ESPN announced it is bringing out a new streaming application. Is this a sign of the death roll that is coming through the door?
Cord cutting has become the norm.
The problem is that we are looking at the death of the cable and satellite package. It was the most powerful broadcasting model we ever saw.
Now, everyone is bringing out a streaming app. Netflix broke the mold and garnered enormous profits. This got the broadcasters drooling. Instead of licensing their content to Netflix, why not develop their own application?
This is exactly what happened.
Unfortunately, for most of these companies, it was a losing proposition. This, however, does not prevent the companies from doubling down.
ESPN is owned by Disney. Even though there is separate management, the decision making is no better than at the mouse.
Disney dumped tens of billions into their streaming services, still registering a loss each quarter. ESPN is now getting into the game.
The company announced it will offer a streaming application for $29.95 per month. This will provide sports fans with the full slate of ESPN content.
What stands out is the fact this is what people use to get from their cable package. Viewers thought the prices got too high, which it did. Nevertheless, all the streaming applications are starting to add up.
ESPN had the highest carrier fees of any single station. This is where the company is making a major mistake.
ESPN fans were subsidized.
One of the major drawbacks to the old model was the fact that non-sports fans were subsidizing those who watched sports. Everyone paid the fees to ESPN. It was based upon the total number of subscribers. While other channels had this, nobody received as much as ESPN.
While the numbers aren't firm, it is believed that as much as $10 per month (per cable subscriber) went to ESPN.
With a streaming application, the only ones tuning in are sports fans. Hence we see the higher price. ESPN has to charge 3 times as much since there will be a lot less than the $75 million cable subscribers (and declining).
To boot, this is the most expensive streaming application.
The final issue that ESPN will have is sports is seasonal. It is true that are many sports fans, we are more likely to see a football or basketball fan. Thus, even if people do subscribe, it will be for the 4 or 5 months of their teams.
Here we see that many subscribers will not fork over $360 per year. Instead, it might be $150 or $180.
And that is if they get the person at all.
It is due to be released in the fall. It will be interesting to see what the numbers look like when they are reported.
