DBSTalk Forum banner
1 - 12 of 12 Posts

·
Beware the Attack Basset
Joined
·
25,904 Posts

·
Premium Member
Joined
·
3,749 Posts
Discussion Starter · #3 ·

·
Hall Of Fame
Joined
·
2,538 Posts
This will not happen for a very long time, if ever.

The first thing that happens if they make linear ESPN available unbundled and on the internet is millions of people drop cable/DBS/alternative (YouTubeTV, etc). The second thing that happens is every cable, et al, company either drops ESPN totally, or moves it to a stand alone separate tier.

If you project a buy rate of 25%, which is what most writers expect, Disney would need to charge upwards of $50/month to make any profit at all.
 

·
Premium Member
Joined
·
3,749 Posts
Discussion Starter · #5 ·
Well they can't keep going the way it is now. With subscriber counts dropping on cable/satellite ESPN is going to have to raise their carriage fees to be able to provide content. Would you want to have $50 per month of your bill be for ESPN if you aren't a sports fan? At some point a major provider of cable/satellite will drop them or move it to a stand alone separate tier. Once that first shoe drops others will follow. If it becomes a stand alone tier only sports fans would be interested in it. How much are they going to have to charge for that for ESPN to continue to provide the kind of content it does now? The fact is sports fans are going to be paying a lot more for sports in the future no matter what happens.
 

·
Registered
Joined
·
2,311 Posts
There is a newer article that I didn't post because it is behind a paywall so I posted the earlier one. Here is the newer link for those that have access.

If you have access to this article, can you post the gist of what they're saying? How much do they estimate that ESPN DTC will cost? (I don't want to bother signing up for a free trial of the NY Post and then cancelling it within 30 days.) Thanks.

I've been saying lately that I believe we'll see Disney bring ESPN out as a standalone DTC service in 2024 or 2025. Who knows, I think they might even divide its live sports into two standalone packages, e.g. ESPN Pro and ESPN College, so that they could have a lower starting price for those who only want part of their overall sports. If that happened, I could imagine either service selling for $15/mo or both together for maybe $22/mo, with discounts either way for those who also subscribe to Disney+.

One analysis I read in the past suggested it would happen when cable TV penetration dips below 50% of US households. Well, we may be there now. MoffettNathanson estimates that penetration fell to just 50.5% of households as of the end of 2Q, three months ago, after sustaining a record drop in pay TV subscriptions that quarter. That brings US cable TV penetration to "the lowest level in more than 30 years" with the result being that "the linear model is hanging by a thread."


I think Disney knows that ESPN is, to a large extent, the foundation stone of the cable bundle. So when they take it DTC (while, of course, still offering ESPN and other linear channels via the bundle), they're going to be fully positioned for the post-cable future. So when ESPN goes DTC, they'll have folded Hulu into Disney+ to make it their single mainstream entertainment app. And they may at that time pull the plug on Hulu with Live TV. Why bother keeping that relic of the past alive?

I imagine when they amend their cable carriage contracts with pay TV operators to allow them to sell ESPN DTC, they'll also make it so that they can sell their linear channels -- ABC (at least the national feed), FX, FXX, Freeform, Nat Geo, Disney Channel, Disney Jr., Disney XD, etc. -- directly to consumers as part of Disney+, with their episodes immediately available on-demand rather than next-day (just as premium services like Showtime have always done in their DTC apps). In other words, the entirety of pay TV offered by Disney, including what is now exclusive to broadcast and cable channels, will be sold directly to consumers via just two apps by 2024 or 2025: Disney+ and ESPN.

One small player in the basic cable space already operates this way: AMC. Their AMC+ app includes live streams of their basic cable linear channels, with all their content available on-demand, with additional non-cable app-exclusive content, i.e. AMC+ Originals, also available.

At about the same time Disney does all that, or within a year afterwards (by the end of 2025), I think we'll see a direct competitor to Disney+ launch in the form of a new service, perhaps named Universal or Universal+. This will be the DTC service offered by an enlarged Universal Group formed when Comcast purchases most or all of Warner Bros Discovery, merges it with NBCUniversal, and then spins that whole thing off as a separate company dedicated, like Disney, to movies, streaming, traditional TV, and theme parks. As I predict for Disney+, I think the Universal DTC app will essentially offer everything available across their linear channels (e.g. NBC, USA, TBS, Cartoon, etc.), probably including the live linear channels themselves, plus additional content exclusive to the app (i.e. what are now known as Max Originals and Peacock Originals). HBO will of course be available too, although it might be an optional add-on instead of part of the core service (as with Showtime and Paramount+). I think there's a decent chance that CNN gets sold off to someone else given that Universal already has NBC News and MSNBC. Same may also happen with some or all of the Discovery basic cable nets (although their biggest personalities, Chip & Joanna Gaines, look set to stick with Warner as their Magnolia has been shifted under HBO's Casey Bloys now).

So once that happens, all the smaller companies that own cable channels will also have to somehow make their cable TV content available DTC as well. Maybe they have their own apps, as AMC+ does now, or maybe they just sub-license their content out to others, as Fox now does with their entertainment content to Hulu.
 

·
Premium Member
Joined
·
3,749 Posts
Discussion Starter · #7 ·
Why ESPN’s eventual direct-to-consumer price might be cheaper than you think

We initially wrote about ESPN going direct-to-consumer in our first newsletter a little more than a year ago. We put the timeline at five years or fewer.
Our podcast partner, John Ourand, finally joined our side last week, saying he thinks it will happen within the next two years.
To reiterate from what I wrote a year ago: ESPN will go direct-to-consumer, but also will remain on cable and satellite providers, giving the customer options.
The next question is what it will cost. Disney hasn’t fully figured it out, but we have some educated conjecture that the opening price will be a little lower than what I’ve seen bandied about.
Let’s go through this:
1️⃣ At the moment, I would project that a standalone ESPN, which would include everything the network has to offer, would cost between $19.99 and $29.99 per month.
2️⃣ Here is what Disney/ESPN will use as a baseline to flip the switch and offer a full DTC product: when its cable subscribers decrease to around 50 million homes. ESPN is currently in 73.5 million homes, according to Nielsen.
3️⃣ But, you say, Mr. Clicker — very polite of you — how can ESPN possibly charge the same or even less than a regional sports network? NESN (home of the Red Sox), for example, has a direct-to-consumer product that is priced at $30 per month. I bet YES and SNY will have their own by the start of next baseball season, and I think they will be priced similarly to NESN’s.
These networks have much smaller potential audiences to draw on, compared to ESPN, but those audiences of diehard Red Sox, Yankees and Mets fans are very loyal, making it a sticky product. The regional sports networks (RSNs) have significantly lower expenditures, but as niche entities, their equation is different than ESPN’s.
4️⃣ ESPN, in contrast, wants a mass audience from all over the country, so the price has to work everywhere. It has nearly a hand in every major sport, but, in most cases, not every game of a certain sport, just many of the most important ones.
5️⃣ The beauty of the cable bundle is that everyone pays for everything. One day, it probably will be remembered fondly by customers. It has always been looked at fondly by ESPN, which still receives around $10 per month per cable customer for its family of networks.
NESN, the cable home of the Boston Red Sox, was an early mover in offering a direct-to-consumer option.
6️⃣ Let’s do some math to get ESPN to its current cable subscriber revenue. I was a journalism major for a reason at Ithaca College, so I’m going to make the math a little easier: Let’s round up on ESPN’s cable subscription revenue — 75 million x $10 — and call it $750 million per month. That is less than it once made, but it’s still an enviable business.
7️⃣ We are not going to include the ESPN+ revenue. Disney says ESPN+ has 22.8 million subscribers, and it is priced at $9.99 per month (though it varies with the Disney+ bundle). But some of those folks in theory will fold into the larger, more expensive ESPN bundle because they signed up for a love of a certain sport(s) or league(s) that can only be found on ESPN and therefore are likely very sticky (like RSN customers).
8️⃣ With the difference of 25 million (I’m rounding up again) between 75 million to 50 million from ESPN’s current subscriber base to the threshold at which it will likely go direct-to-consumer, ESPN has to make up $250 million per month. Many of the cord-cutters that reduce the cable audience from 75 million to 50 million won’t want ESPN because they don’t like sports and now have given up cable. But a good amount presumably will still want to watch “Monday Night Football,” the NBA playoffs and college football’s biggest games.
If ESPN can get half of them — 12.5 million — to pay at let’s call it $20 per month, then it would make back the $250 million and have the benefit of an even more direct relationship with its fans.
It may start at $30 per month for ESPN, the whole enchilada, but I think the company will want to make the pool as big as possible and make a little less revenue, then raise the price later.
Cord-cutters could watch ESPN staples such as “Monday Night Football” via a direct-to-consumer offering.
Getty Images
9️⃣ The idea that a direct-to-consumer ESPN will attract half of the people cutting cable might be too ambitious. Even so, to get to that $250 million per month back, it could go to $30 per month. I don’t know for sure, but I think it still will start a little lower and just inch up the price as it goes, which is what we have seen with Disney+, Hulu and ESPN+.
1️⃣0️⃣ In this equation, we didn’t put the ESPN+ subscribers in, and that group might include a lot of people who now have both ESPN and ESPN+, though not all do. Again, just conjecture, but of those 23 million current ESPN+ subscribers, ESPN may be able to squeeze another $10 a month from a third of them. That’s around eight million people, or an additional $80 million per month.
ESPN is working on parallel paths. With basically a piece of the rights to all of the major sports and most of the minor ones, a lot of people still will want the service.
The RSNs are going to move in this direction quickly, and ESPN is going to be right there with them.
 

·
Hall Of Fame
Joined
·
2,538 Posts
The assumptions the author makes are unsupportable.

The number of people that would stick with cable if they could get ESPN a la carte, is not 50M. It is probably closer to zero.

The buy rate for ESPN is certainly not 50M. Probably closer to 25M.

The other bad assumption is found earlier. The “cable is dying” crew always cite the number of cable/DBS/teleco subscribers as in decline. Leaving out alternative linear providers like YouTubeTV, which has ESPN and is linear. These people are not cord cutters, but cord switchers, still paying for linear channels.

The number of people who are going to give up linear TV has probably been reached. The current number. Most of whom did it to get away from high sports fees.
 

·
Beware the Attack Basset
Joined
·
25,904 Posts
Taking for granted that YES will still be around seems difficult to support all by itself.

Assuming that the vMVPDs are capturing the MVPD losses is pretty difficult to buy into as well as they may represent no more than 10-12 million customers all tolled; not all that impressive given that they draw from perhaps the largest of all customer bases.
 

·
Legend
Joined
·
165 Posts
I don't feel that cable/sat losses have bottomed out. My wife and I cut the cord around 5 years ago and have friends that ask about it all the time. The biggest reason why these people haven't "cut the cord" is the fear of the unknown and trying to find everything they want to watch. Once more people feel more comfortable with moving from cable/sat, I can see another 10-20% drop from the current 50.5% household figures.
 

·
Registered
Joined
·
2,311 Posts
The other bad assumption is found earlier. The “cable is dying” crew always cite the number of cable/DBS/teleco subscribers as in decline. Leaving out alternative linear providers like YouTubeTV, which has ESPN and is linear. These people are not cord cutters, but cord switchers, still paying for linear channels.
Incorrect. The figures often do include vMVPDs (i.e. streaming cable TV services such as YTTV). I'll quote again here from the story I linked above:

With the small gain among vMVPDs included, the US pay-TV sector lost 1.9 million subs, a record decline of 6.1%, according to MoffettNathanson.

Here's the link again:
Pay-TV picture worsens as sub losses hit 1.9M in Q2

Note that the chart in the story is labelled "Total Pay TV Distribution (Including vMVPDs)."

Another key quote from the article:

MoffettNathanson estimates that the vMVPD "conversation rate" (traditional pay-TV losses that become vMVPD gains) plummeted to 25.6%, off from 40.9% in the year-ago quarter.

Those streaming cable TV services were initially keeping lot of folks cancelling traditional pay TV still on the cable bundle. (I would agree that it's pointless to call those people "cord-cutters" since they're still paying for the cable bundle, just a different way. It's no different, really, than switching from QAM cable TV to satellite. It's still cable TV!)

I don't know if the conversion rate was ever more than half but, as the article states, a year ago, it was about 41%. But that's now down to just over a quarter. The data increasingly seem to suggest that the big growth period for vMVPDs is now over. I think Hulu with Live TV even lost a few subs in Q1. It's particularly easy to pick up and drop vMVPDs and only keep them during the part of the year when your favorite sports/shows are playing.

I suspect the conversion rate from MVPD to vMVPD will go back up somewhat in 3Q and 4Q due to football. And I would bet that the conversion rate of folks leaving DTV Satellite is higher than average because of the convenience of switching to its streaming twin, DTV Stream.

But the bottom line is that cable TV, in all its forms, is in broad irreversible decline. I think the companies running those networks are now admitting that to themselves. And I think that by 2025-26 all of them will be making the entirety of the content they now sell via the linear channel cable TV bundle available through one or more DTC streaming apps.
 

·
Beware the Attack Basset
Joined
·
25,904 Posts
The number of people that would stick with cable if they could get ESPN a la carte, is not 50M. It is probably closer to zero.
I'd imagine that there is a pretty large market in the commercial venues that would like to get ESPN without subscribing to a broad scope programming package. I'm thinking sports bars and barber shops as good examples.
 
1 - 12 of 12 Posts
Top