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An advertisement promoting Venu Sports, a collaborative streaming platform initiated by Disney, Warner Bros. Discovery (WBD), and Fox, appeared at the Fanatics Fest in New York City on August 16, 2024. However, the venture has faced unforeseen obstacles before its anticipated launch.
Last month, the three media giants announced the termination of Venu, which was expected to be a direct-to-consumer service aggregating their live sports content. This decision was attributed to various challenges, including budget constraints and legal hurdles, leading to the cancellation of the initial plan to go live in January.
The companies had envisioned launching the platform ahead of the 2024 NFL season. Unfortunately, a U.S. judge’s ruling blocked its debut, prompting the firms to reassess their strategies. While they did pursue an appeal, the ultimate conclusion was to abandon the joint venture and pursue independent paths.
As competition for streaming services intensifies and traditional television subscriptions decline, investors are eager to learn how each company plans to adapt. Disney’s ESPN already has a solid presence in the sports streaming arena, but Venu was anticipated to be a more significant future endeavor for both Fox and WBD.
Recently, each company has been vocal about its future strategies. Disney is pivoting towards enhancing its direct-to-consumer ESPN platform, which will serve as a standalone flagship app, separate from ESPN+. This new app, set to launch in the fall, will reportedly incorporate user-generated content to engage a younger audience.
In the same vein, executives at WBD reaffirmed their commitment to their existing streaming service, Max. This week, they announced that live sports and news would now be included at no extra charge on Max’s standard and premium tiers. Initially, there were plans to implement an additional fee for sports, but it’s unclear if the cancellation of Venu influenced this shift. Sources close to WBD suggest that integrating live sports into the standard subscription has been a part of their broader strategy for some time.
The Shift Towards Unbundling
During a recent earnings call, WBD CEO David Zaslav indicated that the drive behind Venu was primarily centered on consolidating a vast array of sports content. Expressing disappointment at the lost opportunity for a dedicated sports app, Zaslav emphasized that content bundling typically enhances consumer value and simplifies the process of finding favored teams and leagues.
He stated, “A fragmented approach does not create a positive consumer experience, and value has historically been tied to improving that experience,” highlighting WBD’s intention to maintain a bundled service alongside Disney.
Meanwhile, Fox has made significant moves since the dissolution of Venu, announcing plans for its streaming platform after a period of observing the market. The company aims to introduce an app merging news and sports by the end of the year, reflecting a more proactive approach to content delivery.
On Thursday, it was announced that Pete Distad, a former leader of Venu, would head Fox’s new direct-to-consumer streaming venture. Fox CFO Steve Tomsic clarified that the upcoming service shouldn’t be perceived as a drastic strategic shift; rather, Fox is not aiming to replicate the extensive initiatives pursued by competitors such as Netflix and Peacock.
With its 2019 sale to Disney, Fox divested significant entertainment assets, positioning itself away from that segment. Tomsic noted that the current streaming landscape may not provide optimal value to consumers due to the fragmentation of content across multiple platforms. Nevertheless, the decline of traditional cable subscriptions has driven Fox to enter the streaming space to better serve a growing number of households no longer within the traditional bundle.
The Rising Costs of Sports Rights
Live sports continue to be a prized asset for media companies, crucial in drawing large audiences. This demand has driven up the costs associated with sports broadcasting rights, which has led to a more cautious approach among media leaders concerning their investments in sports content.
ESPN recently opted out of its longstanding contract with Major League Baseball, citing the escalating cost per game as unsustainable. Additionally, WBD’s Turner Sports will no longer host NBA games starting in the 2025-2026 season, although it has secured new rights for select college football games and the French Open.
During the earnings call, Zaslav expressed that the company would not impulsively acquire more sports rights, emphasizing a strategic mindset regarding potential returns. “We evaluate sports rights based on their ability to enhance our business,” he clarified, foreseeing potential challenges ahead due to rising costs.
At an investor conference in December, Tomsic echoed Zaslav’s sentiments, noting that while sports are critical to Fox’s identity—particularly with rights to the NFL, college football, and soccer—the company has been selective in its offerings. Tomsic remarked on Fox’s decision to forgo certain sports, including NFL’s Thursday Night Football and other events, based on audience size and advertising revenue potential.
In conclusion, as the media landscape continues to evolve, both Fox and WBD are navigating the complexities of live sports broadcasting amidst rising costs and shifting consumer preferences. Understanding what constitutes a valuable offering in this competitive domain remains a priority for these industry players.
Source
www.cnbc.com