A new sports streaming joint venture involving The Walt Disney Company DIS, Warner Bros. Discovery WBD and Fox Corporation FOXFOXA is expected to offer more than just an "extensive, dynamic lineup of sports content,” Needham analyst Laura Martin says.
What Happened: Disney will own “1/3 of the new JV and continue to own 100% of its sports rights,” Martin said.
But by licensing its rights non-exclusively to the new JV, Martin expects the media conglomerate “to collect revs lost when linear TV subs cut the cord.”
Disney, like other traditional media companies, has suffered in recent years due to customers ditching traditional cable in favor of streaming. And the company’s own attempts to offer streaming content have yet to turn a profit.
The Bob Iger-led company reportedly lost more than $1.6 billion from its streaming businesses in the first nine months of 2023, despite gaining 8 million subscribers.
Teaming up with Warner and Fox to offer a new streaming bundle that includes Disney's ESPN sports content is seen as an effort to change the trajectory.
The platform — currently without a name — will include channels like ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, ABC, FOX, FS1, FS2, BTN, TNT, TBS and truTV.
The new platform will also include ESPN+ and come with an option to bundle Disney+, Hulu and Max.
Why It Matters: Martin, who has a Hold rating and no price target on Disney, points out how the three media companies control around 85% of U.S. sports rights based on estimates.
Together, they could form the largest "sports-centric streaming service" in the U.S.
"This JV represents a new distribution partner for DIS, without an intermediary rev share. Also, ESPN commands the highest fees from the smallest distributors, and this new JV will start with zero subs."
The joint venture is dependent on the signing of definitive agreements from the three entities. Should they sign, the platform is expected to launch in the fall of 2024.
"The launch of this new streaming sports service is a significant moment for Disney and ESPN, a major win for sports fans, and an important step forward for the media business," Iger said.
Related Link: Disney Q1 Earnings Preview: Media Company Battles DeSantis, Musk, Peltz
What's Next: News of the partnership comes ahead of Disney's first-quarter earnings report set for after market close Wednesday.
Disney's direct-to-consumer segment has been a key focus of the company and attracted interest from investors and analysts.
In the fourth quarter, the operating loss for DTC improved from a loss of $1.41 billion a year ago to a loss of $420 million for the fourth quarter.
"We continue to expect that our combined streaming businesses will reach profitability in Q4 of FY24, although progress may not look linear from quarter to quarter," the company said.
Four key building opportunities laid out by the company in the fourth quarter were profitability in streaming, building ESPN into the "preeminent digital sports platform," improving film studios and turbocharging growth for the parks and experiences segment.
With news of the sports streaming joint venture, two of the building opportunities could be coming closer to reality.
DIS Price Action: Disney shares are down 2% to $97.35 on Wednesday versus a 52-week trading range of $78.73 to $118.18.
Read Next: CEO Wars – Star Wars Actress Brings The Force Of Elon Musk Against Disney, Lucasfilm
Image: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
