Will ESPN Leave Your Cable Service Soon?
A Wall Street Journal bombshell report has just confirmed what MickeyBlog has speculated for a while.
Changes are coming to ESPN, and they could permanently change the way we watch sports.
Peyton Manning and Phil Simms
Will ESPN leave your cable network soon? Here’s what we know.
Why ESPN Is So Profitable
Photo: Ed Zurga/Getty Images
Let’s start with the report itself. According to the Wall Street Journal (WSJ):
“ESPN is laying the groundwork to sell its channel directly to cable cord-cutters as a subscription-streaming service in coming years…”
This story may confuse you as a longtime MickeyBlog reader. We’ve been telling you that this day was coming for a while now.
(Gene Duncan, photographer)
After all, Disney introduced the ESPN+ streaming service more than five years ago. It’s already claimed 25.3 million subscribers.
So, why is this a story? The WSJ isn’t talking about the creation of a new app per se. Instead, this article highlights an upcoming inflection point.
One day soon, Disney will commit the overwhelming majority of its content to ESPN+, not the ESPN cable channels.
NEW YORK, NEW YORK – JULY 29: NBA commissioner Adam Silver announces a pick for the Indiana Pacers during the 2021 NBA Draft at the Barclays Center on July 29, 2021 in New York City. (Photo by Arturo Holmes/Getty Images)
The writing is on the wall that the cable television money train is about to reach its final destination.
Disney must prepare for a future wherein it loses all the ESPN revenue it has gained thanks to linear networks. And that’s a massive loss.
According to WSJ, Disney currently earns $9.42 per cable subscriber for ESPN. Here’s the crazy part.
Photo: NBA Central
You don’t even need to watch ESPN for Disney to make that money. It gets paid for every subscriber as a deal it has made with various cable companies.
As of 2023, ESPN claims 74 million cable households, all of whom pay $9.42 for the service, whether they watch it or not.
ESPN earns nearly $700 million a month just for being ESPN! But there are warning signs here.
Photo: Disney
According to a recent story, ESPN has already lost 914,000 subscribers in 2023 alone…and it’s only May!
That one statistic demonstrates how ESPN is facing an existential crisis…and here’s why.
The Evolving Nature of Sports Consumption
Photo: Michael J. LeBrecht II / NBAE via Getty Images file
Did you know that sports media rights are a $55 billion industry? It’s true.
In fact, recent projections call for the industry to cross $60 billion by the end of next year, which is an expansion of nine percent in less than two years.
Credit: Mark J. Rebilas-USA TODAY Sports
We’re in a growth industry for professional sports leagues, and everyone knows it.
That’s why vaguely defined football leagues like the USFL and XFL recently hosted games on network television. And it’s why you can watch Pickleball now, too.
(Matt Stroshane, photographer)
Broadcasters can charge advertising more for live sports than any other form of content. So, all these channels possess incentives to air any competitive event.
This same philosophy explains how the X Games came into being nearly 30 years ago.
(Richard Harbaugh/Disneyland Resort)
A lack of new leagues forced the creation of an Olympics-like event, one that appealed to a younger demographic.
In 2023, an entire generation of sports fans has grown up with the X Games and other second-screen programming. So, they expect to second-screen.
Image Credit: adidas
Many of these customers fall into the target 18-49 demographic, and they generally don’t subscribe to cable television. They DO pay for streaming apps, though.
So, companies like ESPN must go where the customers are, and that obviously won’t be cable television for much longer.
Photo: ESPN
Cable television is a dinosaur, and the asteroid has already struck. The old version of ESPN, like most cable channels, is in its death throes.
What Is Flagship?
Image Credit: ESPN
Enter Flagship.
That’s the code name for Disney’s attempt to revitalize and secure ESPN in a new, evolving marketplace: streaming media.
According to WSJ, ESPN will soon flip its priorities to where everything you’ve always watched on the cable channel will be available on the streaming service.
Photo: Todd Anderson, photographer
As an ESPN+ subscriber, I can assure you that’s not currently the case.
While the streaming service offers a plethora of live sporting events, it lacks a feature that Peacock and Paramount+ have.
On the latter services, you can watch all live programming from the app. ESPN+ hasn’t committed to that option yet…but it will soon enough.
Photo: DIsneyland
Once Flagship is ready, everything in ESPN’s current cable lineup will be available via ESPN+.
At that point, ESPN effectively becomes a digital company, just like its corporate parent, Disney.
The WSJ story indicates that Disney will still “offer the (ESPN) TV channel after launching a streaming option.”
Photo:cnet.com
Otherwise, they’d just be lighting money on fire. For the most recent fiscal quarter, Disney earned $6.625 billion from its Linear Networks division.
So, this isn’t the time to kill the golden goose. Instead, Disney is trying to hatch an egg with a new golden goose in ESPN+.
Photo: Disney
Disney has reworked deals with at least two professional sports leagues to attain authorization to show live events on ESPN+.
While WSJ didn’t mention specifics, ESPN’s four biggest licensing deals are currently with MLB, NHL, NBA, and (especially) the NFL.
Pro football has proven especially willing to adapt to the new form of media consumption.
The NFL recently licensed NFL Sunday Ticket rights to Google (!), and Peacock just confirmed it will exclusively air an NFL playoff game next year.
Flagship may be the headline, but the conversion to streaming isn’t just an ESPN strategy.
The Flagship Problem
(AP Photo/Jeff Roberson)
All the stories about Disney losing money in its Direct-to-Consumer division are correct. And they reflect the problem with strategic plans like Flagship.
Streaming hasn’t proven as lucrative as conventional cable television, at least not yet. And it’s not even close for anybody other than Netflix.
(Photo by Carmen Mandato/Getty Images)
ESPN+ earns an average of $5.64 per user. So, those 25.3 million subscribers are netting Disney $142.7 million monthly, a faaaaar cry from the $700 million it gains via cable.
Disney has committed billions of dollars to sports licensing over the next few years. A streaming service earning about $1.7 billion annually won’t be anywhere near enough.
Photo: Disney
So, when Disney announces Flagship, the conversion of ESPN to a digital service, first and foremost, you can expect price increases.
Of course, for many cable subscribers, it’ll be a money-saver. ESPN is the only reason why a lot of people haven’t cut the cord.
Still, the Flagship initiative signifies a hallmark change in how America consumes live sports. Disney is about to cross the digital Rubicon here.
Photo: MickeyBlog
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Feature Photo: ESPN
