During an earnings call earlier today, Disney CEO Bob Chapek seems to have a clear vision of ESPN’s totally streaming future. He told analysts and investors that “when the time comes to truly pull the trigger,” he believes ESPN can provide “the ultimate fan offering that will appeal to the superfan who loves sports,” and that “I think nobody but ESPN could frankly get that off.”
This isn’t the first time a Disney executive has mentioned the prospect of ESPN streaming – former CEO Bob Iger claimed in 2015 that it will happen eventually but that it will be more than five years away. Chapek, on the other hand, said Disney isn’t ready to share the specifics of its model, such as how long it would take to reach profitability or the impact such a shift would have on its existing cable ESPN business deals, without bothering to include any far-off timetables to reassure his cable partners.
The discussion began when one commentator asked what was preventing ESPN Plus from becoming a fully a la carte sports network. As it is, the subscription provides occasional simulcasts of ESPN’s cable networks, as well as certain unique streaming programs, but it cannot replace traditional ESPN for the majority of viewers, and there’s a significant reason for that: money.
As Chapek recognized in his statement, legacy linear networks like ESPN and the cable fees they generate are “major cash generators,” explaining Disney’s reluctance to disrupt the existing business model too soon.
The slow but steady decline of cable companies’ subscriber numbers as a result of cord-cutting is no secret. The United States had approximately 105 million pay-TV households at its peak in 2010. Leichtman Research Group said in March that the largest cable, satellite, and fiber pay-tv firms in the US saw their subscriber counts fall by roughly 5.5 million in 2021, following a loss of 5.78 million in 2020, leaving their numbers at around 68.1 million at the start of 2022.
“At the same time, we’re extremely mindful of our capacity to go more aggressively into the DTC [direct-to-consumer, aka streaming] sector of ESPN, so what we’re doing right now is sort of putting one foot on the dock, if you will.”
“But what we do know is that at some point, when it’s good for our shareholders, we’ll be able to fully enter an ESPN DTC offering, the way you describe, and we absolutely believe that there is a business model there for us that will enable us to recoup growth on ESPN Plus in a full DTC manifestation.”
This is a delicate balance that Disney has already upset by shifting its attention away from cable channels with the launch of Disney Plus, and one that Warner is managing with HBO and HBO Max. Traditional pay-TV setups (including online streaming like Disney offers through Hulu with Live TV) continue to have too much of an impact on Disney’s bottom line for the company to bypass them and launch the full ESPN experience as its own streaming subscription as it has for many years, but the point where that will change is close enough that Chapek is comfortable openly entertaining the possibilities.
