Dept. of Justice being asked to investigate Disney, Fox, Warner Bros joint venture

Sens. Elizabeth Warren and Bernie Sanders and Rep. Joaquin Castro have sent a letter to the Department of Justice asking it to investigate and potentially prevent Disney, Fox and Warner Bros’ from starting a joint venture that will combine the resources of ESPN, Fox Sports and TNT Sports in a direct-to-consumer streaming service called Venu Sports.

In the letter, obtained by The Athletic, the three Democrats urged the Department of Justice to examine Venu Sports “and oppose it if it violates antitrust or telecommunications laws or regulations.” They also think that Venu being described as a joint venture should not prevent it from scrutiny.

Venu Sports is slated to begin soon at a rate of $42.99 per month. Subscribers will not need a cable subscription and will be able to access all the programming and games from the three networks and their affiliates (such as ABC and Fox), plus ESPN+, the network’s extra direct-to-consumer service that features more niche sports.

ESPN has plans to make its network available directly to consumers as a standalone product next year, which The Athletic has previously reported is expected to cost $25-$30 per month.

Viewers can currently subscribe to services such as YouTube TV for around $70-$75, which includes all three networks plus the other major broadcast entities, NBC and CBS. Both of those networks also have their own direct-to-consumer streaming products.

Fox CEO Lachlan Murdoch reiterated during his company’s earnings call this week that he expected Venu Sports to hit five million subscribers by 2029. While the agreement is between the trio, the subscription revenue from Venu Sports is based on the same formula as the networks receive from cable and satellite providers. ESPN, which makes in excess of $10 per cable subscriber, is set to receive the highest portion of Venu Sports revenue.

When reached, a spokesperson for Venu Sports did not comment.

In the letter from Sens. Warren and Sanders and Rep. Castro, the trio “expressed serious” concerns about Venu Sports, saying that it is “poised to control more than 80 percent of nationally broadcast sports and half of all national sports content, putting it in a position to exercise monopoly power over televised sports. The market power of its three giant parent companies would enable it to discriminate against competitors and increase prices for consumers.”

Venu Sports is already facing a legal challenge from Fubo, a direct-to-consumer provider that carries ESPN and Fox Sports, but not TNT. Fubo is trying to invoke a preliminary injunction in a Manhattan district court to stop the service before it starts.

The senators and congressman seem to agree with Fubo’s premise that ESPN, Fox Sports and TNT are not offering other platforms the opportunity to combine the trio, noting that Disney, ESPN’s parent company, often bundles its “other non-critical, low-demand channels and requires that competitor sports streaming platforms purchase and display the entire bundle to access ESPN.” The letter also argues that joint venture is inconsistent with the goals of FCC’s National Ownership cap that limits any one station from reaching more than 39 percent of television households.

One of ESPN’s counter-arguments has been that it was in around 100 million homes in 2011 and now is in 66.5 million households, according to Nielsen’s latest numbers. It needs to find new customers that either are cutting cable or never have had cable or cable-like offerings, and so it is putting forth multiple price points that will range from $25 to $75 per month. Fox Sports has no other paid streaming service, while TNT Sports is part of the Max platform that features HBO, among other channels.

The letter concludes ”that the “DOJ and FCC should closely scrutinize this transaction and take immediate action to block it if it violates antitrust law, or if it does not serve the ‘public interest, convenience, and necessity.’”

View the letter in full here.

Required reading

(Photo: Jim Watson / AFP via Getty Images)