Venu Sports, the joint sports streaming venture between ESPN, Fox, and TNT Sports, may already be dead. But Wells Fargo analyst Steven Cahall believes the partnership could return to where it started, with ESPN licensing Fox Sports content for its “ESPN Flagship” service starting in 2025.

Cahall appeared on The city podcast and expressed his belief that, based on documents in the Fubo-Venu lawsuit, the original impetus for Venu came when ESPN approached Fox about a licensing deal for its direct-to-consumer “Flagship” service.

Cahall believes the deal still makes sense for both parties, especially considering that Warner Bros. Discovery is essentially dead weight in any version of a Venu-like partnership if it loses the NBA rights as expected.

“This is the new generation of cord-cutters and cord-nevers, and this is how they want to approach content,” Cahall explained to Puck host Matthew Belloni. “They want a la carte streaming products, and that’s what Venu has been more focused on, and that’s what ESPN direct-to-consumer is going to be focused on … If I’m a college football fan, I may go to ESPN Flagship, especially if Fox is on board, which I think it will be.”

Rather than inviting more regulatory pressure from competitors or the federal government, Cahall believes this more traditional licensing deal would actually go more smoothly for ESPN and Fox, as ESPN would pay Fox directly to place its content on “Flagship” rather than bundling a combined catalog within a new company as theoretical competitors.

“Fox’s decision to sublicense content that is not ultimately distributed is very different in the eyes of regulators than ESPN simply licensing that content,” Cahall said.

From a financial standpoint, Cahall estimated that Fox would receive about $10 per month per Venu Sports subscriber. He believes they can effectively negotiate the same rate from ESPN to license the World Series, NFL games and more to “Flagship.”

Overall, Cahall is optimistic about a fertile future for sports streaming platforms and other sports-first subscription packages. While ESPN (along with every other television company) still has a long way to go to fully recoup its cable costs, Cahall sees a significant willingness among younger sports fans to pay for sports content. Whether that’s through a multichannel video programming distributor like Fubo, a sports-only bundled service, or a standalone service, Cahall believes there will be a market.

“Their willingness to pay for sports is greater,” Cahall said. “What they’re not willing to pay for is legacy, network-based entertainment.”

With so much focus on the losses of sports networks and speculation about a potential sports rights bubble, it’s rare to hear anyone optimistic about distributors selling sports to consumers. But even if Cahall is right and both ESPN and Fox find success selling sports subscriptions to the public, that’s really just the first step toward a digital-first business that’s profitable at scale.

(The City with Matthew Belloni)