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
    yankinwaoz (profile), 21 Feb 2017 @ 3:24pm

    Protecting the cash cows!

    There are heaps of examples of companies that drove themselves in to the dirt because they had to protect their cash cow at all costs.

    For example: Kodak - Protecting its profitable film business, refused to switch to digital.

    BlackBerry - Refused to invest in smart phones. Stuck with their profitable BB Service.

    Digital Equipment Corp - "No one needs a computer in their home...". Nuff said.

    reply to this | link to this | view in thread ]

  2. icon
    That Anonymous Coward (profile), 21 Feb 2017 @ 4:01pm

    "We're in 90 million homes," shame only a million of them watch our programming & not just surf past on their way to find the show they wanted to watch.

    reply to this | link to this | view in thread ]

  3. identicon
    Anonymous Coward, 21 Feb 2017 @ 5:19pm

    Response to: That Anonymous Coward on Feb 21st, 2017 @ 4:01pm

    We have ESPN in our breakroom at work. The manager wants it on 24/7. We're don't pay attention until playoffs.

    reply to this | link to this | view in thread ]

  4. icon
    streetlight (profile), 21 Feb 2017 @ 5:38pm

    I assume ESPN makes its profit from advertisements

    What fraction of ESPN's income comes from subscriber fees? If Nielsen has good data on the number of folks that actually watch ESPN, and if those numbers are steady, then ad revenue should be steady and revenue from subscriber fees is responsible for any drop in income. If those fees are $8 per month and 10,000 subs drop per day - 300,000 per month - there is $2.4 million per month in dropped revenue. Seems big to me, but I'd guess ad revenue much, much more. If ad revenue is down because of lost eyeballs, as well as their huge payouts to sports leagues, then they are in trouble.

    reply to this | link to this | view in thread ]

  5. identicon
    Anonymous Coward, 21 Feb 2017 @ 5:59pm

    I'm only guessing

    But the reason ESPN doesn't want to break out their content and instead insists on being included in a base bundle is that it's easier to reach into 10 million pockets and extract $15 a month than it is to reach into 1 million pockets and extract $150 a month.

    That is to say that by being in the base tiers and tied to a bundle means their content is paid for by many that do not care to consume it, but feel that complaining about $15 is petty. But most folks would definitely not like paying $150 a month for something the might want during playoffs.

    For myself, I sit back and tell ESPN (along with the rest of the cable TV industry) that they are "number one!" with a hand gesture. After more than a decade of never ever watching TV, I have far more rewarding entertainments to fill my declining years.

    It would appear that the fig leaf is getting a bit tattered now, and they are moving toward a bit more options.

    reply to this | link to this | view in thread ]

  6. icon
    That Anonymous Coward (profile), 21 Feb 2017 @ 9:23pm

    Re: Response to: That Anonymous Coward on Feb 21st, 2017 @ 4:01pm

    Manger owns Disney stock...

    reply to this | link to this | view in thread ]

  7. 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.

    reply to this | link to this | view in thread ]

  8. icon
    charliebrown (profile), 21 Feb 2017 @ 10:45pm

    Australia: Foxtel

    Our one pay TV provider, Foxtel, broke off the sports channels into an optional extra package several years ago (after almost ten years of customer demand). Suffice to say when that option came in, we dumped the sports channels faster than you could say $15 per month extra.

    Now they have the V8 Supercars races so I'm tempted but I only watch that every now and then when bored so it's not worth the now $25 per month extra.

    reply to this | link to this | view in thread ]

  9. identicon
    Anonymous Coward, 22 Feb 2017 @ 12:17am

    Re: I assume ESPN makes its profit from advertisements

    Advertisement is not just advertisement. If you look at Youtube or Twitch as a reference, the difference is between low income and attrocious income per 1000 eyeballs.

    Online advertising has become so cheap these days. Since TV is selling advertisement at far, far higher costs per eyeball, there is a massive drop from TV ad revenue to online ad revenue.

    As much as bleeding 2.4 million good ones each month sucks for ESPN, the fear of the cost in advertisement revenue from having a separate streaming option, where people can migrate over is incredible. Oldschool TV is on the way out. That is why they are forced to do something at some point. But the longer they can play Comical Ali and keep their advertisers paying through their nose, the more money they have in the bank to enter the online-race when they finally shift over...

    reply to this | link to this | view in thread ]

  10. identicon
    Cowardly Lion, 22 Feb 2017 @ 1:47am

    Re: Australia: Foxtel

    It gets very hard to justify that $25 per month extra when you consider that only a few decades ago, before sports bodies "wised up", that most televised sports were free to air and free to view (I guess largely depending on where you are in the world); broadcasters wanted quality content, viewers wanted quality content.

    But it's hard to be a passionate sports fan when you consider the obscenely huge salaries, fees and payouts in some of the more popular sports. For myself, the moderate interest I once held in Formula 1, soccer, cricket, boxing... has all but died.

    reply to this | link to this | view in thread ]

  11. identicon
    Anonymous Coward, 22 Feb 2017 @ 6:35am

    "Viewers"

    We shouldn't be calling people "viewers" without evidence. The linked article says "subscribers". If someone downgraded their cable package and no longer gets ESPN they were probably never a viewer to start with—just one more person who was paying for a channel they never watched, because of the package structure.

    reply to this | link to this | view in thread ]

  12. icon
    strykerakamack (profile), 22 Feb 2017 @ 7:12am

    Long Live KODI

    reply to this | link to this | view in thread ]

  13. icon
    timmaguire42 (profile), 22 Feb 2017 @ 7:23am

    It still won't be available in Canada, so I will have no choice but to continue pirating the sports broadcasts I would happily pay for if the people selling them were willing to take my money.

    reply to this | link to this | view in thread ]

  14. identicon
    Anonymous Coward, 22 Feb 2017 @ 9:43am

    $ talks

    talk with your wallet

    reply to this | link to this | view in thread ]

  15. icon
    roebling (profile), 22 Feb 2017 @ 12:49pm

    Spurn churn

    Glad to see ESPN being proactive to keep their college sports revenue-generator running and producing for college athletics.
    If pricing is monthly, like most streaming outlets, I can watch all of football season for the price of one ticket to the game, then bail.
    On the other hand, if the pricing's annual, ESPN generates three times the revenue, and I still buy.
    Hope they go monthly!

    reply to this | link to this | view in thread ]

  16. icon
    roebling (profile), 22 Feb 2017 @ 12:50pm

    Spurn churn

    Glad to see ESPN being proactive to keep their college sports revenue-generator running and producing for college athletics.
    If pricing is monthly, like most streaming outlets, I can watch all of football season for the price of one ticket to the game, then bail.
    On the other hand, if the pricing's annual, ESPN generates three times the revenue, and I still buy.
    Hope they go monthly!

    reply to this | link to this | view in thread ]

  17. icon
    Dr. Morbius (profile), 22 Feb 2017 @ 2:21pm

    Good Riddance

    ESPN's entire business model has essentially been a protection racket. I've been forced to pay them plenty of money over the years from cable and satellite subscriptions. No wonder people are dumping it so fast when given the opportunity.

    I won't be happy until ESPN is bankrupt and completely out of business. They belong on the trash heap of history along with other shady business scams.

    reply to this | link to this | view in thread ]

  18. identicon
    DakotaKid, 22 Feb 2017 @ 11:17pm

    Politics on a sports channel

    What about all the political commentary on a sports channel. People watch sports to escape their daily lives, not to be lectured on how you should behave by bunch of social justice warriors.

    reply to this | link to this | view in thread ]


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