Disney Buys One-Third of BAMTech for $1 Billion

Extending a string of aggressive investments and acquisitions this decade, Disney Tuesday said it was acquiring 33% of BAMTech, the tech services and video streaming operation launched by Major League Baseball.

The deal, which will see Disney pay $1 billion in two installments over the next 18 months, gives the company the option to acquire a majority stake in the coming years. BAMTech is also breaking away from MLB upon the announcement Tuesday.

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Disney will use the new asset, which it hopes will prove as transformative as recent acquisitions such as Marvel and Lucasfilm, to launch a new direct-to-consumer OTT app for ESPN. Separately, the company said AT&T/DirecTV will be including ESPN, Freeform, Disney Channel and other nets in its OTT bundle.

BAMTech, which launched in 2000 and pioneered sports streaming starting in the Web 1.0 era, has spearheaded the launch of a range of OTT services for the likes of HBO, WWE and  other top-tier video and TV entities. It also created an OTT service for the NHL, which, under a separate arrangement, netted a small stake in BAMtech as part of today's announcement. BAMtech's properties have 7.5 million total paid subscribers to its clients’ OTT products.

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“Our investment in BAMTech gives us the technology infrastructure we need to quickly scale and monetize our streaming capabilities at ESPN and across our company,” said Bob Iger, chairman and CEO of Disney. “We look forward to working closely with BAMTech as we explore new ways to deliver the unmatched content of The Walt Disney Company across a variety of platforms.”

The launch of the ESPN OTT, which would "probably" happen by the end of 2016, will keep the brand "strong, vital and relevant in a changing media landscape," Iger added in kicking off a call with Wall Street analysts. The nearly hour-long call was dominated by questions about the OTT plan and the BAMtech stake.

Iger said the deal would not entail any additional outlay in terms of spending on sports rights. "We have a lot of rights that are already purchased to put product on this platform," he said. "Long term, there may be an opportunity to purchase rights to put on this platform." But near term, there is no specific pricetag for rights linked directly to the deal.

Pricing was not revealed for the service, which will include content licensed by Major League Baseball as well as things Disney has acquired, including college football and basketball, tennis, rugby, critic. "The goal is not to take content off ESPN's current channels but to use product that's been licensed but it not currently on the channels." Because it won't be robbing one platform to stock another, Iger described the OTT as a "complementary service" to the linear ESPN networks.

With rights deals continuing to rise sharply as live sports retain popularity even as other viewing shifts toward on-demand consumption, Iger said it would continue to be a priority to stay in the sports game. "Our best interest as a company is to invest more in the total pie even if it means fragmentation" given the consistent viewer appretite for sports, he said. "We can't look you in the eye and say that costs are going to go down because it's still among the most valuable assets out there." 

The ad load for the ESPN OTT, which is expected to launch by year-end, will "basically be the same" as the linear network, Iger told analysts. The sales team will be the same one selling ads on linear and other platforms.

As to the inclusion of ESPN and other Disney networks in AT&T/DirecTV's skinny bundle offerings, Iger said the goal of getting distribution in such offerings remains an important one. Bundles such as Dish's Sling TV, which does not include ESPN, have less viability, Iger argued.

Sling "is so skinny you can't even see it," he joked.