New sports streaming platform: what you need to know

The American media world was in a hurry…or panicking? – Wednesday to try to discover the ramifications of disney, Warner Bros. Discovery and FoxThe new joint venture, an unprecedented move to work together in the years since media companies created their own competitive streaming platforms.

The service will launch this fall and will cater to sports fans who do not subscribe to the traditional cable package. Consumers will have access to all networks owned by those companies that broadcast sports, along with Disney's ESPN+.

Some of the companies' motivations are clear, as they look for sports to help them boost streaming profits. Other reasons for launching the product are murkier and company specific.

Many media executives are searching for answers about a deal that could have major knock-on effects on the industry.

At first sight, The company is a major concern for the three largest pay-TV operators. Letter, Comcast and directv.

But it's unclear how much they stand to lose. A person associated with the launch of the new company told CNBC that the platform will be “a monster” and will greatly disrupt cable television.

That's possible. A percentage of people who eventually subscribe to the sports package will cancel traditional cable in favor of the new, cheaper alternative. The price of the new product has not been determined, but sources told CNBC that it will be more than $30. One person said $45 to $50 a month seemed logical after the discounted introductory offers expired.

A product around $40 a month is much cheaper than the $72.99 a month for YouTube TV, which is now a growing cable alternative for sports fans.

But it's also possible that the platform simply doesn't have a large audience. There's a reason tens of millions of Americans have canceled cable. Many simply do not want access to sports and the associated cost.

Fox CEO Lachlan Murdoch said Wednesday that the product is aimed at people who have never subscribed to cable. But it's a leap of faith to assume that many of these people want to spend roughly $40 each month on live sports.

Spokespeople for Charter, Comcast and DirecTV declined to comment on the new offer.

Charter and Comcast don't really care about video defections for years. Broadband is a much more profitable product. Cable television has been relegated to an add-on that helps keep people subscribed to high-speed Internet.

But broadband subscriber growth has stalled for both Comcast and Charter, Verizon, T Mobile and AT&T have launched 5G home and fixed wireless broadband products. That makes the additional loss of video subscribers potentially more damaging to businesses.

Satellite TV providers DirecTV and Dish, which do not have any high-speed broadband products, are potentially most at risk, as are linear network virtual distributors such as GoogleYouTube TV, fubo tv and Hulu with Live TV, owned by Disney.

The service from Disney, Warner Bros. and Fox is not a complete sports offering. It does not include NBC or CBS, which broadcast many sports, including the all-important National Football League. Of course, NBC and CBS are free over-the-air with a digital antenna, and both offer streaming services (NBC's Peacock and CBS's Paramount+) that already include sports.

Still, the more consumers feel they need to add more to this service, the greater the cost and hassle, and the less attractive it will become.

Now that the joint venture exists, perhaps distributors can also eventually get more flexibility to offer similar reduced packages.

There is another dynamic at play: ESPN still plans to launch a full direct-to-consumer offering in the fall of 2025, CEO Bob Iger said Wednesday. That product will also have an audience.

It remains to be seen how many people subscribe to the new platform. Maybe it's a turning point, maybe not.

Traditional pay television still has about 70 million subscribers. That includes so-called “virtual MVPDs,” like YouTube TV, which just announced it has more than eight million subscribers.

The cable package has survived largely because it still contains exclusive live news and sports.

There's now a cheaper way to access most sports, and it doesn't include cable news networks like Fox News, CNN, MSNBC and CNBC. The change could pose a threat to those channels, which now risk losing subscribers.

Could news networks band together to offer a slimmed-down news package, similar to the new sports package? Or will the new sports company be a catalyst for news packages, a concept that CNBC has written about for many years but hasn't happened? Could Fox News combine with other conservative-leaning publications? Could CNBC partner with The Wall Street Journal or the Financial Times to offer a mix of print and video?

These are hypotheses, but the sports package may force executives to think in new ways.

Rich Greenfield, media analyst at LightShed, called the new sports platform “the winners' package.” To some extent, he is right. Customers of this new platform will continue to pay Disney, Warner Bros. and Fox for content, and will not pay NBCUniversal and Paramount Global.

But it also brings risks for Warner Bros. and Disney.

Warner Bros. has separated TNT, TBS and TruTV from the rest of its networks with the reduced package. This may lead pay TV distributors to require that they pay only for the same package, putting many of Discovery's former networks, including HGTV, Animal Planet, TLC and Discovery Channel, at risk. These are low-cost, profitable channels for Warner Bros.

Those who want the Discovery networks can always subscribe to Max. All the content is already there.

Fox faces fewer risks. Cable providers will likely still need Fox News to placate the network's rabid fan base.

Disney's flagship streaming service ESPN now feels muted by this new sports offering. Previously, the only way for cord cutters to remove ESPN from the cable package would have been that next service. Now, the new platform will also give cord-cutters a more affordable way to get ESPN.

He The joint venture will require Disney to split revenues with two other companies. Disney's direct-to-consumer offering is all Disney. The launch of the platform appears to be at best a hedge and at worst a criticism of the potential popularity of an expensive streaming product exclusive to ESPN.

One possible way Disney could add some juice to its own direct-to-consumer product is if the three companies' sports platform comes with limited or no on-demand options. But if that's true, it may diminish the joint venture's appeal.

Part of the reason behind this announcement comes down to competitive dynamics. There has never been any love between Disney and Comcast.

It probably shouldn't be surprising that the product wasn't a shared venture between those two companies after years of disagreements over Hulu's direction. Ownership of the product is still divided between the companies as valuation discussions progress toward making the service fully owned by Disney.

The structure can also be seen as a not-so-subtle swipe at Paramount Global and NBCUniversal by Warner Bros. CEO David Zaslav, who may have interest in merging with one or both companies.

The message it sent to Paramount Global and NBCUniversal is clear: you are no longer strong enough on your own. Not inviting either company to the sports platform party is a sign that Iger and Zaslav feel programming from NBCUniversal and Paramount Global simply isn't necessary.

If the joint venture turns out to be a “monster,” Zaslav may have gained some leverage in future merger discussions.

Disclosure: Comcast's NBCUniversal is the parent company of CNBC.

WATCH: ESPN should have been in a sports package “from the beginning,” says Lightshed's Rich Greenfield

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