ESPN is looking at plans to totally become a stand-alone streaming operation -- not dependent on the traditional TV distributors paying it $8.72-per-subscriber per-month revenue fees in 2022, according to S&P Global's SNL Kagan -- easily the tops among all cable networks.
The average non-sports cable channel typically gets $0.50 to $1.00 a month -- which means some major disruption to the business is on the way.
ESPN is preparing for a world that has complete dependency on streaming.
ESPN already has ESPN+ -- a streaming service with limited programming, and some limited live programming, like the NFL and other sports. But primarily this is non-exclusive to ESPN+.
Disney sees the warning signs. Increasingly, exclusive live TV sports content is coming to streamers -- Amazon Prime Video now has exclusive airings of “Thursday Night Football”, Peacock will be doing an exclusive wildcard NFL playoff game next year.
For a long time the traditional TV-cable industry ecosystem has benefited from the pull of live programming, which for the most part has monthly cable TV network subscriptions due to sports TV-focused networks, and less so for cable TV news networks.
What is the fine line? ESPN gets around $9.2 billion a year in affiliate fee revenue currently. The goal then for Walt Disney is to shift to a stand-alone service near the moment the majority of modern TV consumers will easily make a shift streaming -- cord cutting for pay TV not only being totally acceptable, but necessary.
Perhaps ESPN believes that in a few years' time the average sports subscriber would be comfortable paying around $15 a month. If ESPN can get 45 million subscribers -- currently a major ask -- that would mean a total of $8.1 billion in subscription fees, near current traditional affiliate fee revenues.
Sports-focused TV consumers would then have to believe that adding ESPN to their other four major streaming services -- say Netflix, Paramount+, Peacock, and Disney+ with a total $45-a-month-price tag -- can take on a bit more.
Perhaps the latter three in this group all have over-the-air live local TV affiliates access: CBS, NBC, and ABC.
The key will come from the marketplace belief that making that jump can be fast and easy and relatively modest in price.
David Zaslav, president and CEO of Warner Bros Discovery believes this will happen -- possibly from legacy media companies getting together to form their own distribution system.
But if they do not, he warns that the likes of Amazon, Roku or others will fill the void -- which may not be exactly what media companies want.
In other words, beholden to a distribution system that is not in their control. Kind of what exists now.
Those future TV blackouts now morphing in streaming blackouts? Sports will play a major role either way.