The announcement Tuesday that ESPN, Fox and Warner Bros. Discovery are planning to launch a joint streaming service later this year raises several questions, particularly about the long-term strategy at ESPN.
Despite the joint venture plan, ESPN is still on track to launch direct-to-subscriber feeds of its linear channels within the next year, according to multiple reports Tuesday. It is not clear what an ESPN-specific direct-to-subscriber option could offer subscribers that would not be available through the joint venture, other than a lower cost.
For ESPN and parent company Disney, an ESPN-specific service would both provide additional revenue and serve as a bargaining chip in negotiations with distributors. Disney was only able to break its stalemate with Charter last year by allowing the cable provider to bundle the company’s direct-to-subscriber platforms — including the eventual ESPN service — with its existing cable packages.
An ESPN-only service may also serve as a useful contingency plan in the event that the joint venture is short-lived.
As for ESPN’s other plans, The Wall Street Journal reported Tuesday that Disney is still pursuing a strategic partner to invest in the network. ESPN last month was said to be close to a partnership with the NFL in which the league would invest in the network and the network would assume oversight of the league’s media apparatus. Should that deal come to fruition, it is unknown whether ESPN-run versions of NFL Network and NFL RedZone would be available to stream via the joint venture or the ESPN-specific streaming service. (Notably, the WBD-run NBA TV is not listed as being part of the joint venture.)
(ESPN had also been mentioned as a potential home for regional sports rights, though the proposed bailout of Diamond Sports has likely put an end to that possibility. In the increasingly remote event that ESPN enters the RSN space, it is especially unclear whether those games would stream via the joint venture.)
For Warner Bros. Discovery, the joint venture may complicate any potential merger with Paramount or acquisition by Comcast, neither of whom are involved in the plan.
More immediately for both WBD and ESPN, news of the joint venture comes just weeks before the companies’ exclusive negotiating window opens with the NBA. Per multiple reports Tuesday, the leagues were not consulted about the joint venture plan. In a statement published by CNBC, the NBA said that it is “encouraged by the opportunity to make premier sports content more accessible to fans who are not subscribers to the traditional cable or satellite bundle.”
The NBA was already widely expected to renew with ESPN, and while a TNT renewal has been more uncertain, recent reporting indicates that is also likely. It is difficult to imagine the NBA moving away from either — much less both — of its long-tenured broadcasters in any event, but especially if they are bundled together in a direct-to-subscriber service.
There are fewer questions for Fox in the arrangement. Fox Corporation has no paid streaming service outside of the news-focused Fox Nation, is not bidding for the NBA, and — at least publicly — is not being floated as a possible acquisition target for any larger entity. Fox Sports is also primarily over-the-air, in contrast to cable-first ESPN (and cable-only WBD), meaning that the future of cable is unlikely to be as pressing a concern.
The joint venture has significant implications beyond the participants. Comcast and Paramount, owners of Peacock and Paramount+ respectively, will now have to compete against a sports-specific streaming service with considerably more content. Streaming MVPDs such as YouTube TV and Fubo have more content, but are likely to be undercut on price. For the non-sports cable networks owned by Disney and WBD, such as FX and TCM, being left out of the joint venture could accelerate extinction. Several Disney cable channels, including FXX and Freeform, are already on that path after being excluded from the Charter deal.
