The big boys and girls at Disney have come up with a novel idea. They plan to launch two new streaming ventures, one family-oriented and the other for ESPN. This new Netflix-style version of ESPN will stream 10,000 hours of live sports annually that isn't available now on ESPN cable channels. The sports menu would include baseball, hockey and soccer, along with Grand Slam tennis and a lot of college sports.
In other words, ESPN will actually offer sports -- instead of the endless debate and talk programming that is driving away viewers now. Hopefully it will not include the liberal politics.
Paul Bond, of The Hollywood Reporter, wrote about this today. He says, "Disney appears to be between a rock and a hard place with ESPN: The network remains a cash cow, but its growth has been reversed."
That's because ESPN hasn't stuck to the knitting. It is paying through the nose for programming rights, yet turns off and loses viewers for not airing enough games, for feeding viewers Stephen A. Smith and Max Kellerman arguing, and Michael and Jemele praising Colin Kaepernick.
ESPN has been losing subscribers for nearly half a decade, and it increased its fees to $7.54 per subscriber. As Bond notes, that's "more than consumers pay for TNT, NFL Network, Fox News, USA Network, TBS and Nickelodeon combined.” Losing three percent of its subscribers annually now, Bond writes the conglomerate "clearly feels it needs to do something drastic, given that, by some Wall Street estimates, the sports network is responsible for roughly one-quarter of Disney's profit each year."
Disney CEO Bob Iger wants the new content to be accessed through ESPN's app. Cable customers would still get the tiresome drivel on the ESPN channels via authentication. Bond said ESPN will also "offer freestanding subscriptions to those who don't get ESPN that way (though the premium content will be reserved for TV subscribers)." While much is in flux, the ESPN digital service would also sell individual sports packages.
Bond said industry experts see some risks with the plan:
It sounds simple enough, but investors are wondering first, if Disney will cannibalize its existing ESPN customers and second, whether this move by cable's most popular channel will hasten the demise of the cable TV bundle, thus damaging all of Hollywood.
"The new ESPN service looks initially positioned as an add-on product for existing pay TV subs," wrote Bernstein analyst Todd Juenger. "But it's a very slippery slope from there to a true, full-blown network substitute. Disney could pull that switch any time. What do you do now if you're Discovery, Viacom, AMC Networks, Fox or anybody?"
Barton Crockett of FBR estimates ESPN's cable profit will decline for the next three years. Bond added that analysts forecast cash flow at ESPN to drop from $2.47 billion in 2013 to $1.92 billion this year.
Iger may be in a state of denial about ESPN's decline, however. He told CNBC last week that 94 of the top 100 TV shows in the U.S. last year were sporting events. But not all of those events were aired by ESPN. Iger admitted to erosion in the multichannel ecosystem, but claims it is likely due to "people not signing up until later in life, some cord-cutting, some migration to skinnier bundles. It's a combination of things. It's still, by the way, extremely profitable."
When it comes to ESPN, it's growing less and less profitable because people are growing disenchanted with the product. It's no wonder that some of the talk show drivel that dominates ESPN programming recently lost in a viewer comparison to Nickelodeon's Teletubbies.
Mike Bloxham, of the consultant Magid Associates, sees great potential for Disney's big plan. "The general sports space is wide open for a major player, and there's no bigger brand than ESPN," he says. "If anyone is going to succeed in becoming the Netflix of the sports category, it is ESPN."
This is plausible because people originally got hooked on ESPN when it focused on game broadcasts. 10,000 hours of sports programming -- without liberal politics interjected -- is what the sports fan base wants. And deserves.
