In other words, future deals could be a lot cheaper while Wall Street watchers say the partnership tilts the power away from Big Tech as prices skyrocket across multiple professional and collegiate leagues.
The deal, announced late Tuesday, will bring together the three companies’ respective slate of sports networks. Collectively, the new service encompasses about 55% of US sports rights, according to Citi Research.
“We see this move as defensive vs Big Tech angling into future rights as media will now have both production and distribution,” Wells Fargo analyst Steve Cahall wrote in reaction to the news.
Amazon, which recently debuted the first Black Friday NFL game, agreed to spend $1 billion annually for its 11-year NFL Thursday Night Football deal, while Google’s YouTube coughed up a reported $2.5 billion to acquire the sought-after rights to NFL Sunday Ticket.
Those deals, funded by the deep pockets of Big Tech, have inflated the overall costs of sports with the NBA aiming to fetch a whopping $75 billion rights package, up from its current $24 billion deal with ESPN and WBD’s TNT. The current deal expires at the end of the 2024/25 season.
Seventy five billion dollars “is a big number,” Mark Boidman, partner and global head of media at Solomon Partners, told Yahoo Finance Live on Wednesday. “The cost [of sports] continues to go up and so you bring these companies together, it takes the competitive tension out of the mix.”
Currently, it’s assumed Disney, Fox and Warner Bros. Discovery will continue to bid on sports rights independently; however, media watchers have begun to weigh the possibility of the three companies bidding for rights as a single entity.
MoffettNathanson analyst Michael Nathanson added a possible combo bid “could change the shape and leverage of future sports rights negotiations.”
“If this joint venture evolves over time into a different form and eventually bids as a combined entity for sports rights, that would clearly limit the number of +1 bidders critical to maintaining the inflation in future negotiations that the entire sports ecosystem is built around,” he wrote in a note to clients on Tuesday.
Disney will report its fiscal first-quarter earnings after the bell on Wednesday. It’s widely expected management will address the new partnership on the earnings call.