on a profit call earlier today, Disney CEO Bob Chapek sounded like someone who has clear ideas about ESPN’s fully streaming future. He told analysts and investors that “when it’s time to pull the trigger,” he believes ESPN can “create the ultimate fan offering that will appeal to the sports-loving superfan,” and “I don’t think there is anyone but ESPN who frankly pull that off.”
This isn’t the first time we’ve heard a Disney executive refer to the potential of ESPN streaming — former CEO Bob Iger said in 2015 it will eventually happen, but envisioned the possibility as more than five years old. By contrast, Chapek said Disney isn’t ready to share the details of its model on how long it would take to achieve profitability or the impact such a shift would have on its existing cable ESPN business deals, without bothering to go far. timetables as reassurance for its cable partners.
The conversation started because an analyst asked what’s stopping the company from turning ESPN Plus into a full a la carte sports network. As it is, the subscription occasionally offers simulcasts of ESPN’s cable networks, as well as some exclusive streaming programs, but it can’t replace traditional ESPN for most viewers, and there’s a big reason why: money.
As Chapek acknowledged in his response, legacy linear networks like ESPN and the cable rates they entail are “huge money generators,” making Disney hesitant to disrupt the existing business model too early.
“At some point…we will be able to fully engage with an ESPN DTC offer”
The not-so-slow slump in cable company subscriber numbers as a result of cable cuts is no secret. At its peak in 2010, the US had approximately 105 million pay-TV households. A report in March from Leichtman Research Group tracking the largest cable, satellite and fiber pay television companies in the US saw their subscriber numbers drop by about 5.5 million in 2021 after losing 5.78 million in 2020, bringing their number to about 68 by the beginning of 2022. .1 million remained.
However, he continued: “At the same time, we are very aware of our ability to enter the DTC more aggressively. [direct-to-consumer, aka streaming] area of ESPN, so what we do is put one foot on the dock, if you will, and one foot on the boat now.”
“But what we do know is that at some point, when it’s going to be right for our shareholders, we’ll be able to fully engage in an ESPN DTC offering, as you describe, and we’re fully convinced that there’s a business model.” … for us, that will allow us to grow again on ESPN Plus in a full DTC expression.”
This is a balance that Disney has disrupted enough by shifting its focus away from cable channels with the launch of Disney Plus, and similar to the balance Warner is navigating with HBO and HBO Max. Traditional pay TV setups (including online streaming such as Disney offers through Hulu with Live TV) are still impacting too much on Disney’s bottom line for Disney to bypass them and launch the full ESPN experience as its own streaming subscription, as it has been for many years, but the point where that will change is close enough that Chapek feels comfortable openly entertaining the possibilities.