Disney, Fox and Warner Bros. Discovery’s sports streaming joint venture has captured the attention of Congress.
“As programmers, your companies exert tremendous influence over pricing across the live sports TV ecosystem,” House Judiciary Committee ranking member Rep. Jerry Nadler (D.-NY) and Rep. Joaquin Castro (D.-Texas) wrote in a letter addressed to Bob Iger, David Zaslav and Lachlan Murdoch.
“As a result, the Joint Venture raises questions about how this new offering would affect access, competition and choice in the sports streaming market. Without more complete information about the pricing, intent and organization of this new venture, we are concerned that this consolidation will result in higher prices for consumers and less fair licensing terms for upstream sports leagues and downstream video distributors.”
The pair is giving the trio until April 30 to answer 19 questions they have about the offering and have asked them to include the Department of Justice in their responses. Their questions include:
1. What are the relevant markets impacted by the Joint Venture?
2. How many subscribers is the Joint Venture projected to have within 1, 3 and 5 years of launch?
3. Will the Joint Venture distribute channels of non-joint venture partners?
4. How will the Joint Venture Partners determine the pricing of their own sports channels (e.g., Fox Sports, ESPN) included in the Joint Venture?
5. How do those prices compare to prices at which such channels are currently licensed to third-party MVPDs or virtual MVPDs?
6. Will the Joint Venture Partners implement provisions to prevent anticompetitive sharing of pricing or other competitively sensitive information among each other?
7. What measures will the Joint Venture Partners implement to prevent interlocking directorates?
8. When will the pricing of the Joint Venture be determined and announced?
9. What League Properties does each Joint Venture Partner currently hold the rights to, where “League Property” means a content licensing agreement with any of the following: the NFL, the NBA, the MLB, the NHL, the NCAA Basketball Tournament, NCAA Football (by major league) and NCAA Basketball (Men’s and Women’s). What League Properties do licensors other than the Joint Venture Partners hold the rights to?
10. For each of the sports channels that will be included in the new service, how many hours of live events for League Properties does the channel transmit per calendar year?
11. To what extent will customers be offered opportunities to bundle other products offered by the Joint Venture partners with the Joint Venture? Will Joint Venture customers be offered the opportunity to bundle the Joint Venture with direct-to-consumer products of third parties?
12. Will the Joint Venture Partners offer stand-alone streaming sports services? If the Joint Venture Partners decide to offer independent offerings from the Joint Venture, how will firewalls be implemented to ensure there is no collusion between the Joint Venture and their independent streaming sports offers?
13. The Joint Venture Partners currently bid against each other for sports content. However, the new venture will be pooling sports content among the Joint Venture Partners. Will the Joint Venture Partners continue to bid competitively against one another for sports rights as they become available?
14. Will the Joint Venture Partners make the channels they include in the Joint Venture available to third parties on non-discriminatory terms?
15. Will the Joint Venture Partners negotiate jointly with MVPDs to license sports channels? Also, with virtual MVPDs?
16. Will the Joint Venture Partners continue to require that MVPDs and virtual MVPDs purchase other programming in addition to their sports channels as a condition of their licensing agreements? Will the Joint Venture Partners continue to require penetration minimums for their sports and other channels when negotiating with MVPDs and other virtual MVPDs?
17. The companies propose to engage in a form of vertical integration, leveraging their content assets into a virtual MVPD. In previous transactions involving vertical integration between programmers and MVPDs (e.g., Comcast-NCBU, AT&T-Time Warner), the parties made certain commitments to submit licensing negotiations to binding arbitration. Will joint venture partners make similar commitments?
18. Prior to negotiation of the Joint Venture, what standalone plans had each of the Joint Venture Partners considered for making their sports channels available via streaming, including but not limited to the launch of a new virtual MVPD or inclusion in the Joint Venture Partner’s existing streaming service (e.g., Disney+ or Max).
19. Do you anticipate the joint venture will be required to make a filing with the Department of Justice and Federal Trade Commission under the Hart-Scott-Rodino Act?
Representatives for the JV declined to comment.
Nadler and Castro’s letter comes after Bloomberg reported in February that the DOJ was planning to launch an antitrust review of the offering.
It also coincides with antitrust litigation from Fubo, who is seeking to block the JV. The sports streamer alleges its the latest move in a years-long campaign of anticompetitive practices by Fox, WBD and Disney to block its business.
In court filings last week, Fubo received declarations of support from executives at DirecTV and Dish Network. Fox, WBD and Disney have filed motions seeking to dismiss the lawsuit, arguing it is “nothing more than a transparent attempt to use litigation to get better commercial terms from its suppliers than it has been able to negotiate at the bargaining table.”
The unnamed service, set to launch this fall, will offer access to content from linear sports networks including ESPN, ESPN+, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, FOX, FS1, FS2, BTN, TNT, TBS, truTV, as well as the ABC network. It will include content from the NFL, NBA, WNBA, MLB, NHL, NASCAR, College Sports, UFC, PGA TOUR Golf, Grand Slam Tennis, the FIFA World Cup, cycling and much more. Subscribers would also have the option to bundle the product with Disney+, Hulu and Max.
Fox, Disney and WBD will each own a 1/3 stake, have equal board representation and will license their sports content to the joint venture on a non-exclusive basis. Former Hulu and Apple executive Pete Distad will serve as the JV’s CEO, reporting directly to the board and assembling the independent management team that will be based in Los Angeles.
Analysts have estimated that the JV’s pricing could fall anywhere between $35 to $50 per month. Fox CEO Murdoch suggested it would be in the “higher ranges of what people are talking about.” An individual close to the venture told TheWrap that pricing would be lower than YouTube TV’s $72.99 per month base plan.
When it comes to revenue from the partnership, the companies are expected to earn a similar carriage fee rate as they do through other distribution channels where their networks are available. The trio’s members will each be responsible for selling their own advertising and will retain all of the advertising revenue from their content, the individual said.
Murdoch has previously said he’s “not overly concerned” about the potential for regulatory scrutiny, noting the offering is targeting 50 million to 60 million “cord never” households that aren’t currently being served.
“We’re proceeding as though this is going to clear basically government scrutiny,” Disney CEO Iger recently told CNBC.
The venture is aiming for 5 million subscribers within the first five years of its launch.
