U.S. Reps Question The Impact Of Disney-Fox-WBD Joint Sports Venture, And Want Answers

In a letter to Disney’s Bob Iger, Fox’s Lachlan Murdoch and Warner Bros. Discovery’s David Zaslav, U.S. Rep. Jerry Nadler (D-NY) and Rep. Joaquin Castro (D-TX) have raised anti-competitive concerns over the launch of a new joint sports streaming venture.

Earlier this year, the three companies announced plans to release a combined streaming service that brings together their respective sports portfolios. Since then, the idea of a mega sports service has raised some concerns. Most notably from Fubo, who filed a lawsuit in a bid to block the service from launching in its current form.

Following reports suggesting the Department of Justice plans to take a closer look at the joint venture, the two lawmakers have now added to the concerns by questioning how this new streaming product might affect competition and choice within the sports streaming space.

In the letter, Nadler and Castro highlight how the three companies collectively control 80-percent of the most popular sports content and question whether “consolidation will result in higher prices for consumers and less fair licensing terms for upstream sports leagues and downstream video distributors.”

As a result of these concerns, the lawmakers are asking Disney, Fox, and Warner Bros. Discovery to provide additional information on the joint venture. Specifically, to provide answers on how quickly the service expects to grow, how much the service will cost (and in relation to existing costs for the same content), and what measures will be in place to protect competition within the space.

Disney, Fox and Warner Bros. Discovery has been asked to provide answers to the following questions by April 30, 2024.

1. What are the relevant markets impacted by the Joint Venture?
2. How many subscribers is the Joint Venture projected to have within 1, 3, and 5 years of launch?
3. Will the Joint Venture distribute channels of non-joint venture partners?
4. How will the Joint Venture Partners determine the pricing of their own sports channels (e.g., Fox Sports, ESPN) included in the Joint Venture?
5. How do those prices compare to prices at which such channels are currently licensed to third-party MVPDs or virtual MVPDs?
6. Will the Joint Venture Partners implement provisions to prevent anti-competitive sharing of pricing or other competitively sensitive information among each other?
7. What measures will the Joint Venture Partners implement to prevent interlocking directorates?
8. When will the pricing of the Joint Venture be determined and announced?
9. What League Properties does each Joint Venture Partner currently hold the rights to, where “League Property” means a content licensing agreement with any of the following: the NFL, the NBA, the MLB, the NHL, the NCAA Basketball Tournament, NCAA Football (by major league) and NCAA Basketball (Men’s and Women’s). What League Properties to licensors other than the Joint Venture Partners hold the rights to?
10. For each of the sports channels that will be included in the new service, how many hours of live events for League Properties does the channel transmit per calendar year?
11. To what extent will customers be offered opportunities to bundle other products offered by the Joint Venture partners with the Joint Venture? Will Joint Venture customers be offered the opportunity to bundle the Joint Venture with direct-to-consumer products of third parties?
12. Will the Joint Venture Partners offer stand-alone streaming sports services? If the Joint Venture Partners decide to offer independent offerings from the Joint Venture, how will firewalls be implemented to ensure there is no collusion between the Joint Venture and their independent streaming sports offers?
13. The Joint Venture Partners currently bid against each other for sports content. However, the new venture will be pooling sports content among the Joint Venture Partners. Will the Joint Venture Partners continue to bid competitively against one another for sports rights as they become available?
14. Will the Joint Venture Partners make the channels they include in the Joint Venture available to third parties on non-discriminatory terms?
15. Will the Joint Venture partners negotiate jointly with MVPDs to license sports channels? Also, with virtual MVPDs?
16. Will the Joint Venture Partners continue to require that MVPDs and virtual MVPDs purchase other programming in addition to their sports channels as a condition of their licensing agreements? Will the Joint Venture Partners continue to require penetration minimums for their sports and other channels when negotiating with MVPDs and other virtual MVPDs?
17. The companies propose to engage in a form of vertical integration, leveraging their content assets into a virtual MVPD. In previous transactions involving vertical integration between programmers and MVPDs (e.g., Comcast-NCBU, AT&T-Time Warner), the parties made certain commitments to submit licensing negotiations to binding arbitration. Will joint venture partners make similar commitments?
18. Prior to negotiation of the Joint Venture, what standalone plans had each of the Joint Venture Partners considered for making their sports channels available via streaming, including but not limited the launch of a new virtual MVPD or inclusion in the Joint Venture Partner’s existing streaming service (e.g., Disney+ or MAX).
19. Do you anticipate the joint venture will be required to make a filing with the Department of Justice and Federal Trade Commission under the Hart-Scott-Rodino Act?

While firm details on the joint venture are still light, previous comments have provided some insight into what consumers, and the wider market, can expect. For example, Fox’s Murdoch said the expectation is for the joint venture to generate around five million subscribers over the first five years.

This number, and the suggestion the service is targeting so-called cord-nevers, has been used to justify the competitive nature of the service, suggesting that it won’t meaningfully impact the live TV streaming market. Naturally, live TV providers, including Fubo, see things very differently. In Fubo’s case, the company not only expects the launch of the service to have a much greater negative impact on the value of live TV packages, but it also views the launch of the joint venture as the latest move in a years-long anti-competitive campaign by Disney, Fox and Warner Bros. Discovery.

In terms of the price, between $40 and $50 a month is a number that’s been circulating recently. While not an official number, Murdoch recently suggested the price will likely be more towards the higher end of this scale. If that is the case, it will put it towards the lower end of the live TV streaming package range. Sling Orange, for example, costs $40 a month and offers access to some of the channels associated with the joint venture, including ESPN, TBS, TNT, and in some locations, ABC.