56% Would Drop ESPN In A Heartbeat If It Meant Saving $8 A Month On Cable
from the goodnight,-sweet-dinosaurs dept
Over the last year, ESPN’s decision to laugh off cord cutting has truly come home to roost. The company has had to engage in numerous “belt tightening measures” after losing around 7 million subscribers in just two years. Where are these subscribers going? Many are cutting the TV cord entirely. Others are opting for so-called “skinny bundles” that pull pricier channels like ESPN out of the core cable lineup, moving them to additional, premium channel packs. Companies like Verizon that have experimented with skinny bundles have been rewarded for their efforts with with lawsuits from ESPN.
But there’s every indication things will be getting worse for our friends at Disney and ESPN.
A new study commissioned by BTIG Research and analyst Rich Greenfield (registration required) found that 56% of those surveyed would happily ditch ESPN if it meant saving them $8 a month. 60% of females say they would ditch the channel for the $8 discount, while 49% of males would do the same. And while ESPN could pursue a standalone streaming service, 85% of those polled say they wouldn’t subscribe at $20 a month, even if it bundled in all of the additional ESPN channels such as ESPN 2 and ESPN 3.
And there are some additional problems with ESPN pursuing a standalone streaming platform. ESPN’s recent lawsuit against Verizon revealed that many of the channel’s contracts with cable operators restrict them from breaking ESPN out of the core cable bundle; a provision that is nullified if ESPN offers a streaming version of its own. So ESPN could accelerate its own evolution in the face of cord cutting and go straight to consumers, but (at least initially) it would greatly accelerate the company’s losses as more cable operators pull ESPN out of the core channel lineup.
The problem is effectively that ESPN has enjoyed more than a decade in an artificial bubble, where, thanks to the inflexibility of cable offerings, users were stuck paying for a channel they never watched. In that bubble, ESPN had no real motivation to adapt, and now the check is coming due thanks to internet video. But with the playing field changes, Greenfield’s quick to note that even as a standalone option, there’s simply no way that the financials work out (at least nowhere near the level ESPN’s used to):
“The reality is that ESPN would likely have to charge dramatically more than $20/month/sub in a direct-to-consumer model, given the dramatic reduction in penetration rates…”The math for a direct-to-consumer offering for a basic cable network does not work, especially for channel(s) with very high monthly fees embedded within the current MVPD bundle. Disney cannot take ESPN direct-to-consumer and they know it, whether they admit that publicly or not. Furthermore, if the multichannel video bundle frays faster than expected and the TV ad market continues to weaken, ESPN’s future growth prospects are dim, at best.”
As The Weather Channel can attest, there’s obviously going to be some casualties in the cord cutting revolution. As some companies like The Discovery Channel have been realizing, one way to ensure customers don’t flee under the new paradigm of consumer is to focus on quality, a mysterious new frontier for broadcasters used to getting paid an arm and a leg for delivering the bare minimum.