Disney is Partnering with Warner Bros. Discovery and Fox to Increase its Focus on Sports Streaming

A new sports streaming service from Disney’s ESPN (DIS), Warner Bros. Discovery (WBD), and Fox (FOXA) is scheduled to debut this fall.

The platforms will combine the companies’ respective sports networks, as well as some direct-to-consumer (DTC) sports services and sports rights, according to the companies. All of the major professional sports leagues as well as collegiate sports will be represented in this.

Customers will be able to access the offering through a new app. It was described as a “joint venture” with the three parties splitting the profits equally. Additionally, subscribers will be able to combine the product with Max, Hulu, and Disney+.

The announcement coincides with a sharp increase in sports streaming rights as a result of the National Basketball Association (NBA) and ESPN and Warner Bros. Discovery’s TNT renegotiating their deals.

Fox and WBD’s shares increased by 5% and 3%, respectively, in Wednesday’s premarket trading. Disney’s stock dropped by just over 1%. The quarterly results from Fox and Disney will be released on Wednesday.

Note that this is unrelated to Disney’s plans for an ESPN streaming service. The company is still looking for strategic partners to help it launch a flagship direct-to-consumer service in the coming years, either as a joint venture or as a portion of the company.

A source with knowledge of Disney’s plans claims that the company has held exploratory talks about strategic partnerships with the NFL, NBA, and MLB. There have reportedly been heated discussions about a possible equity stake with the NFL.

While Tuesday’s announcement demonstrates Disney’s seriousness about sports streaming, media observers and analysts have warned that ESPN’s complete streaming transition will be challenging.

Customers paying for an extra service instead of watching sports as part of their cable package has raised concerns in particular.

Sports fans, in the opinion of the company’s former head of streaming, will be prepared to pay, even if the price is more than what the majority of platforms currently charge.

“People have always paid a lot for sports,” Kevin Mayer, who now runs Blackstone-backed entertainment startup Candle Media, said at the Yahoo Finance Invest Conference late last year. “They didn’t always know it because back in the day when 95% of this country had paid TV bundles, probably 40% to 50% of the cost of that bundle was sports programming. … [But] now they can do so explicitly.”

As Mayer noted, Iger’s former boss is “definitely most focused on making sure that ESPN, a company that he really believes in strongly, is well positioned for the future.” Mayer is currently Iger’s strategic adviser.

Analysts have estimated that the ESPN service would need to cost at least $30 per month to break even, but Disney has not released any information regarding pricing.

But Mayer argued that $30 a month is an “entirely reasonable price to get the full suite of sports that ESPN would offer.”