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Justice Department to Scrutinize Proposed Streaming Service from Disney, Fox, and Warner Bros. Discovery

by Violet Dawson
0 comment

Despite questions surrounding the new sports streaming service, the Justice Department has actively monitored developments in both the sports and media sectors that may raise antitrust concerns.

The Justice Department is gearing up to closely examine the new streaming service proposed by Walt Disney Co., Fox Corp., and Warner Bros. Discovery Inc., expressing concerns about potential harm to consumers, competitors in the media landscape, and sports league.

Sources familiar with the process indicate that regulators will delve into the specifics of the joint venture once finalized. However, the companies involved have yet to be formally notified of the impending review. Despite the scrutiny, it remains uncertain whether this will result in any regulatory action, as stated by anonymous sources familiar with the matter.

Earlier this month, Disney, Fox, and Discovery unveiled plans for the new streaming service, which would amalgamate content from Disney’s ESPN and ABC networks, Fox, and Warner channels such as TNT and TBS. Analysts at Citi estimate that the joint venture could command approximately 55% of US sports rights by cost, equating to roughly $14.4 billion of $26.7 billion spent in 2024.

The companies assert that their objective is to attract viewers who do not subscribe to traditional pay-television bundles, offering them sports programming akin to what’s available on conventional cable packages. However, the announcement has already sparked objections from smaller cable providers and at least one Internet TV service, which contends that it could lead to increased prices.

Steve Salop, an emeritus antitrust professor at Georgetown Law School, remarked that the deal “reduces the number of options” for sports leagues to sell their rights.

While the Justice Department declined to comment, officials from the involved companies did not immediately respond to requests for comment.

The proposed streaming service would provide access to hundreds of hours of content from Major League Baseball, the National Basketball Association, the National Hockey League, NASCAR, and college basketball. However, it’s worth noting that only about half of the most valuable sports franchise, the National Football League, would be available on the service, as rights to certain games are held by Comcast Corp.’s NBC, Paramount Global Inc.’s CBS and Amazon.com Inc.

Despite questions surrounding the new sports streaming service, the Justice Department has actively monitoring developments in both the sports and media sectors that may raise antitrust concerns. Notably, the agency has initiated a probe into the PGA Tour amid allegations of exerting pressure on players to prevent them from joining Saudi-backed LIV Golf. Additionally, the Justice Department recently joined an antitrust lawsuit against the National Collegiate Athletics Association over rules limiting player transfers.

In the past, the Justice Department approved Disney’s acquisition of assets from Fox in 2018, except for those related to sports, which were deemed “two of the country’s most valuable cable sports properties.” Similarly, the agency lost its bid to block AT&T Inc.’s merger with Time Warner in 2018, with a judge ultimately rejecting arguments that the deal would lead to higher consumer prices.

However, the landscape has evolved, with AT&T subsequently spinning off its business to Discovery Inc. After reviewing the deal, the Justice Department opted against a challenge but cautioned that it could reopen an investigation later if deemed necessary.

Under the Biden administration, there is heightened scrutiny of joint ventures in certain markets, as evidenced by the dissolution of a partnership between American Airlines Group Inc. and JetBlue Airways Corp. last year.

While some anticipate regulatory clearance for the streaming deal, analysts foresee a lengthy review process. Paul Gallant, an analyst for Cowen & Co., suggests that regulators may scrutinize whether the joint venture discourages competition among Warner, Fox, and Disney for specific sports rights.

Despite historical precedents, such as the Justice Department blocking a joint venture between Viacom’s Showtime and The Movie Channel in 1983, modern deals involving advanced technology present unique challenges.

“We are sceptical that there is a clear antitrust case for blocking here,” noted Blair Levin, an analyst with New Street Research, although reactions from affected parties could prompt government intervention to ensure continued access to local sports content.

Disney Chief Financial Officer Hugh Johnston emphasized that the participating companies will continue to compete for sports rights with each other. Additionally, it was emphasized that the new service will offer non-exclusive content.

Looking ahead, Disney plans to launch a streaming version of its ESPN brand within a year, boasting interactive features such as sports betting and fan chat functionalities. Fox currently lacks a subscription-based sports streaming service, while Warner Bros. A $9.99 add-on for live sports streaming is required for Max service.

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