ESPN Set to Launch Anticipated Over-the-Top Streaming Service
ESPN is finally set to launch its hotly anticipated over-the-top streaming service. The premiere of this direct-to-consumer platform and its complementary application has been scheduled for August 21, making it official during Wednesday’s Disney quarterly earnings call.
Reaching agreements with both the NFL and WWE are some of the recent steps ESPN accomplished in its strategy. These alliances will provide ESPN with a broader programming basket, enhancing its position in a market fragmented by conventional cable, satellite, and emerging streaming technology.
Nielsen tracking demonstrates a notable shift in American television consumption patterns. For the first time, streaming usage has eclipsed the combined viewership of broadcast and cable TV. The 44.8% streaming audience as compared to 44.2% for linear television is a testament to this.
Back in May 2021, the viewership scenario was quite different. The researchers observed that 64% of viewers preferred linear options, outweighing the streaming market, which stood at just 26% of total viewership. This change in user preferences is indicative of the dynamic nature of the media industry.
Subscribers for the ESPN’s forthcoming direct-to-consumer platform are estimated to be around 25 million at launch. This figure includes the network’s cable and satellite customers, but it’s quite apparent that ESPN is extending an invitation to cord cutters to sign up for the service which houses all ESPN networks.
The value of delivering live sports content remains high, and the NFL seems to be the prime real estate of this sector. In seizing control over the NFL Network, ESPN will gain an extra three NFL matches, plus an additional avenue to broadcast Monday night matches, particularly when multiple games are scheduled.
Entering into a deal with WWE is another strategic move for ESPN. Recognizing the influence of entertainment in ESPN’s branding, they’ve secured rights for live WWE premium events. This particular entertainment genre has cultivated a dedicated and diverse viewership base stretching across multiple generations.
However, ESPN’s engagement with WWE is territorially restricted within the United States. International rights for these events belong to another streaming behemoth, Netflix. ESPN managed to generate $4.3 billion in the previous quarter, a modest growth of 1% compared to the previous year. However, the company will have to deal with a 7% drop in operating profit due to higher rights fees.
For NFL rights, ESPN will need to shell out an average of $2.7 billion annually. For an upcoming NBA deal that lasts for 11 years, ESPN is committed to an average annual expenditure of $2.6 billion. In addition, the five-year WWE deal will cost them an average of $325 million per year.
The landscape is further complicated by ESPN’s decision to step away from Major League Baseball, seemingly relinquishing its claim on rights for Formula One. The current three-year deal with ESPN is about to expire, and the owner of F1 reportedly demands a minimum of $120 million for the upcoming contract, due to start in 2026.
Given these conditions, escalating revenue remains a crucial challenge for ESPN. This puts the spotlight on its strategy to introduce a direct-to-consumer product. It’s evident that ESPN is transforming its approach to keep pace with a rapidly evolving media industry.