ESPN will likely be sold directly to consumers in a few years

July 28 01:02 2015

In a few years, ESPN will likely be a channel that cable-ditching consumers can buy directly as a streaming-only option, Walt Disney CEO Bob Iger said. “If we end up seeing more erosion in the so-called multichannel bundle (cable or satellite TV packages), quality will win out and popularity will win out,” adding the ESPN-only option will not happen in the next five years.

“Five years out, I don’t think you see significant change. But I think eventually ESPN becomes a business that is sold directly to consumers. We’ll use their information to customize the product. I think there’s inevitability to that, but I don’t think it’s right around the corner,” he said. ESPN is one of the most popular cable channels and is cited as a key reason why consumers continue to renew their cable subscription even if they want to “cut the cord.”

With sports licensing fees skyrocketing, ESPN’s programming costs have risen and it’s asking pay-TV companies to pay more to carry the channel. ESPN receives more than $6 per subscriber from pay-TV providers, the highest in the industry. In releasing its fiscal second quarter earnings in May, Disney said ESPN’s programming and production costs hurt the network’s bottom line, as the prices paid to broadcast NBA, NFL and other live games continue to climb. But its affiliate and advertising revenues rose compared to a year ago. Revenue for the media networks unit, which includes ABC, ESPN, Disney Jr. and other cable networks, rose 13% to $5.8 billion.

Traditional media companies have been reluctant to dismantle their profitable relationships with pay-TV providers even as consumers now enjoy a wide range of streaming and on-demand choices. But cord-cutters and young TV viewers are insistent on buying only the channels they want, and more networks are wiling to experiment with the trend. Earlier this year, Time Warner introduced HBO Now, a streaming option available on several devices, including Apple TV, for the premium channel’s fans.

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