Could ESPN Become Its Own Streaming Service?

Does the future of ESPN look more like ESPN+ Or ESPN? If you don’t understand the difference between those two designations here they are.

ESPN is the company/network that has been in action for decades, home to Sports Center, The College Football Playoff etc. Under that banner we would also place all of the derivative channels like, ESPN2, SEC Network, ACC Network, Longhorn Network, etc. ESPN has been and is still a family of channels available via bundled TV services via everything from traditional cable and satellite packages to the streaming bundles that are trying to replace them including Disney’s Hulu with Live TV.

ESPN+ on the other hand is an Internet based streaming service that now has 8.9 million subscribers. It costs just under $6.00 per month and is home to UFC, Soccer, 3rd&4th tier college football, basketball and other sports and even features NHL Hockey and MLB games. Along with this all of ESPN’s original programs like the 30 for 30 series are available on-demand.

This question comes up because ESPN in the midst of another major reshuffling which mirrors the kind of movement seen in other big media companies. The sports giant announced a new round of layoffs that will affect 300 current employees. Now with a company that has 5,000 employees that may not seem monumental but keep in mind, of all of the basic cable channels on the market ESPN commands the highest rates by far. Considering that live sports is the most popular genre of TV these days It should not be feeling a crunch, but because of falling subscribers to traditional bundles ESPN is losing revenue that it got from both its viewers and from those who unwittingly helped prop it up via passively collected blanket fees, which is the way all cable channels survive. So ESPN is not suffering anymore than Lifetime or the SyFy channel as far as numbers, but in general the network spends billions of rights fees for leases like the NFL, NBA, ACC, SEC, MLB and so on. Those leaves have to get paid, so losing revenue from the bundle really cuts in to ESPN in a way it doesn’t for MTV. The state of the industry has led Disney/ESPN to take a look at how it should look at the future of sports programming on TV.

Jimmy Pitaro, ESPN’s chairman said the discussions on how to reposition the company in a changing media landscape predate COVID-19, but said the pandemic had accelerated those discussions.

“Placing resources in support of our direct-to-consumer business strategy, digital, and, of course, continued innovative television experiences, is more critical than ever,” he wrote. “However, building a successful future in a changing world means facing hard choices. Making informed decisions about how and where we need to go – and, as always, in the most efficient way possible — is by far the most challenging job of any leadership team.”

iIndustry watchers wonder if ESPN will begin to pivot from the traditional pay TV distribution model to something built around the ESPN+/Direct to the consumer model. As we pointed out, ESPN+ only has 8.9 million subscribers but it is growing very fast, due in no small part to being bundled with Hulu and Disney+ in a $12.99 service bundle. It’s almost a “what the heck let’s throw that in” kind of service. In fact Hulu on its own costs $5.99 and Disney+ costs $6.99 per month. So anybody who would want two, may as well get three. But the effect is not in the amount of money Disney makes via subscriptions, it is how much money it can make by selling advertisements in Hulu and ESPN+.

Disney as a company appears to be aggressively moving to a model aimed at the direct to consumer market. Think about it. How many major new shows or projects have been announced for the Disney Channel or its cousins? What major new series are coming to Free Form? What do you hear about instead? The Mandalorian on Disney+, the bevy of Marvel and Star Wars shows etc. This is where Disney is headed.

Could Disney make ESPN exclusive to its own services? Disney owns a TV Streaming service in Hulu with Live TV. Technically once distribution contracts with other carriers runs out Disney could say ok, we don’t want to be on these cable services anymore, we want everyone to subscribe to Hulu With Live TV to get ESPN instead and singlehandedly become the most sought after streaming service in the industry. At the moment Disney would never be able to handle the traffic or guaranty the performance of a stream if most viewers were accessing them all through Hulu. But as delivery technology infrastructure continues to develop it could. Disney could choose to build out ESPN+ to include its other networks. It would certainly raise its price considerably. Once delivery was reliable offering ESPN’s services via the app would be a simple enough proposition to digest. After all the world already understands HBO Max, Peacock and other services. We would not expect to see this kind of thing happen any time soon, but it has to be a consideration for the future as cord cutting continues to rise. You will know it is an actual strategy the first time you see it drop off a smaller regional cable service.

Picture is a screen grab from ESPN+