Amazon (AMZN) and Apple (AAPL) have shown an increased interest in streaming live sports over the past year, with each company paying billions for new sports media rights and pursuing further projects.
While this may flash a warning sign to smaller broadcasting companies that can’t afford a bidding war with the tech giants, analysts told Yahoo Finance the sports streaming wars will be influenced by brand loyalty and not just who has the most money.
“[Big Tech companies] have huge balance sheets, but they don’t have the experience or the reach,” Jessica Reif Ehrlich, senior U.S. media and entertainment analyst at BofA Securities, told Yahoo Finance Live (video above). “The NFL, NBA have to be careful about the deals they do because they don’t want to lose the fan base. You lose your fan base, it's hard to get that back.”
Amazon is set to air its first NFL Thursday Night Football game in less than a month and is also reportedly in a bidding war with Apple over NFL Sunday Ticket and Big Ten streaming rights.
Ehrlich added that ESPN, despite being the most recognizable brand in sports streaming, is being more selective on which rights to bid as parent company Disney (DIS) develops an overarching streaming portfolio.
During Disney’s third-quarter investors' call last week, CEO Bob Chapek reiterated he’s “still bullish on sports” and teased the potential of a sports betting partnership in the future — something that Ehrlich said could be a good opportunity for Disney.
“They have a great brand name in sports, and they haven’t really capitalized on that,” Ehrlich said. “That’s something we expect in the next year or so: A low-risk way for Disney to get benefit out of the ESPN name in the sports betting universe.”
Disney recently missed quarterly estimates for ESPN+ subscriber growth, and ESPN lost out on Big Ten football media rights for the first time in 40-years. Earlier this week, activist investor Dan Loeb called for Disney to spin-off its ESPN business.
If Disney could successfully spin-off ESPN while keeping it as a part of the streaming package, the company would satisfy the concerns of both Loeb and Wall Street analysts. Even Needham and Company’s Laura Martin, who told Yahoo Finance that Amazon and Apple could “destroy the streaming business,” believes Disney will eventually be a winner in the space.
Martin’s case, like others on the Street, centers around Disney’s bundle package. Even if Disney spins off ESPN, it could still package ESPN+ with Disney+ and Hulu for a price similar to one Netflix subscription.
"Part of their case is they can bundle," Martin said. "Churn is what's killing you. As competition increases, consumers stay shorter on your service because they watch what they want, they turn it off and sign up or another service to watch what they want to watch that month. Churn kills you. What's great about the Walt Disney Company is they have sister subsidiaries."
Tigress Financial Partners Chief Investment Officer Ivan Feinseth echoed that sentiment, arguing that there is enough sports streaming content overall to support multiple winners in terms of live sports streaming.
“It's not a zero-sum game,” Feinseth told Yahoo Finance Live last week. “We see that people subscribe to multiple services. It’s not that you pick one and you’re done. On average people have three services. So, I think there’s room for everybody, but I still believe that the power of Disney’s content will drive their dominant position."
Josh is a reporter and producer for Yahoo Finance.