Two federal lawmakers have sent a letter to the chief executives at Fox Corporation, the Walt Disney Company and Warner Bros Discovery (WBD) expressing concern over their organization of a joint venture that is tasked with developing a sports-centric streaming service.
The letter, sent by Representatives Jerrold Nadler of New York and Joaquin Castro of Texas, included nearly two dozen questions exploring whether the proposed project tentatively called Raptor would benefit the three broadcasters over cable, satellite and streaming TV distributors.
As designed, Raptor will carry sports-inclusive broadcast and cable channels owned by the programmers when it launches later this year, including Fox, ABC, ESPN, Fox Sports 1, TBS, TNT and Tru TV. Absent from the service are ancillary entertainment and news channels like Fox News, CNN, Disney and FX, which carry little to no sports programming throughout the year.
At least two pay television services — Fubo and DirecTV — have publicly complained that the broadcasters are offering better programming rights deals to their joint venture compared to what traditional cable, satellite and streaming TV services are offered.
In an antitrust lawsuit filed by Fubo earlier this year, the company argues that customers of its sports-inclusive streaming service are forced to take all channels offered by Fox, Disney and WBD in order to get the sports networks they really want because of contractual terms imposed by the programmers.
Those terms typically dictate that if a service wants to carry certain high-value channels, they must carry supplemental networks that are less desired by customers. Distributors and their customers wind up paying higher prices for programming as a result.
Nadler and Castro share some of those concerns, saying the broadcasters have typically distributed their channels through cable, satellite and streaming cable-like services before seeking to form their own joint venture.
“The joint venture raises questions about how this new offering would affect access, competition, and choice in the sports streaming market,” the lawmakers write in their letter. “Without more complete information about the pricing, intent, and organization of this new venture, we are concerned that this consolidation will result in higher prices for consumers and less fair licensing terms for upstream sports leagues and downstream video distributors.”
The lawmakers have asked for the three CEOs to furnish responses to 19 questions by the end of the month. The CEOs have also been asked to provide the same answers to the U.S. Department of Justice, which has launched an informal investigation into the joint venture.
The questions range from the mundane (how many subscribers will Raptor have within the next one to five years?) to the specific (how will the broadcasters determine the price of the channel bundles offered to the joint venture?).
It wasn’t clear if the CEOs were planning to respond to the letter. In the past, executives have publicly affirmed their belief that the Raptor project will eventually lead to more competition in the streaming video marketplace.
The full list of questions sent by the two lawmakers follow below:
What are the relevant markets impacted by the joint venture?
How many subscribers is the joint venture projected to have within 1, 3, and 5 years of launch?
Will the joint venture distribute channels of non-joint venture partners?
How will the joint venture partners determine the pricing of their own sports channels (e.g., Fox Sports, ESPN) included in the joint venture?
How do those prices compare to prices at which such channels are currently licensed to third-party MVPDs or virtual MVPDs?
Will the joint venture partners implement provisions to prevent anti-competitive sharing of pricing or other competitively sensitive information among each other?
What measures will the joint venture partners implement to prevent interlocking directorates?
When will the pricing of the joint venture be determined and announced?
What League Properties does each joint venture partner currently hold the rights to, where “League Property” means a content licensing agreement with any of the following: the NFL, the NBA, the MLB, the NHL, the NCAA Basketball Tournament, NCAA Football (by major league) and NCAA Basketball (Men’s and Women’s). What League Properties do licensors other than the joint venture partners hold the rights to?
For each of the sports channels that will be included in the new service, how many hours of live events for League Properties does the channel transmit per calendar year?
To what extent will customers be offered opportunities to bundle other products offered by the joint venture partners with the joint venture? Will joint venture customers be offered the opportunity to bundle the joint venture with direct-to-consumer products of third parties?
Will the joint venture partners offer stand-alone streaming sports services? If the joint venture partners decide to offer independent offerings from the joint venture, how will firewalls be implemented to ensure there is no collusion between the joint venture and their independent streaming sports offers?
The joint venture partners currently bid against each other for sports content. However, the new venture will be pooling sports content among the joint venture partners. Will the joint venture partners continue to bid competitively against one another for sports rights as they become available?
Will the joint venture partners make the channels they include in the joint venture available to third parties on non-discriminatory terms?
Will the joint venture partners negotiate jointly with MVPDs to license sports channels? Also, with virtual MVPDs?
Will the joint venture partners continue to require that MVPDs and virtual MVPDs purchase other programming in addition to their sports channels as a condition of their licensing agreements? Will the joint venture partners continue to require penetration minimums for their sports and other channels when negotiating with MVPDs and other virtual MVPDs?
The companies propose to engage in a form of vertical integration, leveraging their content assets into a virtual MVPD. In previous transactions involving vertical integration between programmers and MVPDs (e.g., Comcast-NBCU, AT&T-Time Warner), the parties made certain commitments to submit licensing negotiations to binding arbitration. Will joint venture partners make similar commitments?
Prior to negotiation of the joint venture, what stand-alone plans had each of the joint venture partners considered for making their sports channels available via streaming, including but not limited the launch of a new virtual MVPD or inclusion in the joint venture partner’s existing streaming service (e.g., Disney Plus or Max)?
Do you anticipate the joint venture will be required to make a filing with the Department of Justice and Federal Trade Commission under the Hart-Scott-Rodino Act?
