“We’re successfully navigating the evolution of consumer choice.”

A clash of business models between ESPN and… its owner?

Disney’s big dilemma for ESPN is whether and when to fully embrace a future without cable.

Broadcast and cable networks still make billions of dollars per year from the traditional TV model. ESPN is a huge beneficiary, because media companies earn monthly subscriber fees from pay-TV providers regardless of how many people watch their programming. Niche channels make just a few cents a month per subscriber, while sports networks charge several dollars.

Disney makes more money from cable subscribers than any other company, and that’s solely because of ESPN. ESPN and sister network ESPN2 charge nearly $10 per month combined, according to research firm Kagan, a unit of S&P Global Market Intelligence. That’s at least four times more than almost every other national broadcast or cable network, according to Kagan.

Disney requires pay-TV providers to include ESPN as part of their most popular cable packages. It’s a no-brainer for TV providers, who wouldn’t dare drop ESPN.

Meanwhile, the non-sports world is cutting the cord.

And why is that a clash?

While Disney makes more than $10 a month per subscriber for sports, it makes far less for entertainment networks such as Disney Channel and FX, which draw lower audiences and don’t command high advertising rates.

If Disney can get a cord cutter to pay $8 per month for Disney+ and $6 for Hulu, it’s a huge win for the company.

The reverse is true for ESPN. Swapping an ESPN subscriber for an ESPN+ customer, who contributes average revenue of less than $5 per month, is a significant loss for Disney. ESPN+ is a streaming service with limited content.

Disney Chairman Bob Iger, who was CEO until last year, told investors when he launched Disney+ that Disney was “all in” on streaming video.

But ESPN isn’t. ESPN’s strategy is to cling to the cable bundle for as long as possible, knowing it can draw potentially billions of dollars from U.S. households that are each paying $120 for the network even if they never watch it.

Some analysts have even questioned whether Disney should spin off ESPN, allowing Chapek to focus more clearly on streaming. An ex-Disney executive, who recently left the company and asked not to be named, said there’s “strategic misalignment” between the parent company and ESPN, and the businesses no longer belong together because Wall Street doesn’t look kindly on declining assets. The executive said having ties to the legacy bundle will weigh down a company’s stock multiple.

Mickey rakes in $9 billion — that’s billion, with a “b” — from carriage fees, plus billions more in advertising.  That’s a lot of jack, but the key fact buried in there is the money it earns from people paying for ESPN who don’t watch it.  What happens to the bottom line as those folks steadily leave for a more a la carte approach with streaming?  Well, one thing you can bet on is that Disney ain’t giving that money up without a fight.

Should the number of pay-TV bundle subscribers drop to a level well under 50 million U.S. households, Disney would likely take ESPN to consumers in a more complete streaming package, said two people with knowledge of the company’s plans. At that point, the economics would flip, as most of the people paying for linear TV would be sports fans. Disney could likely make more from a full-service sports streaming service than it would make in a wholesale pay-TV distribution model.

In other words, prepare to get your asses charged off, sports fans.

(h/t Mark)

35 Comments

Filed under ESPN Is The Devil

35 responses to ““We’re successfully navigating the evolution of consumer choice.”

  1. DarthHenshaw

    I would actually love if ESPN was sold as a streaming service. I hardly watch anything on cable and I’m forced to pay $65-70 for a bunch of channels I don’t watch to get ESPN. I assume the local affiliates will all have streaming versions of at some point soon. When that happens there’s gonna be some cable stations that just die off.

    Who really cares about TNT/TBS when there’s no sports on their channels?

    Like

    • The Braves are on TBS this evening

      Like

      • RangerRuss

        Piss on MLB. Between that fucked up playoff system and meddling in woke politics I’ll never watch that shit again. ESPN can kiss my ass too. But if they’re showing the Dawgs I’ll pay to watch. Until they piss me off. There’s always my lawn to work on. Get off it.

        Like

    • fisheriesdawg

      Agreed. There is no future in Disney Junior and FX. Those shows can be better utilized on a streaming platform…most of us watch their shows that way anyway.

      I get that as a hardcore sports fan there isn’t the savings for me in streaming that there is for people who don’t watch sports. Maybe it’s a net negative for me since those people are subsidizing my sports habit. But I’m OK with getting the costs closer to the actual consumer.

      Like

    • Gaskilldawg

      The NBA and March Madness is on TNT.

      Liked by 1 person

  2. Annabelle DeLine

    Yeah, the entire ad-based model of cable/network tv relies entirely on their being a captive audience with no alternatives.

    I, for one, welcome our $20+/month Ultimate Disney Streaming Bundle overlords.

    Like

  3. theotherdoug

    It looks to me like Disney is setting up their streaming business with Disney+ while milking every last drop from the cable cash cow. Over time the scales will tile more and more towards streaming and Disney is ready for that day.

    The problem is a big tech company like Google, Apple, or Amazon could be waiting for that tipping point, and then buy Disney whether Disney wants it or not.

    Like

    • theotherdoug

      I wish I could go back and edit. When I say buy Disney, I mean buy just Disney’s streaming. Let Disney keep their creative side and parks, but buy the content or a long term agreement to that content.

      Like

  4. Hogbody Spradlin

    “evolution of consumer choice”. Huh? That’s some Orwellian wordspeak.

    Liked by 1 person

  5. ericstrattonrushchairmandamngladtomeetyou

    Speaking personally, except for telecasting football games themselves, I can do without ESPN. I haven’t watched Sportscenter in years. Sophomoric jokes told by morons isn’t my cup of tea.

    Liked by 6 people

  6. Russ

    Eh, at least for me, the streaming ship has sailed. I could have probably saved a little money a few years back, but now all the streaming options are little bundles and when I replicate the channels that I watch I wind up paying the same or more than I currently give Comcast. Plus I’d have the added headache of two or three different platforms to navigate. Comcast has started adding access to some of these streaming platforms via their service, and the interface differences between all of them drive me nuts.

    I’m old and I want convenience. And I’m willing to pay for it.

    Oh, and stay off my lawn!

    Liked by 11 people

    • 79dawg

      Glad to hear there is at least one other old man still paying for cable for the convenience instead of using 20 different streaming platforms…

      Liked by 1 person

    • We switched to YouTubeTV during the pandemic, and it’s worked out pretty well as a savings option for us but that’s because we now only have to have one TV package for both our regular home and our lake house. (We previously had two AT&T cable bills that were costing us as much as rental on a small apartment in order to get all the sports channels.) I said when we did it, though, that the day was coming that to get all the entertainment options that cable used to provide, you would pay just as much for streaming as you ever did for cable with none of the convenience. If that day isn’t already here, it’s not far away.

      Liked by 1 person

    • PTC DAWG

      I’m the same way….especially when you have the game on more than one TV in different areas…the streaming never comes close to matching up with one another.

      If you just have one TV, I see how it could work….oh yeah, internet ain’t free either..gotta pay for that through someone.

      Like

    • Tony BarnFart

      I’m youngish, and we’ve held on to Comcast / Xfinity and have been pretty pleased. Cable is cleaner and quicker and you’re right, Comcast has integrated streaming right into their cable platform like a hub. Very well designed IMO. You used to not have an ESPN app but that’s been worked in now and all of your ESPN+ games show up on your comcast menu and just dive right into the streaming without having to navigate through the native SmartTV menu.

      Liked by 1 person

    • Previously Paul

      You can use Roku to organize and access all your different streaming platforms in one place. Most services allow for 3 to 5:accounts. Share accounts with family members to keep costs down. When they clamp down on the number of accounts, which they eventually will, then I will re-evaluate. At the moment, I actually have access to far more content than ever and I pay far less than I did for cable ten years ago.

      Like

  7. If I could get all of my sports programming as a premium streaming service ad-free and, therefore, no TV timeouts in the stadium, I would absolutely pay for that.

    Like

    • PTC DAWG

      That ain’t happening anytime soon. You couldn’t afford it if it did.

      Like

      • Then why does Disney+ or Netflix work? It’s ad free and they produce and license content. They do it cost-effectively. If the service was provided at $50 a month with 10,000,000 subscribers, that would be a $6b business.

        Like

    • Tony BarnFart

      The cool thing is that when ESPN offers a dedicated Skycam feed you get a tiny taste of that, although there are still some commercials but not nearly as many. During the Arkansas game, i saw probably slightly more than 50% of the redcoats halftime performance from the skycam which settled in about 30 feet above row1 on the south side 50yl.

      Like

  8. Charles Jackson

    Not real sure how this translates with the current model, but I cut the cord just over a year ago, and subscribe to HULU+Live TV, which comes with ESPN. Love it.

    Like

  9. 79dawg

    The problem for Disney (and other media cos.) is that they’ve tried to stop the atrophy of the cable bundle by streaming, which has led to the further erosion and cannibalization of cable and the hyper growth of streaming services.
    I mean, if every cable channel can be streamed, what is the point of one or the other??? There is no growth, it is just a zero sum game moving shells around at this point – as someone alluded to above, at some point people will say they don’t want to have to deal with 20 different streaming services, the market will “flip”, and they’ll just go back to cable….

    Liked by 2 people

    • Tony BarnFart

      Maybe I don’t have my internet speed / connectivity dialed in right, but for the life of me streaming seems to never be as clean of an experience as a channel on cable. And when I take the TV out to the porch, it’s actually way less frustrating to just run a very long HDMI cord through the window like it’s 1995. The remote on xfinity can be 2 walls away and still change the channel super clean……streaming on the porch via chromecast, not so much. Of course, on a CBS game, antenna is all you need……which is actually the clearest of HD pictures.

      Like

      • Previously Paul

        My advice is inside the house you really do need to hardwire all your TV’s with Cat 6 cable. Then you’ll get the clean experience you crave. Also, by hardwiring everything inside (computers, TV’s, etc.) you free up most of your WiFi bandwidth. That will improve your porch experience. Pay for the extra speed and dump the cable. We’ve been doing this for years and we’ve been very happy. You are correct about the antenna. If you can get a signal via antenna it’s usually the highest quality.

        Like

  10. beatarmy92

    The last part is contingent on ESPN having most of/all the rights to various sports including the only one that matters to us: CFB. If Fox or someone else has enough coverage or big popular conferences then Disney’s pricing power is seriously dampened. Think Porter’s Five Forces.

    Like

  11. Former Fan

    Radio may become more popular. So will PPV. Right now, sports fans are being subsidized by tv enthusiast who do not watch sports. That will soon change. How will the added cost impact the sports consumer? I have no intention of paying hundreds a month to watch sports. Maybe others do. Will be interesting to see how it plays out.

    Like

  12. TripleB

    I guess I don’t have to figure this out anytime soon. If you live way out in the country I don’t think there’s any good way to get streaming services? I can use my hotspot on the phone, but it doesn’t seem to always work very well.

    Liked by 1 person

    • miltondawg

      We have a house up in the mountains with DirecTV. The internet up there blows, is frequently out or sketchy, and cell service indoors is nonexistent for the majority of the house other than the back porch. Having to stream sports up there would be tough.

      Like

  13. Disney (non ESPN sports) creates content and then distributes it. ESPN is still primarily a broadcaster that must go purchase content created by the various sporting organizations. I think they are vulnerable as a business model. They have the infrastructure now to beat back a competitive startup broadcaster, but advances in technology will lessen this. Imagine a small creative company working with the SEC to build their own team of cameramen using drones, iPhone 17Max cameras, one central control center, etc. Then the SEC controls all of the rights to market and sell ads/ sponsorships. IDK how this really could work, but some disrupter will come along very soon and change the landscape even more than this article contemplates.

    Like

    • Tony BarnFart

      I’m a sucker for immersive sporting experiences and would probably pay an unreasonable amount for Georgia games broadcast with full stadium sound mics, no announcers, no commercials, full halftime show and awesome drone stadium / sideline views during game timeouts. Add in an option to auto-sync the radio broadcast and I’d lap it up like a pig.

      Liked by 1 person

    • 79dawg

      Sometimes more is less!
      I believe the PGA Tour is now producing all regular PGA Tour events (but not majors) for distribution via the networks, Golf Channel, overseas, streaming, etc. – the only thing the networks have control over, I believe, are announce teams and ad sales, pretty much….
      In reality, the in-house PGA Tour produced events are sterile – no critical commentary from announcers, no bad shots shown, fewer “bells and whistles”, etc.

      Like

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s