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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.
 

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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.
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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.
 
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