The Disney/FOX/Warner Sports Network Faces Concerns From U.S. Gov.

Despite the streaming wars being a major topic over the past five years or so there have already been multiple mergers, sales and even shutdowns of some services. Most of the mergers were made out of necessity to try and stay afloat. One of those mergers being announced earlier this year with Disney owned ESPN, Fox Sports and Warner Bros. Discovery announcing a joint sports streaming service where all major sports brands could be in one place. The currently unnamed service is believed to launch later in the year.


However, the announcement has received some major pushback. Fubo TV, another major sports streamer/broadcaster filed an antitrust lawsuit against the three companies due to unfair competition. 

Now the steaming alliance is facing some scrutiny from the United States Federal Government. On April 16th both Representatives Rep. Jerrold Nadler (D.-NY) and Rep. Joaquin Castro (D.-Texas) sent a letter expressing concerns over the venture. 

“As programmers, your companies exert tremendous influence over pricing across the live sports TV ecosystem. They continue to say that the venture “raises questions about how this new offering would affect access, competition, and choice in the sports streaming market.“

“Without more complete information about the pricing, intent, and organization of this new venture, we are concerned that this consolidation will result in higher prices for consumers and less fair licensing terms for upstream sports leagues and downstream video distributors.“

The letter also included a total of 19 questions for the companies:

1. – What are the relevant markets impacted by the Joint Venture?
2. – How many subscribers is the Joint Venture projected to have within 1, 3, and 5 years of launch?
3. – Will the Joint Venture distribute channels of non-joint venture partners?
4. – How will the Joint Venture Partners determine the pricing of their own sports channels (e.g., Fox Sports, ESPN) included in the Joint Venture?
5. – How do those prices compare to prices at which such channels are currently licensed to third-party MVPDs or virtual MVPDs?
6. – Will the Joint Venture Partners implement provisions to prevent anti-competitive sharing of pricing or other competitively sensitive information among each other?
7. – What measures will the Joint Venture Partners implement to prevent interlocking directorates?
8. – When will the pricing of the Joint Venture be determined and announced?
9. – What League Properties does each Joint Venture Partner currently hold the rights to, where “League Property” means a content licensing agreement with any of the following: the NFL, the NBA, the MLB, the NHL, the NCAA Basketball Tournament, NCAA Football (by major league) and NCAA Basketball (Men’s and Women’s). What League Properties to licensors other than the Joint Venture Partners hold the rights to?
10. – For each of the sports channels that will be included in the new service, how many hours of live events for League Properties does the channel transmit per calendar year?
11. – To what extent will customers be offered opportunities to bundle other products offered by the Joint Venture partners with the Joint Venture? Will Joint Venture customers be offered the opportunity to bundle the Joint Venture with direct-to-consumer products of third parties?
12. – Will the Joint Venture Partners offer stand-alone streaming sports services? If the Joint Venture Partners decide to offer independent offerings from the Joint Venture, how will firewalls be implemented to ensure there is no collusion between the Joint Venture and their independent streaming sports offers?
13. – The Joint Venture Partners currently bid against each other for sports content. However, the new venture will be pooling sports content among the Joint Venture Partners. Will the Joint Venture Partners continue to bid competitively against one another for sports rights as they become available?
14. – Will the Joint Venture Partners make the channels they include in the Joint Venture available to third parties on non-discriminatory terms?
15. – Will the Joint Venture partners negotiate jointly with MVPDs to license sports channels? Also, with virtual MVPDs?
16. – Will the Joint Venture Partners continue to require that MVPDs and virtual MVPDs purchase other programming in addition to their sports channels as a condition of their licensing agreements? Will the Joint Venture Partners continue to require penetration minimums for their sports and other channels when negotiating with MVPDs and other virtual MVPDs?
17. – The companies propose to engage in a form of vertical integration, leveraging their content assets into a virtual MVPD. In previous transactions involving vertical integration between programmers and MVPDs (e.g., Comcast-NCBU, AT&T-Time Warner), the parties made certain commitments to submit licensing negotiations to binding arbitration. Will joint venture partners make similar commitments?
18. – Prior to negotiation of the Joint Venture, what standalone plans had each of the Joint Venture Partners considered for making their sports channels available via streaming, including but not limited the launch of a new virtual MVPD or inclusion in the Joint Venture Partner’s existing streaming service (e.g., Disney+ or MAX).
19.  – Do you anticipate the joint venture will be required to make a filing with the Department of Justice and Federal Trade Commission under the Hart-Scott-Rodino Act?

The companies have until April 30th to respond. While it is true that such an alliance could be seen as a potential monopoly, it should be noted that Hulu was at one point a joint venture between Disney, 20th Century Fox and NBC Universal. We will have to wait and see what the response from the executives might be and if this joint effort will be allowed to move forward. 

Source: WDWNT