After Losing 10,000 Viewers Per Day, ESPN Finally Buckles To Offering Standalone Streaming Video Service

from the swimming-upstream dept

For years now, ESPN has been the perfect personification of the cable and broadcast industry's denial regarding cord cutting. Long propped up by a system that forces consumers to buy massive bundles of largely-unwatched channels, ESPN has struggled with the rise of streaming alternatives and sleeker, "skinny" channel bundles. The sports network, which has lost 7 million viewers in just a few years, has been trying to argue that these losses (which caused Disney stock to lose $22 billion in value in just two days at one point) are simply part of some kind of overblown, mass hallucination.

Last year, ESPN exec John Skipper even went so far as to suggest that these departing customers weren't worth keeping anyway:

"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

In other words, there's "nothing to see here" -- outside of the total collapse of our entire legacy business model. At one point late last year, ESPN even went so far as to make a giant (unwarranted) stink about Nielsen data showing the cable channel had lost 621,000 homes in a single month. Things still aren't looking particularly good for the company, with Disney's earnings indicating that ESPN is fairly consistently losing about 10,000 viewers per day. That's not surprising when you see surveys indicating that 56% of subscribers would drop ESPN in a heartbeat if it meant saving the $8 per user the channel is estimated to cost consumers.

Despite these numbers, Skipper and other ESPN executives have spent the last few years insisting that offering a standalone streaming app (you know, evolving for the market you're doing business in) wasn't financially viable:

"We could sell ESPN, as a standalone product, but we don't believe it to be a good business," Skipper said. "We're in 90 million homes," he added, "so no, we do not have a contemplation now that we would launch as a standalone."

That was then, this is now. And ESPN executives appear to have been overruled by Disney higher ups. Speaking on the company's recent earnings call, Disney CEO Bob Iger said that ESPN would now be conducting an about-face, and would launch a standalone streaming video service sometime in the next year or so:

"Iger affirmed that ESPN will launch a branded standalone streaming service later this year, in partnership with BAMTech, the digital technology firm in which Disney bought a $1 billion stake last year. He also talked up the prospects for ESPN to offset the industry-wide trend of declining subscriber rates via from traditional MVPDs through gains from the handful of upstart streaming channel packages that are in the works."

Necessary evolution -- how novel! Granted, ESPN's still on the hot seat. I've heard from several industry insiders familiar with ESPN's contracts with cable companies that language currently prevents cableco's from breaking ESPN out of the core channel lineup (something ESPN sued Verizon for in 2015, because of course) unless ESPN offers its own streaming service standalone. In other words ESPN's in for a rocky stretch either way.

Either the company launches a streaming video service that encourages cable companies to kick ESPN from the core bundle, further eroding ESPN's traditional cable customer totals, or they refuse to offer such a service and these users leave anyway. But when you're facing a major dismantling and reconfiguring of a legacy industry due to disruption, it's better to be out in front of it and ready to meet evolving user demand, than stumbling around blindly in denial.

Filed Under: ott, over the top, sports, video streaming
Companies: espn

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  1. icon
    That Anonymous Coward (profile), 21 Feb 2017 @ 9:42pm

    Re: I assume ESPN makes its profit from advertisements

    Last time we talked about them IIRC, they had their own in house metrics that disagreed with Nielsen & threw a fit and demanded the report be recalled.

    They feel their product is worth X, despite the dropping numbers they've been ignoring around them. We always made this much so we should always make this much. We force them to take our 14 others channels, even the elementary school kickball tournament network.

    Then they say we have X reach so you should pay us this much to run your ad on our shows, because the pool of viewers is this deep... even if a majority of them just have the basic bundle we shovel 4 of our channels into to inflate the numbers.

    Everyone expects to make the same cash they always made, even if the Uncle Bubba's Hog Wrestling channel only gets 4 viewers that are cats... you need to pay close to what the big boys pay to get great placement on our real channels. Teams want more, colleges want more, players want more. We've already started to see the 'nascarification' of some teams with logo placements where there is open space. God a bigger budget, you can sponsor our review of other events happening at the same time as we fill the space with has beens talking about how the losing team needs to do better to be the winning team.

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