New sports streaming platform: what to know

The American media world was in a panic: panicked? – Wednesday to try to understand the ramifications Disney, Discovery by Warner Bros AND Fox‘s new joint venture, an unprecedented move to work together in the years since the media companies launched their own competing streaming platforms.

Service will launch this fall and will target sports fans who don’t subscribe to the traditional cable package. Consumers will have access to all corporate-owned networks that broadcast sports, along with Disney’s ESPN+.

Some of the motivations for companies are clear, as they look to sports to help generate revenue from streaming. Other reasons for launching the product are more obscure and more company specific.

Many media executives are searching for answers about a deal that could have major ripple effects across the industry.

At first sight, the undertaking is a major concern for the three largest pay TV operators, Paper, Comcast and DirecTV.

But only As much of what they stand to lose is obscure. A person associated with the launch of the new venture told CNBC that the platform will be “a monster” and will massively disrupt cable TV.

It’s possible. A certain percentage of people who ultimately sign up for the sports package will nix traditional cable in favor of the new, cheaper alternative. The price of the new product has not been determined, but sources told CNBC it will be more than $30. One person said that $45 to $50 a month seemed logical after the discounted introductory offers expired.

A roughly $40-a-month product is much cheaper than the $72.99 a month of YouTube TV, which is now a growing cable alternative 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 television. Many simply don’t want access to the sport and the associated costs.

Fox CEO Lachlan Murdoch said Wednesday that the product is aimed at people who have never subscribed to cable TV. But it’s a leap of faith to assume that many of these people want to spend around $40 each month on live sports.

Spokespeople for Charter, Comcast and DirecTV all declined to comment on the new offering.

Charter and Comcast haven’t worried about video defections for years now. Broadband is a much more profitable product. Cable TV has been relegated to an add-on that helps keep people subscribed to high-speed Internet.

But broadband subscriber growth has stalled for both Comcast and Charter as Verizon, T-Mobile AND AT&T have launched 5G home and fixed wireless broadband products. This makes the further loss of video subscribers potentially more damaging to businesses.

Satellite TV providers DirecTV and Dish, which lack high-speed broadband products, are potentially more at risk. The same applies to virtual distributors of linear networks, such as Googleit’s YouTube TV, Fubo TV and Hulu with Live TV (owned by Disney!).

The Disney, Warner Bros. and Fox service is not a complete sports offering. It doesn’t include NBC or CBS, both of which broadcast many sports, including the all-important National Football League. Sure, NBC and CBS are free over the air with a digital antenna, and both offer streaming services (NBC’s Peacock and CBS’s Paramount+) that already include sports.

However, the more consumers feel the need to add this service, the greater the costs and hassles, and the less attractive it will become.

And now that the joint venture exists, perhaps distributors will also gain more flexibility to offer similar packages.

There’s another dynamic at play: ESPN is still planning to launch a full direct-to-consumer offering within the next year. That product will also have an audience.

It remains to be seen how many people will sign up to the new platform. Maybe it’s a turning point, maybe not.

Traditional pay TV still has around 70 million subscribers. This includes so-called “virtual MVPDs,” like YouTube TV, which just announced it has more than 8 million subscribers.

The cable package has largely survived because it still contains exclusive news and live sports.

There is now a cheaper way to access most sports, and it doesn’t include cable news networks like Fox News, CNN, MSNBC, and CNBC. The change could pose a threat to those channels, which now risk losing subscribers.

Could news networks band together to offer a bare-bones news package, similar to the new sports package? Or will the new sports venture serve as a catalyst for news packages, a concept that CNBC has written about for many years but has never happened? Could Fox News integrate 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 package could force managers to think in new ways.

LightShed media analyst Rich Greenfield called the new sports platform “the winners’ package.” To some extent, he is right. Customers of this new platform will continue to pay Disney, Warner Bros. Discovery and Fox for content and will not pay NBCUniversal and Paramount Global.

But it also brings risks for Warner Bros. Discovery and Disney.

Warner Bros. Discovery separated TNT, TBS and TruTV from the rest of its networks with the skinny bundle. That could push pay TV distributors to demand you pay only for the same package, putting many of the older Discovery networks, including HGTV, Animal Planet, TLC and Discovery Channel, at risk. These are low-cost, profitable channels for Warner Bros. Discovery.

Those who want Discovery networks can always subscribe to Max. All the content is already there.

The fox takes fewer risks. Cable providers will likely still need Fox News to appease the network’s rabid fan base.

Disney’s flagship ESPN streaming service, whenever it launches, now seems turned off by this new sports offering. Previously, the only way for cord cutters to get ESPN outside of the cable bundle would be with the incoming service. Now, the new platform will also offer cord cutters a cheaper way to get ESPN.

THE The joint venture will require Disney to split revenues 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 can add some oomph to its direct-to-consumer product is if the three-company sports platform offers limited or no on-demand options. But if that were true, the joint venture’s attractiveness could diminish.

Part of the logic behind this announcement can be traced back to competitive dynamics. There has never been any love lost between Disney and Comcast.

It probably shouldn’t be surprising that the product wasn’t a shared venture between the two companies after years of disagreements over Hulu’s direction. Ownership of the product is still split between the companies as valuation discussions continue to make the service fully owned by Disney.

The structure can also be seen as a not-so-subtle jab at Paramount Global and NBCUniversal by Warner Bros. Discovery CEO David Zaslav, who may have an interest in merging with one or both companies.

The message he sent to Paramount Global and NBCUniversal is clear: you are no longer strong enough alone. Not inviting either company to the party on the sports platform is a sign that Iger and Zaslav believe NBCUniversal and Paramount Global’s programming simply isn’t necessary.

If the joint venture turns out to be a “monster”, Zaslav may have just gained some leverage in future merger discussions.

(Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.)

WATCH: ESPN should have been in sports package ‘from the beginning,’ says Lightshed’s Rich Greenfield