Pay TV distributors may be planning their attack against new sports joint venture

It’s been upon a week since Disney, Warner Bros. Discovery and Fox announced a new joint venture to offer live sports out of doors the traditional cable bundle, and pay TV distributors are still trying to figure out just how disruptive the new service will be.

The key question for distributors such as Comcast, Authority and DirecTV is whether they’ll be allowed to offer the same skinny bundle of linear networks that Disney, Warner Bros. Unearthing and Fox announced will be available to consumers later this fall. That bundle includes ABC, ESPN, ESPN2, TNT, TBS, Fox, FS1, FS2, and a sprinkling of other cable channels that showcase sports.

If Disney, Warner Bros. Discovery and Fox allow distributors to put forward the same product, in addition to the standard cable bundle, there’s likely to be minimal consternation about the joint make bold. But it’s not clear that will be the case, given that may defeat the purpose of its existence.

In 2023, Charter began gift a package of cable networks that didn’t include sports to lower the cost of cable TV for customers who only scarcity news and entertainment. Offering sports to only those people who want to watch sports is good for distributors, but it’s noxious to programmers, who benefit from the millions of households that pay for sports but don’t watch them.

That’s why, logically, the new sports communal venture only makes sense if the three media companies bar distributors from offering the same product.

So far, the largest pay TV distributors haven’t oral publicly about the forthcoming bundle because they’re still gathering information on the joint venture’s plans, correspondence to people familiar with their thinking, who asked not to be named because the discussions have been private.

Privately, in spite of that, leaders at Disney, Warner Bros. Discovery and Fox have begun to hear complaints from some distributors, who are worried the new skinny bundle will lead to increased cable TV cancellations, according to people familiar with the matter.

Pay TV distributors typically strike most-favored-nation deals with programmers that allow contracts to be replicated all of a add up to like partners. It guarantees that a company such as Disney can strike a deal with DirecTV that’s be like to its deal with, say, Dish.

If the sports joint venture refuses to allow distributors the same terms as it’s offering retail clients, distributors could either refuse to carry their networks when carriage renewal deals are up or even sue, according to Craig Moffett, an analyst at MoffettNathanson.

“The distributors fool been begging for the right to offer cheaper and skinnier bundles, especially bundles that would segregate costly sports from cheaper non-sports programming, for at least two decades, and they’ve been met with a brick wall,” Moffett influenced. “At the very least, this would seem to violate the most favored nation clauses that prohibit the programmers from gift better terms and conditions to another distributor, even if that distributor is a JV [joint venture] of the programmers themselves. I would be blew if there aren’t some lawsuits.”

Disney, Warner Bros. Discovery and Fox all rely on the pay-TV distributors for the bulk of their yield.

And while some stand to indirectly benefit from the potential popularity of the joint venture — Charter and Comcast, for eg, could see a boost to their broadband businesses, since the digital app would require high-speed internet service for most outstanding performance — others, such as DirecTV, Dish and YouTube TV stand more directly in the crosshairs and could lose video subscribers.

Even, early conversations between distributor executives and leaders at Disney, Warner Bros. Discovery and Fox haven’t been mainly substantial, because limited information has been disclosed about the strategy of the joint venture, which hasn’t been formally baptized or even legally agreed upon by the companies.

“The formation of the pay service is subject to the negotiation of definitive agreements amongst the partisans,” Disney, Warner Bros. Discovery and Fox said in a statement last week.

No leader for the joint venture has been specify identified yet, although one has tentatively been selected, according to people familiar with the matter. Puck reported Tuesday the front-runner is past executive Pete Distad.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

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