Disney Reveals OTT Deals/Platform For ESPN

Walt Disney has announced two OTT initiatives for its powerful ESPN network group -- hoping to combat criticism the sports group might face when it comes to carriage on future low-cost “skinny” digital TV services.

Disney will start up its own ESPN-branded OTT service, which comes partly via a deal Disney made for 33% of BAMTech for $1 billion. BAMTech is Major League Baseball’s digital arm, servicing third-party content owners and programmers.

Programming on the new ESPN OTT service will be limited, including college football and basketball games and tennis as well as products from Major League Baseball and the National Hockey League.

Bob Iger, chairman/CEO of Walt Disney, told CNBC that programming for the ESPN-branded OTT service will not be pulled off the ESPN cable TV network.

In addition, as part of its third fiscal quarter announcement, Disney announced that ESPN would be a part of DirecTV’s upcoming digital over-the-top service DirecTV Now brand. DirecTV’s competitor, Dish Network, already has the OTT service Sling TV, which it launched over a year ago.

For some time, media analysts have been concerned that big, pricey cable networks like ESPN could be in trouble when it comes to cord-cutting/shaving, and consumers shifting to “skinny” OTT packages from higher-cost traditional pay TV services from cable, satellite and telco companies.

“What this does is give us the option to pivot if the business model that is supporting these great media properties starts to fray in any significant way... to put out a direct-to-consumer product that can either replace or supplement it,” said Iger.

But Iger added: “We are not suggesting that it is going to happen; it’s our hope that it doesn’t happen.”

Iger expects its networks like ESPN to be part of other OTT services in the future -- like one that will be launched from Hulu later this year. “We fully expect to be part of that,” says Iger. Disney is an equity partner in Hulu.

For its third-quarter financial results, Disney posted a 9% gain to $14.3 billion in revenue. Net income grew 5% to $2.6 billion.

Disney’s media networks were up 2% revenue to $5.91 billion, despite lower ABC network advertising revenues during the period. Studio Entertainment grew 40% to $2.8 billion, chiefly because of strong results from movies such “Captain America: Civil War” and “Finding Dory.”

Disney’s Parks & Resorts unit grew 6% in revenue to $4.4 billion, with higher average ticket prices at its theme parks and cruise line.

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