Disney’s Shift To Streaming Puts It Into Conflict With ESPN

Disney`s Shift

Chapek’s generic reply regarding the future for one of Disney’s most important assets created no follow-up questions or headlines. But Chapek was directing an existential threat confronting the media industry and a problem that may one day rock the foundation of his media empire. It covers some of the most relevant studios and film franchises globally, apart from the dominant network for live sports.

Disney’s massive dilemma for ESPN is whether and when to cover a future without cable completely.

Broadcast and cable networks still earn billions of dollars per year from the traditional TV model. ESPN is a cumbersome successor because media companies gain monthly subscriber payments from pay-TV providers regardless of how many people follow their programming. Niche channels select just a few cents a month by a subscriber, while sports networks price several dollars.

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

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

 

Meantime, the Non-Sports World Is Cutting the Cord

 

More than 6 million people left pay-TV in 2020, as stated by research firm eMarketer — the biggest yearly total ever. Approximately 25 million Americans have cut linear TV bundles in the preceding decade.

That produces a conflict within Disney that’s poised to intensify. Disney requires people to sign up for its streaming entertainment products, Disney+ and Hulu. Wall Street loves this too. Streaming video is an increase in business. Traditional pay-TV is a declining one.

It’s also a smart financial swap for Chapek. Disney executes more than $10 a month per subscriber for sports. However, it earns far less for entertainment networks like Disney Channel and FX, which carry lower audiences and don’t require high advertising rates.

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

The opposite is true for ESPN. Exchanging an ESPN subscriber for an ESPN+ customer, who provides average revenue of fewer than $5 per month, is a significant loss for Disney. ESPN+ is a streaming service with restricted content.

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