Pay TV distributors are scrambling to determine their next moves in response to the new joint venture announced by Disney, Warner Bros. Discovery, and Fox. The joint venture aims to offer live sports outside of the traditional cable bundle, posing a potential threat to distributors like Comcast, Charter, and DirecTV.
One of the key questions for distributors is whether they will be allowed to offer the same skinny bundle of linear networks that will be available through the joint venture. This bundle includes popular sports channels such as ESPN, TNT, and Fox. If distributors are allowed to offer the same product, there may be minimal disruption. However, if they are not, it could significantly impact their business.
Charter, for example, began offering a package of cable networks without sports in 2023 to lower costs for customers who only wanted news and entertainment. While this is beneficial for distributors, it harms programmers who rely on the revenue from households that pay for sports but don’t watch them. Therefore, it makes logical sense for the joint venture to bar distributors from offering the same product.
So far, pay TV distributors have not publicly commented on the joint venture as they are still gathering information. Privately, however, leaders at Disney, Warner Bros. Discovery, and Fox have reportedly heard complaints from distributors who are worried about increased cancellations of cable TV subscriptions.
The terms of agreement between pay TV distributors and programmers typically allow for replication of contracts among like partners. If the joint venture refuses to offer the same terms to distributors, they could refuse to carry their networks or even sue. Analyst Craig Moffett suggests that this could violate most favored nation clauses that prohibit programmers from offering better terms to another distributor.
While some distributors like Charter and Comcast could indirectly benefit from the joint venture through boosted broadband businesses, others like DirecTV, Dish, and YouTube TV may face direct losses in video subscribers.
However, conversations between distributor executives and leaders at Disney, Warner Bros. Discovery, and Fox have been limited so far due to the lack of information about the joint venture’s strategy. The venture has not yet been formally named or legally agreed upon by the companies involved.
The joint venture is subject to negotiation of definitive agreements, and a leader has not been officially named yet. Former Apple executive Pete Distad is reportedly the front-runner for the position.
Overall, pay TV distributors are closely monitoring the situation and considering their potential strategies in response to the new sports joint venture. The impact on the industry and individual companies remains uncertain until more details are revealed.
