Ah, Coronavirus. She was just the nail in the coffin for ESPN’s dwindling pay-TV viewers. More than ever, people are switching to streaming for all their entertainment needs including sports, which makes now a great time for ESPN to consider taking its world of broadcast sports to direct-to-consumer streaming.
Media Analyst Ben Swinburne of Morgan Stanley thinks now is the right moment for Disney to relocated its focus for ESPN to the streaming world, saying Disney “may be uniquely positioned to take the leap” thanks to its stranglehold on the streaming market with the successful Disney+ launch, control over Hulu, and magnitude of ABC and ESPN.
“Disney’s scale and ability to vertically integrate in general entertainment has positioned it as a long-term winner in streaming,” the Swinburne wrote in a letter to clients this week, reported by Deadline. “Using ESPN’s still significant scale to better align sports fans with sports content is a logical next step.”
So what would that next step look like? The analyst is proposing an “all-Disney bundle” including Disney+, Hulu, and the full ESPN. The current Hulu and ESPN+ bundle available has limited sports offerings due to linear ESPN’s list of longstanding rights deals between linear with its pay-TV partners, and instead focuses on more feature content like 30 for 30. The streaming service closed March 2020 with 7.9 million subscribers.
Swinburne thinks Disney has the greatest chance of being able to make sports and streaming work. A better chance than Amazon, YouTube, or Facebook who aren’t as positioned as well to carry such a load. And if there was ever a time to take the plunge, now seems to be it since ESPN peaked a few years ago and is on the downward with subscriber numbers. And with that decline has come a decrease in revenue for the pay-TV sports broadcasting network.
“Sports rights on TV are rising at a high-single-digit annual growth rate, while cord-cutting is driving down pay-TV revenues,” Swinburne wrote. “If these trends continue, by the end of 2030 there will be little earnings left in the business of broadcasting sports. This would be a bad outcome for all involved, even team owners and players. The majority of revenues for all major leagues stems from TV rights.”
“But it gets more challenging over time,” the analyst said. “Sports distribution offers challenges that do not exist in general entertainment. In contrast to Disney+ and Hulu, Disney cannot vertically integrate in sports, nor can it scale its business over a global footprint.”
Challenges aside, it will be interesting to see if this analysis is something Disney actually entertains. Would you subscribe to an all-Disney bundle if it included full access to sports? Let us know in the comments.
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