Disney's ESPN (DIS) will team up with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, set to debut sometime this fall.
According to the companies, the platform will bring together their respective slate of sports networks along with certain direct-to-consumer (DTC) sports services and sports rights. This will include content from all the major professional sports leagues and college sports.
The offering, which was described as a "joint venture" split evenly between the three parties, will be available to consumers via a new app. Subscribers will also have the ability to bundle the product with Disney+, Hulu, and Max.
The news, announced on Tuesday, comes as sports streaming rights have skyrocketed with both ESPN and Warner Bros. Discovery’s TNT renegotiating their packages with the National Basketball Association (NBA).
The service will be priced at or above $40 per month, according to a new CNBC report, citing sources. The report added an executive has been identified to lead the new venture. The executive will be announced at a later date.
Shares of Fox and WBD fell about 6% and 3%, respectively, in mid-morning trading on Wednesday. Disney shares fell just over 1%. Fox reported earnings before the bell. Disney will report after market close.
To note, this is separate from Disney's ESPN streaming ambitions. The company is still seeking strategic partners, either through a joint venture or part ownership, to enable ESPN to launch a flagship direct-to-consumer service in the next few years.
Disney has held exploratory talks with major sports leagues, including the NFL, NBA, and MLB regarding strategic partnerships, according to a source with knowledge of Disney's plans. Talks reportedly have heated up with the NFL regarding a potential equity stake.
Although Tuesday's news highlights how serious Disney is when it comes to sports streaming, analysts and media watchers have cautioned that ESPN's full transition to streaming will be a difficult journey.
In particular, concerns have risen when it comes to consumers footing the bill for an additional service rather than watching sports as part of the cable bundle.
But the company's former streaming chief believes sports fans will be willing to pay — even if the price tag is higher than what most platforms currently cost.
"People have always paid a lot for sports," Kevin Mayer, who now runs Blackstone-backed entertainment startup Candle Media, said at the Yahoo Finance Invest Conference late last year. "They didn't always know it because back in the day when 95% of this country had paid TV bundles, probably 40% to 50% of the cost of that bundle was sports programming. ... [But] now they can do so explicitly."
Mayer, who is currently serving as a strategic adviser to Iger, said his former boss is "definitely most focused on making sure that ESPN, a company that he really believes in strongly, is well positioned for the future."
Disney hasn't disclosed any details regarding pricing for the ESPN service, although — similar to the joint venture's reported price — analysts have estimated it would need to cost a minimum of around $30 a month in order to break even.
Mayer, however, insisted that $30 a month is an "entirely reasonable price to get the full suite of sports that ESPN would offer."
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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