The new ESPN joint venture (JV) adds value for Walt Disney (NYSE:DIS) shareholders, according to analysts at Needham & Company on Wednesday.
DIS's ESPN, Warner Bros. Discovery (NASDAQ:WBD) and Fox Corporation (FOX) said Tuesday that they will create a new sports streaming service with their linear sports channels plus some direct-to-consumer sports content in what will become the largest US sports-centric streaming service available.
Needham & Company estimates that the joint venture will see the three companies control 85% of US sports rights.
"DIS will own 1/3 of the new JV and continue to own 100% of its sports rights, but by licensing its rights non-exclusively to the new JV we expect DIS to collect revs lost when linear TV subs cut the cord," analysts said.
"This JV represents a new distribution partner for DIS, without an intermediary rev share," they added. "Also, ESPN commands the highest fees from the smallest distributors and this new JV will start with zero subs."