ESPN Flagship

Venu Sports, the joint sports streaming venture between ESPN, Fox and TNT Sports, may already be dead. But Wells Fargo analyst Steven Cahall believes the partnership could end up right back where it started, with ESPN licensing Fox Sports content for its “ESPN Flagship” service starting in 2025.

Cahall appeared on The Town podcas t and expressed his belief that based on filings in the lawsuit between Fubo and Venu , the original impetus for Venu came when ESPN approached Fox about a licensing deal for its direct-to-consumer “Flagship” service.

Cahall believes the deal still makes sense for both sides , especially considering that Warner Bros. Discovery is basically a dead weight in any version of a Venu-type partnership if it loses NBA rights as expected.

“This is the new generation of cord-cutters and cord-nevers, and this is how they want to engage with content,” Cahall explained to host Matthew Belloni of Puck. “They want to have a la carte streaming products, and that’s what Venu was more targeting, and that’s what ESPN direct-to-consumer is going to target … If I’m a college football fan, I can go onto ESPN Flagship, especially if it has Fox included, which I think it will.”

Rather than invite more regulatory pressure from competitors or the federal government, Cahall believes this more traditional licensing arrangement would actually go over more smoothly for ESPN and Fox, because ESPN would be paying Fox directly to put its content on “Flagship” rather than bundling a combined catalog within a new company as theoretical competitors.

“Fox’s decision to sublicense content where it’s not part of the ultimate distribution is very different in the eyes of the regulators than ESPN simply licensing in this content,” Cahall said.

From a financial standpoint, Cahall estimated Fox would receive about $10 per month per Venu Sports subscriber. He believes they can negotiate effectively the same rate from ESPN to license the World Series, NFL games and more for “Flagship.”

In general, Cahall is bullish on a a fruitful future for sports streaming platforms and other sports-first subscription packages. While ESPN (along with every other television business) has a long way to go to recoup its cable carriage fees fully, Cahall sees a significant willingness on the part of younger sports fans to pay for sports content. Whether that is through a multichannel video programming distributor like Fubo , a sports-only bundled service , or a standalone service, Cahall believes there will be a market.

“Their willingness to pay for sports (is) higher,” Cahall said. “What they don’t want to pay for is legacy, network-based entertainment.”

With so much focus on sports networks’ losses and speculation about a potential sports rights bubble, it’s rare to hear someone be bullish on distributors selling sports to consumers. Still, even if Cahall is correct and both ESPN and Fox find success selling sports subscriptions to audiences, that is effectively just step one toward a digital-first business that is profitable at a large scale.

[ The Town with Matthew Belloni ]

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