Disney’s ESPN Is Losing Its Powerhouse Status

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ESPN

ESPN was once the big kahuna of cable. Providers didn’t think of separating subscribers from their sports content even though ESPN demanded a hefty per-subscriber fee.

Things are changing, though. The “worldwide leader” has seen its audience fall to 92.94 million homes from the 100.18 million it served in May 2011. Verizon launched low-cost cable packages that did not include ESPN, which led to a lawsuit from the all-sports network.

John Connolly, ESPN’s new executive vice president of affiliate sales and marketing, told Sports Business Daily last month “competition and consumer affordability around pay TV” are the biggest challenges for the company. “How do we keep as many people in the overall content ecosystem as possible?” Indeed.

Connolly and his pals have an uphill battle to fight. In the Walt Disney Co.’s earnings call to analysts Tuesday, CEO Robert Iger noted that ESPN may have suffered “some subscriber losses,” but it will be healthy for a long time due to lengthy contracts it has with the NBA, college football playoffs and other entities. That “adds up to a very strong hand and gives us enormous confidence in ESPN’s future no matter how technology transforms the media business,” Iger said, according to the Wall Street Journal.

It remains to be seen just how Disney is going to stem those subscriber losses. ESPN is currently on Sling, the $20 a month streaming service from the Dish Network—and this is the only way to get ESPN other than having a traditional cable setup. Iger told CNBC recently that it would be at least five years before the channel went its own way and provided its own content directly to consumers, as HBO has done.

Iger isn’t predicting there will be “dramatic declines” in basic cable subscriptions in the near future, the Journal notes, but the cord-cutting trend continues to get stronger and the cord-nevers keep popping into the mainstream. However, Iger surely has the future top-of-mind, since cable made up 46 percent of Disney’s operating income during this fiscal year.

For now, though, it appears Disney doesn’t need to worry too much. Total revenue went up 5 percent to $13.1 billion and net income was $2.5 billion, an 11 percent rise. Within that, cable networks revenue went up 5 percent to $4.14 billion in the quarter.

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