Disney's ESPN (DIS) has partnered with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, set to debut sometime this fall.
The companies say the platform will integrate their respective sports network slates, along with certain direct-to-consumer (DTC) sports services and sports rights. This includes content from all major professional sports leagues and college sports.
The service is described as a 50-50 “joint venture” between the three parties and will be available to consumers through a new app. Subscribers can also bundle this product with Disney+, Hulu, and Max.
The news comes amid rising prices for sports streaming rights, with both ESPN and Warner Bros. Discovery's TNT renegotiating packages with the National Basketball Association.
Shares of Fox and WBD rose 4% and 3%, respectively, in after-hours trading. Disney stock fell more than 1%. Disney and Fox will report their quarterly results on Wednesday.
Note that this is separate from Disney's ESPN streaming ambitions. The company continues to seek strategic partners, either through joint ventures or partial ownership, to help ESPN launch its flagship direct-to-consumer service within the next few years.
Disney has been in exploratory discussions with major sports leagues, including the NFL, NBA and MLB, regarding strategic partnerships, according to people familiar with the company's plans. Negotiations are reportedly intensifying with the NFL regarding a possible stock ownership.
Tuesday's news highlights how serious Disney is about sports streaming, but analysts and media watchers warn that ESPN's full transition to streaming will be a difficult journey.
In particular, concerns are growing about consumers paying for additional services rather than watching sports as part of their cable bundle.
But the company's former head of streaming believes sports fans will be willing to pay, even if the price is higher than that of most current platforms.
“People have always paid a lot of money for sports,” Kevin Mayer, who now runs the Blackstone-backed entertainment startup Candle Media, said at the Yahoo Finance Invest Conference late last year. “They didn't always know that, because back in the day when 95% of this country had a pay TV bundle, maybe 40% to 50% of the cost of that bundle was sports programming… [But] Now you can do so explicitly. ”
Meyer, who currently serves as a strategic advisor to Iger, said his former boss is “certainly most focused on making sure ESPN, which he really believes in, is well-positioned for the future.” ” he said.
Disney has not released pricing details for the ESPN service, but analysts estimate it will need to cost at least about $30 per month to break even.
But Mayer argued that $30 a month is “a perfectly reasonable price to watch all the sports that ESPN has to offer.”
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
