A new “joint venture” sports streaming partnership between Disney's ESPN (DIS), Warner Bros. Discovery (WBD) and Fox (FOXA) could have profound implications for the entire sports ecosystem.
In other words, while Wall Street watchers say the partnership will take power away from Big Tech, future deals could be significantly cheaper as prices soar across multiple professional and college leagues. Thing.
The partnership, announced late Tuesday, will combine the three companies' respective sports networks. The new service will cover about 55% of U.S. sports rights, according to Citi Research.
Big tech companies like Amazon (AMZN), Apple (AAPL), and YouTube (GOOG, GOOGL) have become more aggressive in recent years when it comes to streaming deals, especially in the sports space.
Reacting to the news, Wells Fargo analyst Steve Cahall said, “This move is defensive against big tech companies eyeing future rights, as the media will have both production and distribution.'' That is what we see.''
Amazon, which recently debuted its first Black Friday NFL game, has agreed to spend $1 billion a year on an 11-year NFL Thursday Night Football deal, while Google-owned YouTube has agreed to buy the sought-after NFL Sunday Ticket deal. They reportedly spent $2.5 billion to acquire the rights.
Meanwhile, Apple announced a 10-year, $2.5 billion deal with Major League Soccer at the end of 2022. It is also rumored to be bidding to acquire F1 and NBA rights.
These deals are being funded by Big Tech's deep pockets, with the NBA aiming to land a whopping $75 billion rights package, exceeding ESPN and WBD's current deal with TNT for a whopping $24 billion. The cost of sports as a whole is ballooning. His current contract expires at the end of the 2024/25 season.
Mark Boydman, partner and head of global media at Salomon Partners, told Yahoo Finance Live on Wednesday that $75 billion is “a big number.” “cost [of sports] As stock prices continue to rise, merging these companies eliminates competitive tensions. ”
He added: “In the medium term, this will… allow us to be more competitive around this very expensive content… It will also allow each company to absorb costs as a group rather than individually. It will be like that,” he added. They are individually chasing the same type of content. ”
It is currently believed that Disney, Fox and Warner Bros.' Discovery will continue to make their own bids for sports rights. However, media watchers are beginning to consider the possibility of the three companies bidding to acquire the rights as a single entity.
“It could be interesting for companies to come together and compete for potential sports rights,” Boydman said. “We don't know if that's going to happen. But it's certainly something we predict could happen.”
Moffett Nathanson analyst Michael Nathanson added that the possibility of a combo bid “could change the shape and use of future sports rights negotiations.”
“If this joint venture evolves into a different form over time and ultimately bids as an integrated sports rights entity, in order to maintain inflation in future negotiations where the entire sports ecosystem is built.” “The number of essential +1 bidders will clearly be limited,” he wrote in a note to clients on Tuesday.
Nathanson said the partnership is the “ultimate move” for Disney, WBD and Fox to “stop relying on the current distribution system and take the fate of our sport into our own hands.”
Separate rights updates may also become less important for each of these companies, as content owned by other companies in the bundle will be available.
“That would be bad for sports leagues and would be a reason for them to strongly oppose this joint venture,” Rich Greenfield of LightShed Partners argued in a separate memo Wednesday.
“On the flip side, if this makes Disney/Fox/WBD stronger, they will be more willing to pay for sports rights and the ever bigger tech giants (Amazon “This means it will be easier to compete with companies such as Apple and Apple,” he said. Added.
“It's going to be expensive.”
Still, larger issues revolve around sign-ups, especially when consumers pay for additional services rather than watching sports as part of a cable bundle.
This is where the pricing of your services becomes important. According to a new report from CNBC, the joint service will cost more than $40 a month, which is in line with Wall Street expectations. The report added that executives have been identified to lead the new venture. The executive will be announced at a later date.
“It's going to be expensive, but compared to cable bills, it might not be,” Boydman said. “These companies are going to think very carefully about what people are currently paying for to offset their losses as they look at pricing this plan.”
“The reality is that consumers should win here, because they have more choice,” he continued. “But the question is, do you actually want to put that much money into this programming?”
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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