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Fitch Ratings analysts believe the much-touted joint venture between Disney, Warner Bros. Discovery and Fox is unlikely to have a credibility impact on sports leagues. But they predict that offering yet another streaming option could accelerate cord-cutting, which would have a negative impact on linear broadcasters and their distributors.
Sports Skinny Bundle itself does not bid on sports rights, so its success will depend on how the three companies independently approach future bids. Three companies have multi-year deals with various leagues: Disney through ESPN, WBD through TNT Sports, and Fox between broadcast networks and cable companies FS1 and FS2. These deals “provide important credibility and revenue stability for the league at a time when media companies risk viewer engagement and subscriber churn,” the report said.
However, Fitch said the companies will need to weigh the incremental revenue the joint venture will earn against the potential for cannibalization of these highly linear revenue streams. Consumers who subscribe to thinner bundles are more likely to drop their traditional cable or satellite subscriptions. In their words, this would “accelerate the decline in profits generated by existing linear distribution platforms, including non-sports cable networks, and further compress linear platform profitability.”
Fitch's opinion disagrees with the joint venture's primary purpose, which is to limit the rise in broadcast rights costs in the first place. Faced with declining linear subscribers, these media groups are hoping to meet cord cutters where they are, outside of the traditional revenue models that have sustained the industry for decades. I'm here.
According to CreditSights, Disney, WBD, and Fox cover 69% of the U.S. sports rights market.
Fitch also believes that over the medium term, rights renewals will include both linear and streaming delivery options to maximize reach and revenue. The paper noted that MLS's 2023 deal with Apple includes a linear distribution of local markets and exclusive rights to the Peacocks' 2023 wild-card postseason games. The company said it's unclear whether Peacock will retain subscribers after the playoff games, but Antenna research shows the Comcast-owned streamer retained 71% of signups (2.1 million users) from the games. It turned out that it was.
Details about the joint venture (other than the appointment of Peter Dystad as CEO) have not been revealed since the three media giants announced their formation in February. In addition to the Skinny Bundle, Disney remains committed to launching another ESPN direct-to-consumer service in 2025.
