Disney unveils sports streaming ventures: Is it too risky?

Disney (DIS) is taking sports streaming to the next level as ESPN enters into a sports streaming venture with Warner Bros. Discovery (WBD), and Fox (FOX, FOXA), set to launch in fall 2024, while ESPN will offer its own -over-the-top (OTT) service in fall 2025.

With consumers moving away from linear TV and more into streaming, will these moves help or hurt the media giant?

Yahoo Finance Entertainment Reporter Alexandra Canal reports on this and weighs in on the decline of cable TV consumption.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

SEANA SMITH: Disney is going all in with streaming sports. The media giant announcing this week to power moves with its ESPN segment that may spell trouble for the cable bundle. Here with the details, Yahoo Finance's Alexandra Canal. So how--

ALEXANDRA CANAL: Yes.

SEANA SMITH: --should we frame this and all the news that we got this week?

ALEXANDRA CANAL: Well, two important pieces of news. One, the ESPN over-the-top streaming service, that is going to be coming sometime in fall 2025. Separately, ESPN is also teaming up with Warner Brothers Discovery and Fox for its own sports streaming combo service that is going to debut sometime this fall.

But these come at a very critical time for Disney, which like many other companies within the world of media are struggling with when it comes to consumers' pivot to streaming from linear TV. Now a big part of this conversation has been-- and if you look back in the past, a lot of these companies have relied on affiliate fees and advertising in order to drive their business.

But now, with streaming, that's sort of out the window. We've seen linear television essentially fall off the cliff. Linear Networks' revenue in that segment fell 12% year-over-year for Disney. We've also seen some serious advertising declines. But at the same time, Linear is bringing in the profits. It's still a profitable segment for Disney.

Streaming? Unprofitable. Losses continue to narrow. So it's this double-edged sword for Disney. And I was digging through some of these earnings, the conversations that analysts were having following Disney's results. And one stood out to me. This is from Morningstar analyst Matthew Dolgin.

He said that pricing is going to be a big conversation. Because right now, we don't know the prices here. The combo service, it's reportedly going to be upwards of $40 a month. We don't know what the ESPN over-the-top service is going to be. But if they're priced too low, that's going to speed up the demise of cable TV. And if it's priced too high, it's going to hinder demand there.

So when we're at this critical juncture for a lot of these media companies when it comes to weighing how linear TV can offset some of the subscriber declines monetarily, I just don't know how these companies are going to get to that point, because it's clear, that chicken and egg situation where you have, this is the future streaming, but you're losing money. Linear, not so much the future, but it's still profitable.

SEANA SMITH: Yeah.

- And now, let me get your take on this headline, which we just saw crossing from the journal, which is that Amazon's Prime Video getting to exclusively stream an NFL playoff game next season. What do you make of that and what it means for competition?

ALEXANDRA CANAL: I think this points to this [? ESPN-Warner Brothers Discovery-Fox ?] bundle that we saw come out earlier this week, because it's a defensive move against big tech. We've seen big tech really lean into sports more heavily. I mean, Amazon has that Thursday Night Football deal. That's over an 11-year period.

Google's YouTube has the rights to NFL Sunday Ticket. Apple has a deal with the MLS. So this is a way for these legacy cable operators to distribute and produce the content and not have that big tech competition. And to know, Comcast Peacock, they got an NFL play-off game this year. Now it's going to Amazon.

We don't have much details around it. But again, I think it points to how sports is the last frontier of streaming. You have big tech that has the big pockets, a lot of the money that they can support. How do these other players really compete against that? They're teaming up. So I think we're going to see more of that down the line. And that could lead to consolidation in the future.

- All right, we'll keep watching. Allie, thanks so much.

ALEXANDRA CANAL: Thank you.

- Appreciate it.