Live sports remains one of the main things people tune into on TV, and Disney, which owns live sports staple ESPN, knows it. But the media conglomerate is willing to experiment with bringing live sports to internet-only streaming services.
The company announced on Tuesday that it was acquiring a 33 percent stake in BAMtech, a technology company spun off from digital media company MLB Advanced Media, for $1 billion. It will be paid in two installments, with the option to acquire majority ownership.The deal had been rumored for months.
"We think it is a good investment," said Disney CEO Bob Iger on "Closing Bell." "We love the business model. We think that in today's world having the ability to stream on a scaled basis, live sports and live programming is a competitive advantage and something that is necessary."
BAMtech will work with ESPN to create a standalone, cable-free digital streaming service. However, the new product will not have current linear ESPN content.
The deal is independent of the upcoming DirecTV over-the-top (OTT) bundle. Disney announced on Tuesday that it will make ESPN, ESPN2, ABC, Freeform (previously known as ABC Family), Disney Channel, Disney XD and Disney Jr. available through the streaming service through different subscription packages.
On a call with analysts on Tuesday afternoon, Iger said that the pricing of the DirectTV OTT service would be similar to what consumers are used to on their traditional pay-TV services. ESPN's offering would have several options for viewers.
"By us being on these platforms at prices that make sense to us, we're really quite neutral in terms of shifting from a traditional MVPD (multi-video programming distributor) consumer to an over-the-top consumer," Iger said on the call.
"Technology has fundamentally changed the relationship that consumers have with television," said Mike Goodman, director of digital media strategies for Strategy Analytics. "It used to be dependent on appointment viewing, but across the board networks are coming to the realization that it's changing."
Disney, which reported earnings after Tuesday's closing bell, had adjusted earnings of 1.62 per share. Revenue for the fiscal 2016 third quarter was $14.277 billion.