The new sports venture being launched by Fox, ESPN and Warner Bros Discovery isn’t in the market for additional partners, according to Fox CEO Lachlan Murdoch.
Speaking on Fox Corp.’s fiscal second-quarter earnings call Wednesday, Murdoch said Fox remains supportive of its traditional distributors and the pay TV ecosystem and that the new venture will primarily target cord-nevers.
Adding new partners is “not something we’re considering at this stage,” Murdoch said. “We think that the 14 linear networks that this service offers gives people a tremendous amount of content.”
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The current bundle would not include sports programming on networks owned by Comcast NBCUniversal, such as NBC, or Paramount Global, which includes CBS.
Fox CFO Steve Tomsic said it was early to forecast how much Fox would have to contribute to cover operating and marketing costs. “As we look at it, it will be accretive to us from a net-net perspective when you take into account affiliate fees that we’ll collect as revenue,” he said.
Murdoch said that Fox does not believe the new sports bundle will accelerate cord-cutting.
“We would not be launching this product if we thought it was going to significantly affect our affiliate partners,” Murdoch said. “I think we’re the biggest supporters of the traditional pay TV bundle. We think there’s tremendous value in the pay TV bundle for the consumer who wants to get it all at an affordable price.”
Murdoch said the new sports bundle would be targeted at “cord nevers” and other sports fans currently not taking a pay TV bundle.
Of the 125 million U.S. TV households, about half, or 60 million, are not in the traditional bundled ecosystem.
“So the opportunity is huge,” he said.
Murdoch added that the risk of the new sports bundle would cause more people to cut the cable cord, hurting assets like Fox News was very low.
“That channel and that brand really drives tremendous viewership and audience engagement for [distributors] and we think it will continue to do so within the traditional pay television bundle,” he said.
Analyst Steven Cahall of Wells Fargo was skeptical the joint venture wouldn't hurt network like Fox News Channel.
"Fox said they're confident that the sports streaming JV with Disney and WBD won't disrupt the traditional pay TV ecosystem. We are not yet convinced and think it's a gamble to give bundle subs additional options," Cahall said. "We expect the sports streaming JV to improve the reach and value of Fox's sports business through higher ARPU and more overall subscribers. We think this could come at the expense of Fox News affiliate revenue."
Despite forming a joint venture with two rivals, Murdoch said Fox will still be competing for sports rights, sports viewers and sports advertising dollars.
“We will be aggressively competing in the sports market,” he said. “Sports remains a competitive business in which we currently thrive and we don’t see any difference to that.”
Murdoch said Fox has been monitoring the streaming space for several years and the partners have been developing the new venture for months.
“We felt now was the right time to launch a product into a new market. It’s a new market where there’s no product serving the sports fans that are not within the cable TV bundle,“ he said. “It accesses for us a whole new network and really drives a tremendous amount of new reach that we weren’t servicing before.”
