Venu Sports, the new sports streaming service created in partnership by Disney’s ESPN, Warner Bros. Discovery (NASDAQ:WBD), and Fox Corporation (NASDAQ:FOX), is set to launch with a monthly subscription price of $42.99. The announcement has sparked debate among Wall Street analysts about whether consumers will be willing to pay for another standalone service, especially at a time when streaming options are abundant.
Fox CEO Confident in Pricing Strategy
Fox CEO Lachlan Murdoch expressed confidence in the pricing strategy during the company’s fiscal fourth-quarter earnings call, stating that $42.99 is the right price point for Venu Sports. “We think that really hits the right mark and the target for where we want to be as a business, but also as a consumer proposition,” Murdoch said. This price point is on the lower end of expectations, with Morgan Stanley previously estimating a potential range between $40 and $50 per month.
Murdoch also emphasized the importance of targeting “cord cutters” and “cord nevers,” noting that Venu Sports aims to capture sports fans who are not currently subscribed to traditional cable television bundles. The goal is to reach around 5 million subscribers by 2029, a milestone Murdoch believes is achievable given the current market dynamics.
Financial Outlook and Strategic Goals
Fox CFO Steve Tomsic provided further insight into the financial expectations for Venu Sports. While acknowledging that it will take some time for the service to reach break-even cash flows, Tomsic is optimistic about the long-term revenue potential from affiliate fees. He noted that Fox, as a key supplier to the joint venture, expects the service to be accretive on a “pretty quick basis.”
Fox’s recent financial performance has been solid, with fourth-quarter affiliate revenue growing 5% year over year, including 2% growth in cable and 9% in television. The company anticipates continued growth in affiliate fees into 2025, despite an overall decline in traditional cable subscribers.
Potential Risks and Challenges
Despite the optimistic outlook, Venu Sports faces several challenges ahead of its launch. One significant risk involves potential antitrust regulation. Competitor FuboTV (NYSE:FUBO) has already filed a lawsuit against the media giants behind the joint venture, alleging “extreme suppression of competition in the US sports-focused streaming market.” The companies have acknowledged the possibility of antitrust hurdles, noting that the launch of the service is contingent upon regulatory approval and finalizing definitive agreements.
Another major challenge for Venu Sports is the recent loss of NBA rights for Warner Bros. Discovery. The NBA’s decision to award media rights to Amazon (NASDAQ:AMZN) and Comcast’s NBCUniversal instead of renewing with Warner Bros. has raised concerns about the platform’s viability. Without NBA rights, Warner Bros. Discovery could struggle to maintain its position within the joint venture, potentially weakening the service’s appeal to consumers.
eMarketer senior analyst Ross Benes has cautioned that the loss of NBA rights could diminish Warner Bros. Discovery’s leverage, affecting its ability to sustain or grow its retransmission fees. This development could impact the overall strength of Venu Sports, which relies on the collective sports rights holdings of its partner companies.
Conclusion
As Venu Sports prepares for its debut, the $42.99 price point reflects a calculated effort to balance consumer expectations with the service’s business objectives. With a target of 5 million subscribers by 2029, the joint venture between Disney, Warner Bros. Discovery, and Fox aims to carve out a significant share of the sports streaming market. However, the service must navigate challenges, including antitrust scrutiny and the loss of key sports rights, to achieve long-term success.
Featured Image: Freepik
