ESPN's past, present and future: Cable TV collides with streaming

ESPN was once America's largest cable network. As the pay-TV era nears its inevitable conclusion, what will become of "The Mothership"?

By the numbers: ESPN, like many of its competitors, is faced with the delicate task of planning for the future (i.e. investing in streaming) without cannibalizing the present (i.e. monetizing linear).

• TV: 76 million pay-TV subscribers have access to ESPN, per Disney's annual SEC filing. That's a 10% decrease from 84 million at the end of fiscal 2020 — and a 24% drop from a peak of 100.1 million in 2011.
• Streaming: ESPN+, which launched in 2018, ended the fiscal year with 17 million subscribers, up 66% year-over-year.

State of play: Cable subscribers pay nearly $10 per month for ESPN and ESPN2, while ESPN+ subscribers pay $6.99 per month. So you can understand why Disney is in no rush to exit the cable business.

• But that approach conflicts with Disney's overall content strategy, which is to go "all-in" on streaming.
• In fact, some analysts have even questioned whether Disney should spin off ESPN due to this strategic misalignment.

Put it this way: Disney makes more money from non-sports fans via streaming (Disney+, Hulu) than cable (entertainment networks like FX don't command high ad rates). The reverse is true for ESPN, which makes more money from cable subscribers than ESPN+ subscribers, not less.

What they're saying: ESPN probably won't consider a direct-to-consumer service until the pay-TV bundle falls below 50 million U.S. households, which could happen in the next five years, CNBC reports.

The big picture: ESPN launched in 1979 as a TV network but has since expanded far beyond the living room and become a multi-platform behemoth — from the web to radio to fantasy sports.

• Digital: ESPN Digital attracted a record 120 million unique visitors in October, including 95.2 million to ESPN.com alone.
• Social: ESPN is Disney's largest social media brand, generating 63% of the company's total actions on Twitter, Instagram and Facebook.

What to watch: ESPN will have to figure out how to make up roughly $3 billion in annual lost pay-TV revenue that's coming in the next few years.

• The plan, per CNBC, is to incrementally raise the price of ESPN+ as it adds more content, while maintaining its contractual pay-TV obligations (exclusive content like MNF's "ManningCast").
• Disney will also "aggressively" pursue sports betting, which is now legal and operational in 30 states, plus D.C. "We have to seriously consider getting into gambling in a bigger way," CEO Bob Chapek told investors last month. A future "ESPN Sportsbook" seems likely.
• Of note: Disney has said it may consider bundling ESPN+, Disney+, and Hulu into a single service. In the meantime, it just added ESPN+ and Disney+ to its Hulu live TV bundle ($72.99 per month).

The bottom line: Traditional TV is a leaky bucket that will eventually run out of water. But it's going to be a slow bleed, with networks like ESPN clinging to the cable bundle until the bitter end.