The Rise and Fall of ESPN’s Leverage
stratechery.com/2023/the-rise-and-fall-of-esp...
stratechery.comPosted Sep 10, 2023, 4:52 AM UTC
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stratechery.comNotably, the first NFL Monday Night Football game (ESPN) features two Spectrum-market teams; the New York Jets and the Buffalo Bills. To handle a potential rush of customers anxious about missing the game, Charter is preparing a one-touch QR code that would not only create a new YouTube TV or Fubo subscription, but would also downgrade from a Spectrum video bundle with a single click…Disney may learn the hard way that it’s tough to win a negotiation with a counterparty that has nothing to lose.
Damn Charter is serious about potentially walking away from cable TV.
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The thing here is, so far ESPN has kept the major sports content on espn and the other stations. Very little of that is through their svod services. It’s Comcast (Peacock) and Paramount CBS (Paramount+) that have dropped the barrier of entry.
But yes this diagram though does show what will happen when espn channels are available outside of traditional cable and cable like services.
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Turns out sports isn’t universal, the exploit Disney used to require ESPN be paid for by every cable household is ending and Disney and the sports leagues will just have to figure out how to operate with lower revenues.
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In time, yes they will have to make due with less but it starts with the networks negotiating lower paying deals or walking away. NBA contacts with espn and Warner run through the 2024/25 season. NHL 2027/28 season. Mlb is a mess. NFL runs until 2033… but the nfl has a more broad distribution system including over the air to keep people engaged for free if they have reception with an antenna. So nfl is not struggling in the same way to keep and create fans. WNBA is getting a lot more ota and streaming as ion is widely available even in streaming for free. Same for lower league sports. It’s possible some of these could grow over the coming years as people are more likely to watch when the barrier to view is low (though I have my doubts any will succeed).
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In time? No we’re talking an immediate 14.7 million loss in subscriber fees. It will be less when the avid sports fans move to other services but ESPN is losing eyeballs and fees continuously now.
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Its a slight loss as the customers are being pushed to fubo or YouTubetv which carry the channels. And it’s too early to think Spectrum won’t cave. Disney can walk back the increase some so spectum saves face, while not giving in to other demands.
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I doubt it, since what we're seeing now is a bundle of linear TV channels being replaced with a bundle of branded VOD apps.
That locks the carriers away and potentially buys the network more revenue for a bit, but net neutrality will catch up with them eventually. Already Comcast won't charge against your data cap if you watch ESPN on the Xfinity Stream app through a cable subscription, but if you watch on the Disney+ bundle you bought it counts against that terabyte you're limited to monthly.
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What ESPN did was paywall most of the ESPN3 and ESPNU content behind ESPN+. It's pretty much a middle finger to all their cable customers. The same is true for FX and Hulu. The Bear is an "FX Hulu original" but you don't get it on cable. Disney's greed may finally be catching up to them.
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They need to just add a cancel TV option in our account.
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I wonder how it was found to be legal that companies like Disney were able to push these unwanted channels on subscribers. There must have been some court cases. That and the monopolies that cable companies had kept us screwed for the last few decades. Good that it is over.
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They were actually required to carry local channels for awhile by law, also couldn't carry out of market network stations. I remember in my area when I was a kid we also got the Boston stations on cable but that ended sometimes in the early 2000s. But I think the court cases settled on the government not really having much power to regulate cable because it's not available to everyone like broadcast, most of the regulations are from local entities which they can attach to the contracts that allow them to build out the system in public right of ways.
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ESPN owes something like 45 billion dollars for the TV rights to football baseball and basketball. Charter makes most of their money on broadband and losing a few million viewers will not be a hit because they are more likely keep their broadband. So ESPN is losing millions and millions of paid subscribers who don't watch sports but have the sports as part of their bundle. I would guess a few million will cut ties with cable but its just not as many as people think. Disney is already trying to move ESPN out from under them and are currently trying to get investors to help the burden of all these up coming payments for the TV rights. Nobody is getting in that line as of right now. Charter has all the leverage in the world and ESPN will eventually buckle under the pressure.
If ESPN tried to make their own stream service, that would also be a big hit because they will not get all those paid subscribers who don't watch sports. If you make it too expensive, people are not going to buy it. They are screwed there too. Its just way to easy to watch the games online for free and more and more people are realizing this. Lets face it, a lot of people are not liking Disney so they really won't to do anything that helps them out.
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It was somewhat arrogant of the content owners to think they could just put their best shows and slowly siphon cable sports onto their streaming apps and still demand higher carriage fees from the mvpds. You dipped the chip and then you dipped again.
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They were trying to thread the needle, and they knew this day would come. They are just trying to delay it.
This is the problem Disney has and the only way is to bite the bullet and move to direct to consumer streaming and work with cable providers to bundle that. Or they can do what they seem to be doing and try to delay that day (it will come) and milk some extra revenue in the meantime.