A sports streaming app planned to debut this fall from a joint venture between Disney, Fox and Warner Bros. Discovery, expects to amass 5 million subscribers within five years, according to Fox CEO Lachlan Murdoch.
The chief executive cited the figure Monday speaking at the Morgan Stanley Technology, Media & Telecom investor conference, while emphasizing the app is built to target consumers currently outside of the pay TV bundle, where subscribers will be incremental to Fox.
“Our internal expectations and what we’ve built our plans around are that within five years we will have 5 million subscribers,” which overall, are incremental to Fox’s base, Murdoch said, adding “it’s a very good business for us.”
Although the JV-developed app will have a lot of sports content, it won’t have all, including from the NFL, but Murdoch suggested he thinks it will be able to attract that many subscribers in a handful of years as it makes life easier for consumers currently dealing with a very fragmented and confusing sports TV ecosystem.
“What this bundle does is it puts a majority of sports into one bundle, it’s an easy place for people to come to. If you’re a sports fan…and you don’t get those sports already in a big bundle this is absolutely a service you’re going to be interested in,” he said.
Fox has been one media company not to throw its proverbial eggs, including sports assets, into a streaming basket, with executives previously suggesting the pay TV bundle still offers the most effective way to monetize its content. Asked by a Morgan Stanley analyst about risks to increased cord-cutting if the forthcoming sports app ends up being a very attractive offering, Murdoch emphasized it’s not expected to cut into the pay TV business.
He said Fox thought about the JV extensively to ensure the streaming sports bundle is focused on attracting those viewers outside the traditional cable bundle. The mechanics and economics, according to Murdoch, will be similar to as if the JV were selling to virtual MVPDs like Fubo, YouTube TV or DirecTV Stream, where Fox, Disney and WBD get paid on a per subscriber basis.
“We get paid on the same economics as if they were a cable subscriber,” he said. “The pricing [of the app] because of that…is going to be in the higher ranges of what people have talked about.”
Morgan Stanley’s analyst at the event estimated the sports app bundle, which combines linear networks and digital sports assets of WBD, Disney and Fox would be priced around $40-$50.
While contending the JV doesn’t represent Fox getting into the streaming wars, Murdoch also reiterated that Fox’s distribution approach is agnostic. He said the company wants its brands and content in front of as big of an audience and as many viewers as possible, wherever they are.
“For us that means the audience that are cord cutters or cord nevers, which is a huge market in the United States. If we can put our sports in front of those fans, that will be accretive to us” Murdoch commented. “We think that’s an important place to be” and what the sports streaming JV is about, he added.
Large market for sports outside the pay TV bundle
Questioned Monday on logic that people currently remaining within the pay TV bundle essentially represent all those that are still willing to pay for sports – Fox’s CEO rebuffed the notion.
Murdoch said, looking at middle America there “are huge number of households outside of the [cable] bundle for reasons other than that they don’t love sports” such as economic reasons including impacts from inflation. “There are a lot of people that are outside of the bundle that are still…very strong, very passionate sports fans.”
And he noted sports is still the top driver of TV viewing and subscriptions, where Fox sees big opportunity for uptake of the forthcoming sports service, pegging the market at 50 million or 60 million households – or about half the TV households in the country - that don’t currently subscribe to a cable bundle.
“And so that’s a huge market, that within that 50 million or 60 million [households of cord cutters or cord nevers], there is, we believe, a very high percentage of them that will be open to taking this new package,” he said.
Fox doesn’t see regulatory concerns
The streaming sports JV hasn’t been met with positive reaction by all.
That includes sports-focused vMVPD Fubo, which filed an antitrust lawsuit against the media companies and JV, claiming anticompetitive practices and categorizing them as a “sports cartel.” Reports also surfaced that the DoJ could investigate the JV once terms are finalized.
However, asked on Monday, Fox’s CEO indicated he doesn’t expect regulatory setbacks.
“The answer is no, I don’t think we have any concerns from a regulatory approval perspective,” Murdoch said, adding that the service is pro consumer and pro competition, while focused on a cohort of people outside of pay TV not served with sports content.
“We want to serve that part of the market that’s not served today. There’s no competition in that market today,” he said. “And we want to do it in a very pro-consumer, consumer first manner.”
Leaning on Kayo for inspiration
In designing the forthcoming sports app and user interface, Murdoch cited “creative inspiration” from the Kayo Sports service that launched in Australia in 2018 from cable operator Foxtel (whose ownership includes News Corp) and has roughly 1.5 million subscribers.
Kayo includes access to Fox Sports Australia, ESPN and beIN sports.The Kayo app doesn’t feature channel brands, instead focusing on sports themselves, Murdoch noted. And while marketed to sports fans ,is not necessarily meant to be a competitor to linear. It differs from the JV sports app from a business perspective, he added, noting that Kayo has close to 100% of all sports in Australia on its platform. That won’t be the case in Fox’s U.S.-based sports streaming JV, where he also said the price of the app is also expected to be “significantly more expensive” than the Kayo service. Kayo has two subscription plans priced at $25 and $35 per month.
And while not envisioned yet, Murdoch said down the line the JV sports app is capable of integrating features like sports betting.