ESPN Going DTC May Save Cable 

ESPN’s post-cable future is starting to come into focus.  

It is still a year or two away from possible implementation, but there’s news that ESPN is planning “Project Flagship” — the internal name for offering full ESPN, not just ESPN+, to consumers without needing to subscribe via pay TV. 

This may be the one thing that helps to stabilize traditional MVPDs.  

In the first quarter of 2016, there were 59.7 million subscribers to pay TV via Comcast, Charter, Dish, Verizon and Altice. That figure has shrunk to 42.4 million seven years later, a decline of 17.3 million (-29%). Some have gravitated toward virtual MVPD service, but with the major services increasing their costs, providers such as Hulu With Live TV are beginning to see subscriber slowdown. (This is a chief reason behind the launch of Comcast’s new Now TV service). 

The ever-increasing cost of sports rights is a key factor behind the consumer exodus. These new fees are passed on to consumers, raising the price of cable packages, which have also suffered from a reduction in original shows in favor of streaming platforms. 

This has seen the affiliate fee for ESPN skyrocket, with every cable subscriber paying close to $10 per month in 2022 for ESPN and ESPN2 alone. 

The rise of VMVPD bundles such as FrndlyTV, Now TV and Philo, which eschew sports in favor of lifestyle cable TV brands at a much lower price point, shows there is an appetite for sports-free TV. Charter’s Spectrum TV has also offered this for years to subscribers, allowing them to pick up to 15 networks for $35 a month. 

ESPN going direct-to-consumer does not mean it won’t remain part of all-inclusive cable packages. But VIP+ anticipates that in order to greenlight Project Flagship, MVPDs will ask for the right to offer channel bundles without all the ESPN networks. This in turn would allow them to preserve the cable TV rump that wants to keep access to news and entertainment channels but at an affordable price. 

Project Flagship could see the U.S. pay TV industry finally follow that of the U.K., where those who want sports pay for it and those who don’t, don’t. It could also see the introduction of innovations including day passes for sports networks, which would be sold both via MVPDs/VMVPDs and DTC. 

As the table above shows, ESPN had 21 games with a TV audience of 10M or more in 2022 (although some of these were multicasts on ABC and/or ESPN2). It’s certainly not hard to envision people paying $19.99 to watch the College Football Championship or even for a regular-season MLB, NHL or NBA game if priced appropriately. 

Going direct may then open up new revenue streams. These will be necessary to maintain the profitability of Disney’s sports division but are also necessary to preserve some sort of general cable TV business. Rather than being the chief poison to slowly kill it all, ESPN going outside of cable may prove to be essential to keeping it all together.