Making sense of the momentous new sports streaming bundle from Disney, Fox and Warner Bros. Discovery

The bombshell news of Disney, Fox and Warner Bros. Discovery joining forces to create a single super sports streaming platform is the most significant development in live sports’ shift toward streaming to date.

The move combines the power of three networks, which are now offering streamlined access to 14 linear TV channels — from ESPN to Fox Sports 1 to TNT — on a new, yet unnamed streaming service. Analysts from Citi estimate that the new streaming service will encompass approximately 55% of U.S. sports rights from the three networks, offering users access to the most live sports in a single destination to date.

The news of the announcement was well coordinated with Disney’s and Fox’s earnings calls this week and timed strategically just ahead of upfront season in the spring. The new streaming service will launch this fall, when many sports seasons start in the U.S. and as those upfront commitments typically start to activate.

This is a particularly important element of the announcement because as Fox CEO Lachlan Murdoch shared on the company earnings call, no net-new ad inventory will be sold on the new service, meaning the ads bought during the upfront for its linear TV channels will be the same ones streamed.

The networks may not capture a chance at structuring streaming-specific upfronts deals with this venture this year, which advertisers are increasingly eager to include, but it does enable them to gain access to more precise audience viewing data that traditional TV doesn’t.

No price has been announced for the streaming service, but CNBC reports it will be likely be more than $30 a month. The platform can also be bundled with Disney+, Hulu and Max for a higher monthly cost. Right now, there are no details for a rollout plan on when or how people can subscribe.

If the price is cheaper than many cable packages in the U.S., a subscription to YouTube TV ($72.99), and Hulu + Live TV ($76.99), it could be an attractive offering for sports fanatics looking for a simpler, consolidated way to gain access.

“There is no product serving the sports fans [who] are not within the cable TV bundle,” Murdoch said on the earnings call. “So, it accesses a whole new market and really drives a tremendous amount of new reach.”

“This is a long overdue repackaging of linear’s core content that strips out the bloat of non-exclusive content found cheaper elsewhere,” MoffettNathanson analysts Michael Nathanson and Robert Fishman wrote in a report after the news.

Fox has waited years to get into the paid streaming game, or subscription video on demand after initially resisting the surge of media giants launching their own platforms during the COVID-19 pandemic. Of course, Fox has the free ad-supported platform Tubi, but Murdoch said this opportunity meant it was the right time to enter the paid streaming market.

Eating its own business?

As cord-cutting has accelerated over the past decade, legacy networks have straddled the line between preparing for a streaming future while still making most of their money from traditional TV. Murdoch and Disney CEO Bob Iger don’t believe this streaming service will cannibalize their linear TV business though, with Iger calling it "low risk."

“We are very confident this is a large market and a large opportunity that we can address without undermining the traditional bundle,” Murdoch said on the earnings call.

Disney, Fox and Warner Bros. Discovery will share roughly one-third ownership of the new platform, although Murdoch and Iger both confirmed the revenue will be split up based on how many live events each company has.

Disney doubled down during its earnings call that its streaming business would become profitable by the end of the year, and revealed for the first time that they anticipate double digit streaming margins.

The Mouse House also announced it would start cracking down on passwords, as well as ESPN going over-the-top next year by offering its linear TV channels through streaming. Those items alone would have been big news on a regular day, but they were sidelined by fervor for the joint streaming service.

Fighting for future dominance

These legacy networks have had to consider not only streaming’s effect on their traditional business, but also the growing power of the tech players coming in. Amazon, Apple, YouTube, and Netflix have made waves in the live sports arena recently and are all rumored to be in the mix for the crown jewel of upcoming sports rights: the NBA. Murdoch said Disney, Fox and Warner Bros. Discovery will continue to bid against each other for rights, but the NBA rights deal will likely be a test case to see how the pendulum swings. Disney and Warner Bros. Discovery are key parts to the current NBA deal, which The Wall Street Journal reports could triple in the next contract to $7.8 billion a year.

"We see this move as defensive versus Big Tech angling into future rights as media will now have both production and distribution," Wells Fargo analyst Steven Cahall wrote in a report.

This new streaming service is the latest landmark move in sports ascendance toward streaming. With Peacock and Netflix also making headlines in the past month, the sports landscape is rapidly innovating.

“It is also clear that this is not the final form for these companies’ sports offerings, nor is this yet a full emergence of the ‘Great DTC Re-Bundling,’” Nathanson and Fishman wrote.