Gradually, then Suddenly, Obviously

ESPN set to let traditional cable television bleed out…

Jessica Toonkel with the scoop for WSJ:

ESPN is laying the groundwork to sell its channel directly to cable cord-cutters as a subscription-streaming service in coming years, according to people familiar with the matter, a shift with profound implications for the company and the broader television business.

Executives at ESPN and its parent, Disney, for years have said it was inevitable that the sports-TV channel would one day be available as a stand-alone streaming service. Now, as consumers increasingly cut the cable-TV cord, the company is actively preparing for that shift under a project with the internal code name “Flagship,” the people said. The company has set no firm timeline for the change.

This is obviously big news because ESPN is, without question, the glue that holds the cable bundle together. But these days, it’s more like the duct tape over the hole in the Hoover Dam. I’ve written a lot about this moment over the years, for example, over eight years ago:

I think the collapse of cable television will happen in this way. The death isn’t that easy to see because it has been happening so slowly. And yet the decline is also accelerating, but very gradually. This is also hard to perceive in the same way that your hair doesn’t look like it’s getting longer on a day-to-day basis, but if you didn’t look at yourself for six months, the change would be shocking.

Make no mistake, a shocking change is happening in cable television. It will just take a while for everyone to get the appropriate perspective to be able to perceive it. Then it will be obvious, in hindsight.

And a few months later, specifically about ESPN:

So does ESPN really want the world of big cable to go away? No. But they’re not dumb. They see the same numbers pointed out above, and they see them much sooner and with much better clarity than WSJ or you or I do. They know the writing is on the wall. Cable’s time is ending.

…

So it becomes a math equation. At what point does cable’s dwindling subscriber number cross the threshold where it makes sense for ESPN to start going it alone? And I mean really go it alone, not wrapped in the warm embrace of Sling TV’s bundle. I’m not sure.

But looking over these numbers, I am sure that it’s sooner than many people think. And that must scare the piss out of ESPN and the shit out of Disney. Because when you find that 25 percent of your seemingly unassailable profit center is suddenly under attack, you tune in.

And here we are. I was off on the timing, but it was inevitable. Disney had to do this slowly. And now it’s hardly shocking that they would make this move with ESPN. Perhaps it’s less “gradually, then suddenly” and more “gradually, then suddenly, obviously”.

Also obvious: this won’t be Disney saying “screw you” to cable completely. It will be them saying, “sorry, we have to do this” to cable. And cable agreeing. Because what other choice do they have? Again, it’s a symbiotic relationship. Cable should be far more worried about this, but what choice (and leverage) do they have? If they threaten to pull ESPN, the cord-cutting stream will become a flood.

The next big question, of course, is price:

That system means that many consumers who don’t watch ESPN are paying for it in their packages. ESPN gets a $9.42 slice of the average cable TV bill — it collects fees from cable providers for each customer — compared with an average of 49 cents per subscriber for other U.S. cable networks, according to S&P Global Market Intelligence.

Streaming is a different world. People only pay for the subscriptions they want. It is likely that the number of households who would sign up for an ESPN streaming service would be smaller than the number who have the ESPN channel in their cable TV packages. That could impact how ESPN prices its streaming service. MSG’s new streaming service, which offers New York Knicks and Buffalo Sabres games, is priced at $30 a month.

I mean, depending on the type of league content on offer from ESPN, it may not be totally crazy to expect them to try to charge $50/month.¹ Or maybe there are levels, starting at say $19.99/month for ESPN original content including SportsCenter, but going up quickly from there if you want actual live sports. Or maybe the cost is further obfuscated via the Disney+/Hulu/ESPN+ bundle. Regardless, it’s not going to be cheap. And I suspect Disney will aim for a more premium market to start here (as opposed to what they did with Disney+, which was a great deal to start), because cable will still exist.

In the longer run, I can’t help but wonder if the cable bundle comes back around simply as the better deal option for consumers. I’m not sure this will still be on traditional cable, but instead via streaming cable packages offered up by YouTube TV and the like. Sure, they’ll cost $100/month, but you’ll get all kinds of services such as ESPN and Discovery and the like. But you’ll watch them linearly, with ads. Whereas if you pay for the services directly, just a handful will cost well over $100/month. But you’ll get to pick and choose what you want to watch. And if you want ads or not. The whole system will be harder to use because nothing will effectively unify the various apps content.² But hey, choice!

¹ Especially if they make ESPN into even more of an all-encompassing sports hub.

² Which is what Apple and others have been trying — and failing — to do for years. So maybe one day, but Netflix is the wildcard here.