ESPN chairman hints at a full move to its streaming service

The GIST: The fate of the universe cable may rest in ESPN’s hands. In a Monday interview, chairman Jimmy Pitaro said it’s “a ‘when,’ not an ‘if’” the broadcaster moves its entire slate to streaming service ESPN+, which would change the entire sports broadcasting landscape as we know it.

The current model: ESPN operates its cable and streaming businesses separately, though the verticals are beginning to converge due to industry trends. TV generated $28B in revenue last year, and the broadcaster has 74M cable subscribers, down from 99M a decade ago.

The streamer: Most things are trending upwards for ESPN+ — it has 25M subscribers, aired 27K live sporting events in 2022, total viewership grew 53% YoY, and women’s sports viewership doubled. Profits are a different story, though — ESPN+ lost $400M in the last fiscal year and makes an average of only $5.53 per subscriber a month, despite charging $10.

• Its bundle option with Disney+ and Hulu also plays a factor. A whopping 61% of subscribers are from the discounted package, and though crossover content like Hulu’s Welcome to Wrexham benefits ESPN+, it decreases the monthly revenue generated per subscriber.

The context: Even if digital platforms are increasingly popular, especially among women’s sports fans, the switch from cable to streamer is a complicated one. Recent JPMorgan analysis said it’s “unclear” how digital platforms will match cable’s profitability because of low subscription costs and high churn rates.

• The report also argued that the surge in sports media rights fees is “unsustainable” as cable subscription rates fall, even if some properties ink new and improved deals in the coming years. Fasten your seatbelt.

The lingering questions: King of cable ESPN will likely be the one to ring its death knell but will also have to answer a handful of questions as it charts a streaming-first path: How does ESPN turn its digital offering into a massive revenue-generating business, and what is the knock-on effect for the rest of the industry?

• The JPMorgan report suggests media rights figures may tumble once streaming takes over, but it’s also worth wondering if everyone in the broadcast business — advertisers included — will ditch TV when ESPN does. Watch this space.