers from cable and satellite TV providers, the analyst thinks, “it will also pose a significant threat to other sports-oriented streaming services, such as FuboTV, a virtual MVPD with a focus on live sports.”

Roth MKM analysts Darren Aftahi and Dillon Heslin also warned against the new service cutting into Fubo’s competitive advantage in the sports streaming landscape.

“We believe this could spell trouble for Fubo’s competitive advantage as a sports-first and focused streaming app that has been able to get away with recent price hikes due to limited competition elsewhere with a more holistic sports offering besides one-off sports channel subscriptions,” wrote Aftahi and Heslin in a note reported by SeekingAlpha.  

Fubo recently raised its base prices by $5 per month, bringing the cost of its live streaming TV base plan price to just under $80 per month. That doesn’t include an additional regional sports fee, now between $13-15 per month after a $1 increase, which nearly all subscribers are subject to.

Service could be pricey

While Parker believes the appeal of an all-in-one sports app “will be tough for sports fans to resist” there is still a key question of pricing for the yet-to-be-named streaming service, as the cost of sports rights has continued to rise in recent years.

Parker acknowledged that with robust sports assets, the forthcoming streaming service “might cost more than potential viewers are willing to pay.” That said, consumers will have the option to bundle the standalone app with Disney Hulu and/or Max, likely meaning ability to take advantage of discounted pricing “for a full package of streaming services.”

Still, Rayburn in his column said it’s too early to call the service a “game-changer,” while listing several burning questions that remain. He too emphasized the service likely won’t be cheap, writing that he’s “guessing” it will cost $40-50 per month after special discounted launch pricing.

Sports offerings getting messy?

And while fans who want to leave the pricey linear pay TV ecosystem could be attracted by the new service, Rayburn also suggested offerings from some of the JV partners are getting confusing, particularly for Disney.

The new streaming service isn’t impacting Disney’s plans to launch a standalone flagship ESPN app, as it will be in addition to.

“You'll have ESPN+, a new ESPN app, and a new sports streaming service that includes ESPN content. This is getting messy,” wrote Rayburn. The analyst also questioned “whether there is enough sports content throughout the entire year to support this service.” Read more of his analysis and key questions here.  

Kevin Kowalick, VP of Strategy for Media and Entertainment at TransUnion, meanwhile, said that live sports “has been one of the toughest nuts for the streaming ecosystem to crack,” adding the JV is “something of a gift” both to consumers interested in cutting the cord and to marketers that will have a new gateway to engaged and passionate sports audiences.

“That said, this is just another step in the prophesized 'great rebundling' and reincarnation of cable,” Kowalick told STV via email. “Subscription fatigue is real, so how receptive audiences are to yet another service is something of an open question.”

The complexity of sports rights and partners’ contributions to the platform is another grey area, according to Krim, such as WBD and Paramount’s joint ownership of March Madness rights, and Fox and Peacock owning Big Ten.  NBCU and Paramount aren’t part of the JV as of now and Rayburn also questioned the latter’s absence, noting rights to several sports events, including NFL and other properties.

“While Paramount and NBCUniversal are notably absent from this initial announcement, I wouldn’t be surprised to see them join in before the service officially launches,” Krim said.

As for more players joining the mix, as noted by Rayburn, on Fox’s earnings call Wednesday CEO Lachlan Murdoch said the JV isn’t contemplating adding more content partners at this stage.

Approach to ad sales

A second area Krim thinks Disney, Fox and ESPN still need to address ahead of the launch is their approach to ad sales.

“Ad rates for the NFL are much different than a regional Big 10 game, and the trio will need to figure out whether their sports-dedicated sales orgs will all be selling into the joint venture, or the entity will have its own, or some combination of the two,” he noted. “This will have a great effect on the live sports ad ecosystem.”