(03-20-2023 05:25 PM)Gitanole Wrote: (03-20-2023 04:32 PM)DavidSt Wrote: I could see ESPN could drop the ACC and SEC Networks as they are very expensive. They promised too much money to give to these two conferences.
ESPN splits SEC and ACC network profits with the conferences.
ESPN didn't 'promise too much money to give.' If ESPN loses money, so do the schools. If ESPN makes money, so do the schools.
As it is, both SEC and ACC conference networks are profitable. ESPN and the partner schools have every incentive to make sure these projects remain profitable—hence, divisionless formats, discussion of 9-game schedules, etc.
SEC and ACC networks are not structured like the old LHN, if that's what you're thinking.
Correct. SECN and ACCN have been huge bright spots for ESPN as all cable networks have been losing subscribers due to cord cutting. The only major offsets to the losses due to cord cutting suffered by ESPN have been increased subscriber fees for all of the ESPN networks and the addition of new streams of subscription revenues from SECN and ACCN.
In general, sports programming will continue to have significant value due to its ability to deliver the 18-34 and 18-49 male demographics. Soccer, basketball and football are three sports that deliver this audience most effectively. MMA does well also. (Soccer is the strongest demographically of the team sports (i.e., the highest percentage of its audience is in these demos) but has the smallest total audience, with the English Premier League being the strongest soccer property generally.) College basketball and football are not as strong as the NBA and NFL, but are still quite strong, which bodes well for college sports content.
The most significant problem for ESPN is that the cable model is so profitable. The cable model allows ESPN to leverage itself into every multichannel service home in the country, whether the household watches sports or not, and charge $10+ per month to be there. This produces a massive revenue stream that will be very difficult to replace on an a la carte basis.
Streaming is an a la carte service and is not an effective replacement for cable because it requires viewers to choose to pay for the service. Those who are not sports fans will not. To make up the lost revenue, the default scenario would seem likely to be to raise the subscription fee substantially, potentially to $30/month or more.
To replicate the cable model in streaming, you would have to have a service in a similar amount of homes as cable and to then charge for the ESPN family of networks at the same prices that are currently charged by cable. Currently there are 72 million cable households in the US. By comparison, Netflix currently has 74 million subscribers in the US and Canada combined, Hulu has 48 million, and Prime is subscribed to by 77 million households in the US. These all compare favorably to cable. In my view, Disney's best chance to preserve/replace its existing cable revenue stream is to increase the number of subscribers to the Disney Bundle (Disney+/Hulu/ESPN+) to 72 million while simultaneously increasing the price of the bundle to $20-25/month to cover the additional cost of sports programming. The advantage of this model is that Disney would collect the cost of sports programming over a wider group of subscribers at it has previously done successfully under the cable model.
There seems to be some consideration by Disney of the possibility of selling Hulu to Comcast rather than buying out Comcast's share. This would help Disney substantially by deleveraging its balance sheet. However, unless ESPN is part of a general programming service bundle, I believe its likely high a la carte price will scare away casual sports fans.
Another alterative would be for Disney to spin off a combination of ESPN, ABC, Hulu, FX and 20th Century Studios with all of the debt associated with the Fox acquisition. This would create a company built around Hulu and ESPN capable of pursuing the strategy that I described above and allow Disney to focus on its core business of family focused and blockbuster movies, theme parks and Disney+. Disney would be a much smaller but highly focused company with significant synergies generated between its core movie franchises, theme parks and streaming service.