ESPN’s Destiny As Streaming Stand-Alone Gets Nod From Disney CEO Bob Chapek: “It Will Be The Ultimate Fan Offering”

Dade Hayes
·3 min read
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While the idea of ESPN going “over the top” as a stand-alone streaming offering has been bruited about for years, Disney CEO Bob Chapek enthused about the scenario Wednesday during the company’s quarterly earnings call, describing it as an inevitability.

“It will be the ultimate fan offering,” he said during the call with Wall Street analysts. “It will appeal to superfans that really love sports, and I think there’s nobody but ESPN who could frankly pull that off. We don’t have a lot of specifics when it comes to structure, but we do believe that because sports is so powerful — in fact, in the last quarter, 46 of the top 50 most-viewed programs on linear TV were sports.” Sports is also “the third leg of our domestic offerings,” he added. “Right now, that expression is through the bundle and I think that can become very powerful for us going forward into the future.”

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Asked multiple times by analysts during the discussion of fiscal second-quarter results to outline how such a shift of ESPN’s focus might affect its financials, Chapek declined to offer preliminary analysis. Even so, he also expressed more distinctly upbeat sentiment than either he or predecessor Bob Iger have in recent years. Chapek used the phrase “when it comes time to actually pull the trigger” (as opposed to “if”), but also cautioned, “We’re not ready to share the specifics of our models in terms of how it would take for us to reach profitability on that or the impact it would have on our linear business.”

In fiscal 2021, which ended last October 2, Disney disclosed in an SEC filing that ESPN’s traditional subscriber base dropped 10% compared with the previous year, down to 76 million households. Given the industry outlook for at least 5 million pay-TV subscribers canceling their service in 2022, cord-cutting remains a front-burner issues for media companies as they reckon with the onset of streaming.

In its fiscal second-quarter earnings release, Disney painted a rosy picture of streaming service ESPN+, which jumped 62% from the prior-year period to pass 22 million subscribers. It pulled in an average of $4.73 per subscriber during the quarter, up 4% from the prior year.

Disney+ Adds Almost 8M Subscribers In Fiscal Q2, Nearly 20M Over Past Six Months

While certain programming from linear ESPN is also carried on ESPN+, the streaming outlet has thus far been positioned as a complementary offering and priced accordingly. The company hesitant to prematurely take any more out of the gradually deflating balloon by mounting a full-on offering with high-profile live rights, though rivals like Amazon and Apple are upping their sports quotients.

The economic returns on streaming are much more uncertain than in pay-TV, however. ESPN, which was among the first cable networks to charge carriage fees back in its early stages in the 1980s, set the standard for programmers charging operators escalating fees while also collecting significant advertising revenue. That dual revenue stream created one of the most profitable business models in any industry.

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