The ESPN-Fox-WBD sports venture is a counterstrike against Big Tech and rights fees inflation. Here's how.

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The new "joint venture" sports streaming partnership between Disney's ESPN (DIS), Warner Bros. Discovery (WBD), and Fox (FOXA) could have serious implications on the entire sports ecosystem.

In other words, future deals could be a lot cheaper while Wall Street watchers say the partnership tilts the power away from Big Tech as prices skyrocket across multiple professional and collegiate leagues.

The deal, announced late Tuesday, will bring together the three companies' respective slates of sports networks. Collectively, the new service encompasses about 55% of US sports rights, according to Citi Research.

In recent years, tech giants like Amazon (AMZN), Apple (AAPL), and YouTube (GOOG, GOOGL) have been more aggressive when it comes to streaming deals over the past several years — especially for sports.

"We see this move as defensive vs Big Tech angling into future rights as media will now have both production and distribution," Wells Fargo analyst Steve Cahall wrote in reaction to the news.

Amazon, which recently debuted the first Black Friday NFL game, agreed to spend $1 billion annually for its 11-year NFL Thursday Night Football deal, while Google's YouTube coughed up a reported $2.5 billion to acquire the sought-after rights to NFL Sunday Ticket.

Apple, meanwhile, announced a 10-year, $2.5 billion agreement with Major League Soccer in late 2022. It's also rumored to be bidding on Formula One and NBA rights.

Those deals, funded by the deep pockets of Big Tech, have inflated the overall costs of sports with the NBA aiming to fetch a whopping $75 billion rights package, up from its current $24 billion deal with ESPN and WBD's TNT. The current deal expires at the end of the 2024/25 season.

Seventy five billion dollars "is a big number," Mark Boidman, partner and global head of media at Solomon Partners, told Yahoo Finance Live on Wednesday. "The cost [of sports] continues to go up and so you bring these companies together, it takes the competitive tension out of the mix."

He added: "In the medium term, it's going to allow them to ... better compete for this content, which is extremely expensive ... It's also going to allow them to absorb the cost together as a group as opposed to each of them individually going after the same type of content."

Currently, it's assumed Disney, Fox, and Warner Bros. Discovery will continue to bid on sports rights independently; however, media watchers have begun to weigh the possibility of the three companies bidding for rights as a single entity.

Phoenix Suns guard Bradley Beal (3) slips past Milwaukee Bucks guard Malik Beasley (5) to get a shot off against Bucks center Robin Lopez during the second half of an NBA basketball game Tuesday, Feb. 6, 2024, in Phoenix. The NBA is aiming to fetch a whopping $75 billion sports rights package. (AP Photo/Ross D. Franklin)
The $75 billion men? NBA basketball in action on Feb. 6. (Ross D. Franklin/AP Photo) (ASSOCIATED PRESS)

"Companies coming together bidding on potential sports rights could be interesting," Boidman said. "We don't know if that will happen. But that's certainly something that we project could happen."

MoffettNathanson analyst Michael Nathanson added a possible combo bid "could change the shape and leverage of future sports rights negotiations."

"If this joint venture evolves over time into a different form and eventually bids as a combined entity for sports rights, that would clearly limit the number of +1 bidders critical to maintaining the inflation in future negotiations that the entire sports ecosystem is built around," he wrote in a note to clients on Tuesday.

Altogether, Nathanson said, this partnership serves as "the ultimate play" for Disney, WBD, and Fox "to take ownership of their own sports destinies, foregoing their reliance on the current distribution system."

It could also mean individual rights renewals will be less critical for each of these companies, as they would now be able to leverage the content owned by others in the bundle.

"That would be bad for sports leagues and a reason they would advocate strongly against this joint venture," LightShed Partners' Rich Greenfield argued in a separate note on Wednesday.

"The counterpoint is that if this makes Disney/Fox/WBD stronger they will be even more willing to pay up for sports rights and better apt to compete against ever larger technology juggernauts that have entered sports (such as Amazon and Apple)," he added.

'It's going to be expensive'

Still, a bigger question revolves around sign-ups, especially when it comes to consumers footing the bill for an additional service rather than watching sports as part of the cable bundle.

In that regard, pricing for the service will be critical. According to a new CNBC report, the joint service will be priced at or above $40 per month — on par with Wall Street estimates. The report added an executive has been identified to lead the new venture. That executive will be announced at a later date.

"It's going to be expensive, but relative to what you're paying for cable, maybe not," Boidman said. "As these companies think about pricing this plan, they're going to think very carefully about what people are paying for today to offset any losses."

"So the reality is the consumer should win here, because you'll have more choice," he continued. "But the question is, will you actually want to fork out that amount of money for this programming?"

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].

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