FLASH: Big money target WBD, DIS, FOXA! Buy?
In this modern age of business, if there is one thing to learn from observations is — there are no forever competitors but forever business opportunities.
Case in point, I am referring to the recently inked business collab amongst $Walt Disney(DIS)$ , $Warner Bros. Discovery(WBD)$ and $Fox Corporation Class A(FOXA)$. (see below)
Who knows there might be more in the pipeline, further down the road. After all, it is only the beginning of 2024.
The formation of a new entity to house each company’s sports programs under one roof is but only one aspects of the overall Sport Industry.
Sport Market: Definition & Segment
- By type - spectator sports, participatory sports.
- By revenue source - media rights, merchandising, tickets, sponsorship.
- By ownership - chained, standalone.
Sub-segment - sports team & clubs, racing & individual sports, golf courses & country clubs, skiing facilities, marinas, fitness & recreational sports centres, bowling centres, other participatory sports.
Sport Market: Valuation & Projection.
The sport market size has grown strongly in recent years:
2024 projected growth stands at $506.93 Billion, at a compound annual growth rate (CAGR) of +5.6%.
Based on projected growth rate, it will become a $629.81 Billion industry by 2028 (4 years time).
Blue, Green & Red versus Purple, Orange, Grey, Yellow & White.
Oops, I have digressed.
Coming back to the Disney, Warner-Bro Discovery and Fox collaboration.
According to Citi Research, collectively, the new service encompasses about 55% of US sports rights. (see above)
The new "joint venture" sports streaming partnership between the 3 companies, could have serious implications on the entire sports ecosystem.
Wall Street watchers say the partnership tilts the power away from Big Tech as prices skyrocket across multiple professional and collegiate leagues.
By “Big Tech”, of course I am referring to $Amazon.com(AMZN)$, $Apple(AAPL)$ and Youtube ($GOOG).
They have been more aggressive when it comes to streaming deals in the recent few years — especially for sports.
Wells Fargo, analyst - Steve Cahall’s reaction to the tie-up as "defensive vs Big Tech, angling into future rights as media will now have both production and distribution”.
Intense competition: (latest)
Competition between the media versus tech companies has certainly fired up.
Amazon, recently debuted the first Black Friday NFL game has agreed to spend $1 Billion annually for its 11-year NFL Thursday Night Football deal.
Google's YouTube coughed up a reported $2.5 Billion to acquire the sought-after rights to NFL Sunday Ticket.
Apple, not to be outdone by its rivals (above) has announced a 10-year, $2.5 Billion agreement with Major League Soccer (MLS) in late 2022. It is also rumored to be putting in bids for exclusive rights for (a) Formula One and (b) NBA.
The deals funded by the Big Tech (with deep pockets), have inflated the overall costs of sports with the NBA, aiming to fetch a whopping $75 Billion rights package.
This is up from its current $24 Billion deal with ESPN and WBD's TNT; that is set to expire at the end of the 2024/25 season.
My viewpoints : (mine & mine only)
From a consumer viewpoint, will competition between the Big 3 versus the Big Tech result in higher subscription fees ?
If the reply is “yes”, then it is the consumer who will be at the losing end of the competition. How could that be equitable?
Having said that, there seems to be an insatiable demand for “live” sports streaming in recent years.
Even Netflix, which has shunned live sports, recently signed a 10-year agreement to stream WWE Raw.
Is it the thrill of watching sports “live” in the comfort of one’s home or at the stadium more enjoyable than participating in the sports itself ? I have no idea!
What is certain though is that the new platform should be available by this Fall, in time for the NFL and college football seasons.
As in all business deals, there are both disadvantages & advantages in the latest offering.
Disadvantages:
Antitrust Concerns: Regulators might scrutinize the merger due to its potential impact on competition and consumer choice. The combined entity could dominate sports broadcasting, reducing options for fans and potentially influencing prices.
Integration Challenges: Merging three large organizations with different cultures and operations could be complex & time-consuming. Integrating infrastructure, personnel, and technology could delay benefits and incur significant costs.
Advantages:
Dominant Media Powerhouse: The merger could create a media giant with unparalleled sports content rights, including NFL, NBA, MLB, NHL, college football, and international rights. This vast portfolio could attract significant viewership and advertising revenue.
Content Synergy: Combining production resources and libraries could lead to more efficient content creation and enhanced offerings across platforms. Imagine ESPN, Turner Sports, and FS1 collaborating on documentaries or studio shows.
Streaming Leverage: The new entity could leverage popular streaming platforms like Disney+, HBO Max, and Hulu to attract and retain sports fans, offering bundled packages and exclusive content. This could disrupt the market and challenge rivals.
Disney has just reported its Q1 2024 earnings, that exceeded Wall Street expectations.
Earnings per share (EPS): $1.22 adjusted vs. $0.99 cents expected.
Revenue: $23.55 Billion vs. $23.64 Billion expected vs $23.51 YoY (+0.17%).
Net Income: $1.91 Billion vs $1.28 Billion YoY (+49.22%).
2024 Outlook: It is on track to meet its “cost-cutting” goal of $7.5 Billion by end FY 2024, with an expected fiscal 2024 earnings per share of $4.60 (approx), that is at least +20% higher than 2023.
With ex-CEO Bog Iger firmly at the helm, surely Disney knows the many benefits they are getting out of this collaboration, no?
Without the specifics and/or details, it is too early to draw any conclusion.
From what is predictable so far, there seems to be more plus+ then minus- in this project.
Of course, the proof is in the pudding.
Do we get into the act now and invest OR wait until the launch is completed before getting the feet wet, that is the million dollar question that beckons ?
Whatever the decision is, it must be supplemented by due diligence okay.
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Do you think now is the time to buy-in to Disney, Warner-Bro Discovery or Fox?
Do you think it is better to bet on Amazon (PrimeVideo), Apple (AppleTV) or Youtube?
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