A Major League Baseball logo at Angel Stadium in Anaheim, California, May 22, 2022.
Ronald Martinez | Getty Images
It’s been about a week since then Disney, Discovery by Warner Bros and Fox announced a new joint venture to offer live sports outside the traditional cable bundle, and pay-TV distributors are still trying to figure out how disruptive the new service will be.
The key question for distributors like Comcast, Charter and DirecTV is whether they will be allowed to offer the same slim bundle of linear networks that Disney, Warner Bros. Discovery and Fox announced that they will be available to consumers later this fall. This bundle includes ABC, ESPN, ESPN2, TNT, TBS, Fox, FS1, FS2 and a handful of other cable channels that show sports.
If Disney, Warner Bros. With Discovery and Fox allowing distributors to offer the same product, other than the standard cable bundle, there’s likely to be little concern about the joint venture. But it’s not clear that it will, given that it might defeat the purpose of its existence.
In 2023, Charter began offering a cable network package that did not include sports to lower the cost of cable television for customers who only wanted news and entertainment. Offering sports only to those people who want to watch sports is good for distributors, but harmful for broadcasters, who profit from the millions of households that pay for sports but don’t watch it.
So, logically, the new sports joint venture only makes sense if the three media companies prohibit distributors from offering the same product.
So far, the major pay-TV distributors have not spoken publicly about the upcoming package because they are still gathering information about the joint venture’s plans, according to people familiar with their thinking, who asked not to be identified because the discussions have been private.
Privately, however, the leaders of Disney, Warner Bros. Discovery and Fox have begun to hear complaints from some distributors, who worry that the new skinny package will lead to increased cable TV cancellations, according to people familiar with the matter.
Terms of Agreement
Pay TV distributors usually go on strike the most favored nation deals with developers that allow contracts to be replicated between similar partners. It guarantees that a company like Disney can make a deal with DirecTV similar to its deal with, say, Dish.
If the sports consortium refuses to allow distributors the same terms it offers retail customers, the distributors could either refuse to carry their networks when the renewal carriage deals are completed or even sue, according to Craig Moffett. MoffettNathanson analyst.
“Distributors have been begging for the right to offer cheaper and skinnier packages, especially packages that would separate expensive sports from cheaper non-sports programs, for at least two decades, and they’ve been met with a brick wall,” Moffett said. . βAt the very least, this appears to violate most-favoured-nation clauses that prohibit developers from offering better terms and conditions to another distributor, even if that distributor is a JV [joint venture] of the developers themselves. I’d be surprised if there aren’t some lawsuits.”
Disney, Warner Bros. Discovery and Fox all rely on pay-TV distributors for most of their revenue.
And while some stand to benefit indirectly from the joint venture’s potential popularity β Charter and Comcast, for example, could see a boost to their broadband businesses since the digital rollout would require high-speed Internet service to perform better β others , as DirecTV, Dish and YouTube TV are most directly targeted and could lose video subscribers.
However, early talks between distributor executives and leaders at Disney, Warner Bros. Discovery and Fox have not been particularly meaningful because limited information has been revealed about the joint venture’s strategy, which has not been formally named or even legally agreed upon by the companies.
“The establishment of the fee service is subject to the negotiation of definitive agreements between the parties,” Disney, Warner Bros. said in a statement last week. Discovery and Fox.
No leader for the consortium has yet been named, although one has been tentatively chosen, according to people familiar with the matter. Elf mentionted Tuesday, the pioneer is ex apple executive Pete Distad.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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