Disney Enters Its Final Frontier with ESPN

Well, it’s here, whether anyone is ready for it or not.

On August 21^st, the new ESPN over-the-top streaming bundle debuted.

Now, ESPN the cable channel doubles as ESPN the app, thereby completing the Disney Bundle.

Yes, Disney’s three-headed streaming model has achieved its final form after nearly six years of attempts.

As Disney enters its final frontier this week, CEO Bob Iger and ESPN Chairman Jimmy Pitaro sat down for a CNBC interview.

Here’s what we learned about Disney’s content plan, along with a few of my thoughts regarding the new ESPN service.

A Decade-Long Plan

At the start of the CNBC interview, parts of which you can watch below, Iger referenced a conversation:

In August 2015, almost exactly ten years ago, Iger spoke during a quarterly earnings call.

At the time, Disney’s CEO relayed details of erosion occurring at ESPN due to cord-cutting.

In that moment, Iger effectively committed to Disney’s digital future. That’s the final frontier we’re discussing today.

And I won’t lie to you. It’s a mess. I looked at the ESPN app as soon as it went live.

First, I examined my upgrade options as a current Disney Bundle subscriber. I have the one with Max.

Well, upgrading from that tier proved challenging in that it’s a Kafkaesque process to change packages.

Disney currently lists 13 potential bundles, which is remarkable for a company with just three streaming services.

Notably, none of them included the new Fox One bundle, which causes me to wonder how hard Disney is pushing that.

I also learned that ESPN+ is now ESPN Select sometimes, but not always, while ESPN is also ESPN Premium.

In reading my options, I quickly realized that Disney has promised a one-size-fits-all solution.

On ESPN’s launch date, the company failed to deliver that. It’s a Machiavellian process trying to choose a bundle.

Iger and Pitaro presented themselves as confident that they’ve unlocked ESPN’s future.

In reading those menus, I wondered how Disney could have spent ten years on this but gotten it so wrong.

The answer circles back to Disney being stuck between two worlds right now.

Iger’s Holistic Approach

Here’s how Iger explains his company’s goals for the new Disney Bundle, especially concerning ESPN:

“Let me also emphasize the fact that as a company, we’re now agnostic when it comes to linear television and digital television and digital content.

“We manage them together and holistically, and so we don’t really measure them as much individually. We look at the whole.

“We will continue to improve what we’re offering sports fans, and we believe that this will contribute nicely to ESPN’s bottom line over time as engagement grows.

“We don’t feel that the way to measure this is immediate, nor do we feel the way to measure this is just in subscribers.”

That’s Bob Iger signaling Wall Street not to ask about subscriber numbers or expect them.

Disney will release that information when it’s beneficial to do so and only then, which makes good business sense.

Nobody’s gonna like that he said that, though. It ties into a question CNBC pondered before Iger appeared.

How to Measure

How will people measure ESPN’s new audience since it’s moving past Nielsen ratings?

To a larger point, how will Disney measure success? That’s the sticking point with much of this conversation.

Iger’s so-called holistic approach creates an obfuscating veil for investors even as it improves content consumption.

Many sports lovers have felt caught in the middle between existing sports rights deals and our preference for streaming.

Now that ESPN has switched to a full media app, as opposed to ESPN+ working as an imperfect bridge, it’s better for fans.

We can watch all of ESPN’s games on streaming, where the picture looks better and offers better functionality.

However, from Disney’s perspective, ESPN still makes tons of money. This new app jeopardizes that revenue.

Should ESPN the app struggle, it’ll trigger a cascading negative impact for Disney.

Disney Tries to Meet Fans Halfway

As Disney enters its final frontier, it is trying to meet fans halfway, which is a significant choice.

Currently, multiple generations of people consume content, and we’re all over the place as a people.

Some adult consumers have lived in a world where High School Musical and iPhones were always a thing.

These people watch just as much content as consumers old enough to remember black and white television.

Managing media distribution capable of targeting both groups is nigh-impossible.

Iger himself points out that competitors such as Comcast/NBCUniversal are bailing from linear television.

In fact, a CNBC analyst flat out said, “Nobody has Peacock. You don’t need to have Peacock. Peacock’s over.”

Do you know which streaming service shows CNBC content? Why yes, it’s Peacock!

The person said this because they’re a bit disgruntled that NBCUniversal is spinning off CNBC.

Television’s an absolute mess right now, with the old guard getting cast aside in favor of streaming.

Disney technically did just that this week with the introduction of the ESPN app. Despite this fact, Iger said:

“We manage our television assets as one business, not as individual businesses, meaning we don’t manage (our businesses) separately.

“We want to be agnostic about how people watch or consume our product.”

He explained that Disney doesn’t care whether people watch conventional television or digital apps.

Disney has differentiated itself in the media realm by adopting this approach. It’s the only company doing so.

Why This Matters

Right now, Disney is trying to have its cake and eat it too, and the financials suggest the strategy works.

Still, much of what the company’s attempting relies on ESPN to succeed. Disney markets to customers via live sports.

That’s the most effective aspect of the Disney Flywheel: the ability to reach eyeballs via sports.

Disney has acquired the NFL Network, WWE Premium Live Events, and (apparently) MLB.tv for this reason.

So, the new Disney Bundle featuring the true form of ESPN, the one with all its content, MUST work.

Otherwise, Disney will see severe adverse effects. The rising cost of sports licensing escalates the problem, too.

Pitaro addressed this aspect by saying:

“The traditional ecosystem…still has a ton of value. On top of that, you would have to be a member of Amazon Prime (and) Netflix…

“[For] the customer that is very happy in the pay TV bundle, our goal is to drive everyone to the ESPN app.”

What he’s acknowledging is that collective self-destructive nature of streaming services.

Since they’re all competing for the same content, especially NFL games, it’s escalating costs.

The NFL is selling its games piecemeal, forcing subscribers to buy several different streaming services.

Iger deflects how big a problem this is, though. As always, he believes that the Disney Bundle stands on its own.

“I look at it the other way. [Other media businesses] are competing with us…they envy us and the position we’re in.”

Iger says this with a genuine smile on his face, reflecting his extreme confidence in his market position.

He adds, “We’ve got the ability to afford [and] monetize [live sports] better than anyone else…on multiple sports.”

I’ll say this. Pitaro and Iger appear certain the ESPN portion of the Disney Bundle is about to excel.

My Thoughts on ESPN

I tried ESPN in two phases last night, using the Disney+ app both times.

First, I accessed Disney+ without signing up for ESPN. I wanted to see what would happen.

I’m currently a YouTube TV subscriber, with Disney previously indicating I’d get ESPN for free.

Since then, Disney has clarified that this will happen once YouTube TV extends its carriage deal.

My package would have cost $26 more a month ($38.99 for the Disney Bundle including ESPN plus the HBO Max upgrade).

That’s not much different from the standalone price of $29.99 for ESPN. So, I wouldn’t recommend that for anyone.

These are the sorts of things happening with streaming right now that are maddening to consumers.

In these businesses’ rush to turn a decent profit, they’ve lost all perspective of price concerns.

Not that long ago, I could have purchased all major streaming services for about $60 a month.

This Disney Bundle with HBO Max on its own would be $56. It’s out of control, and something’s gotta give.

The Problems with Live Streaming

That’s the rant side of this conversation, but from the user interface perspective, ESPN is…fine.

As Disney promised, it’s just an over the top version of ESPN, albeit with a significant caveat.

Streaming services require buffering to operate correctly. So, when you’re watching live sports, you’ll experience a delay.

Certain settings reduce this gap, but if you’re chatting with someone or on social media, it can present problems.

You won’t experience plays at the same time, causing you to do as much as a full minute behind the action.

Anecdotally, I live in Knoxville, Tennessee, a city that lives and breathes by the University of Tennessee.

At times, we’ll know a big play is coming due to the collective roar in the neighborhood, even though we haven’t seen it yet.

Hopefully, technology reduces/negates this problem over time, but we’re 20 years in now. Nothing has changed.

So, this may be a constant problem with an ESPN app as opposed to watching on a linear network.

Otherwise, the customization options on the ESPN streaming service already differentiate themselves.

A couple of years from now, I suspect it’ll feel like you’re programming the Me Channel for live sports.

Obviously, Disney expects you to pay a pretty penny for the privilege, though.

I suspect you can tell from my tone that I’m adopting a wait-and-see approach with ESPN the app.

The theoretical sounds amazing, but this streaming service lacks a WOW! factor at launch.

Streaming Ratings

I’m working on a side project this month, so I’ve switched streaming ratings to a bi-weekly topic for now.

So, let’s go ahead and jam in two weeks of ratings at the end of this discussion. It’s relevant for this reason.

Who’s that? Do you need water? Streaming ratings earned another record viewing percentage in July. That’s why ESPN had to make the jump.

In action movie terms, the train was reaching the end of the tracks. It was “jump or die” time.

According to Nielsen, streaming claimed 47.3 percent of all television use. It’ll be over 50 percent soon.

At that point, conventional television will be on life support as a business model. Disney had no choice.

Anyway, for the week of July 14^th through July 20^th, here are Disney’s streaming hits:

• Bluey – 896 million viewer minutes
• Grey’s Anatomy – 714 million viewer minutes
• Family Guy – 688 million viewer minutes
• NCIS – 613 million viewer minutes
• The Amateur – 310 million viewer minutes
• Zombies 4: Dawn of the Vampires – 284 million viewer minutes

That’s it. That’s the list. So, it was obviously a very slow week for Disney.

On the bright side, a pair of movies performed quite well. The Amateur’s Hulu debut went better than expected.

As for Zombies 4, its viewership was likely much higher. Nielsen has that blind spot for second-screening.

Therefore, I consider this a solid albeit unspectacular performance. It’s no Descendants. That’s for sure.

Streaming Ratings Part 2

For the week of July 21^st through July 27^th, here are the Disney streaming hits Nielsen tracked:

• Bluey – 880 million viewer minutes
• Grey’s Anatomy – 723 million viewer minutes
• The Amateur – 201 million viewer minutes

Just to be clear, I haven’t cut out anything on this list. That’s all Disney managed for the week.

So, the final full week of July represents Disney’s worst Nielsen Streaming Ratings in years.

You can understand why the ESPN streaming app matters so much to the company’s future.

Disney’s current streaming business model of Bluey and early 2000s reruns will eventually run out of steam.

Something’s gotta give here, and it all falls apart if fans don’t subscribe to the ESPN app.

Iger and his team have done an exceptional job in reinventing Disney streaming on the fly.

Still, this position appears precarious, and a lot’s riding on a VERY expensive app. 

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Feature Photo: ESPN