For decades, ESPN had a massive advantage over pretty much every other cable channel. It was an expensive advantage to build, and many of those costs remain in place, even as that advantage slips away.
The self-described “World leader in sports” has always made sure it owns rights to an impressive array of live sports. That is included most of the major sports leagues as well as key college games. ESPN has also offered a high volume of live programs through its deals with Major League Baseball, the NBA and the NHL as well as certain college conferences.
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As a product that could only be found on cable, the ESPN channels had a lot of clout. Every cable customer paid somewhere between six and $12. To get the ESPN channels. They paid for and got those channels whether they wanted them or not.
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ESPN had a ton of content that was exclusive and cable companies had very little leverage when it came to negotiating fees. That has changed quite a bit and many cable players are opting to offer skinny bundles which do not include ESPN.
To combat that, Walt Disney DIS plans to offer a direct consumers version of the channels. That’s a necessary step as cord cutting has made the cable world, smaller, and smaller, lowering those carrying fees, as there are simply less subscribers out there.
But it’s a very risky proposition, and Walt Disney CEO, Robert Iger, talked about what would happen next and the future of ESPN during his company’s first-quarter earnings call.
Iger is in his second stint as the CEO of Walt Disney.
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ESPN goes down a risky road
With ESPN, Iger essentially had two choices: lower expenses dramatically by giving up a lot of sports rights, or find a way to make more money. ESPN did cut some salaries by dropping certain on-air personnel, but it has not cut its rights budget — arguably, it has increased that spending.
Iger has a simple goal for ESPN.
“The goal all along, as it relates to ESPN, is to make ESPN as accessible as possible and in as many ways as possible to the consumer. Some will want to consume it just through an app. Some will want to consume it as part of, I’ll call it, the more traditional expanded basic bundle. Some will migrate in the direction of skinnier bundles or sports bundles only,” he shared.
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The CEO does not make guesses as to what that will fully look like.
“I can’t predict whether the emergence of these skinnier bundles is going to have a material impact on cord-cutting or not, except to say that we plan to take advantage of the emergence of these bundles because it is a great way to distribute ESPN,” he added.
Iger does have an ESPN plan
Disney’s CEO has committed to betting big that enough sports fans will pay for ESPN even if they have to do that as a service separate from a cable or streaming bill.
“In terms of our sports strategy. I’ve touched on some of it, and that is make ESPN available however the consumer wants it, wherever the consumer wants it. Some will want to consume it as part of a linear channel. But we’re obviously leaning into the development of what is now called Flagship,” he shared.
Flagship will be a standalone, paid product that offers sports fans everything they want in one place.
“[Flagship] is essentially ESPN with multiple, multiple elements to it or multiple essentially enhancements and, of course, the inclusion ultimately of some form of betting and fantasy and a high degree of customization and personalization and essentially a much bigger offering in terms of product programming than the linear channels currently offer, Iger explained.
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Iger and DIsney are working on a plan to launch Flagship, which may not end up being its official name.
“The plan will be to launch it sometime toward the — in the fall of this year. And we’re actually quite excited about it because, first of all, it gives us an opportunity to bundle it with Disney+ and Hulu, and then we will get really smart and strategic about pricing there, but it gives consumers the option of basically just staying in a sports-only experience or combining it with their other services,” he said
Disney also plans to leverage all of its streaming properties for consumers who want that.
“And if they happen to subscribe to Disney+ and Hulu, then they can experience ESPN flagship in a one-app experience, which will be both convenient from a subscription perspective and also convenient from a user perspective. So we’re bullish,” Iger added.
