Commentary
Is Disney Trying To Reset The Playing Field In TV?
- by Cory Treffiletti , Featured Contributor, July 26, 2023
Disney is a behemoth that owns most of the primary entertainment franchises of the last 60 years. It’s not wise to bet against the house of the mouse, but Iger knows how to read the market. He knows ESPN and ABC are widely respected sources of news and information. They are rarely (if ever) criticized for the content they present, although they are sometimes criticized for the financial moves they make -- guilty of either overpaying for talent or poorly mismanaging the recent layoffs of high-profile talent, as ESPN did with Jalen Rose. Those are management issues and not strategy issues, and Iger is dealing with strategy issues.
The larger question is not whether ESPN and ABC are valuable entities -- it’s what format the two should be focusing on to succeed for the next 20 years.
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ABC is a news outlet, and news outlets have had their fair share of challenges these last 15 years. That being said, ABC is the benchmark for news coverage and has been so for a long time, rarely venturing into partisan territory and generally maintaining a fair and balanced approach. You can find people to argue with that stance, but I think that would be unfair.
On the other hand, sports is one of the only remaining “appointment viewing” opportunities left. People still watch sports live, and ESPN offers a lot of live sports. Its coverage of the NBA by itself is enough to get people tuning in, if not for the live cornhole and axe throwing competitions trotted out for viewing in the shoulder season of sports between NFL and NBA. Here ESPN is growing beyond what it should be. Cornhole is not engaging television.
Should ESPN and ABC be maintained as primary network and/or cable news channels or are they better off going wholeheartedly into digital streaming? That feels like the bigger strategic question. Is this the tipping point for major media where the cable networks lose the focus of ESPN? Is there a better model of simply making ABC and ESPN free to anyone with an internet connection, and relying on different models for advertising to drive revenue?
Maybe having ESPN+ as a streaming service doesn’t make sense, and it should simply focus on garnering the broadest possible audience and monetizing that. After all, that's what the original three networks did, and that worked for a very long time.
The streaming wars are fascinating because they hinge on subscriptions, but what Bob Iger is likely realizing is that we can get news and highlights anywhere, at any time. Just check out YouTube and you can likely see what you want quickly. ABC and ESPN are personality-driven, and maybe the audience won’t pay for personality, but they will live with commercialization of the content if they don’t have to pay for it.
Of course, interruptive commercial breaks are less and less effective (and more annoying), so there will certainly be a change in the model of how that content is monetized. If they figure out the model, then it is all about the audience. Content wins and audiences bring the bagels (just go with it, it’s fun).
Whether someone buys ABC or ESPN is up for discussion. Whether the sports leagues invest in ESPN is up for discussion. Everything is up for discussion, and it feels like these are discussions that could have ramifications across the industry for many years to come.
What are your thoughts on what Bob Iger is doing?
The larger question is how the NBA will get paid with no commercials.
Product placement, jersey sponsorships and more!
Cory, I'm surprised to see you describing the ABC broadcast TV network as "a news outlet" While ABC has a news division and pumps out nightly newscasts as well as prime time newsmags , early AM shows like "Good Morning, America", the weekend political interview shows and special coverage ---such as political debates, election night coverage,, etc. ABC is also a sports network and, more importantly, an entertainmemt network. In fact, the latter---entertainment -----dominates in terms of program time, viewing and ad revenues.
What's missing in most of the discussions of a possible "fire sale" by Iger are the interactions between the existing properties. For example, the ABC TV network and its stations supply a large amount of daily news and entertainment content whose costs are funded by linear TV ad dollars. These shows can be added to Disney's streaming libraries at modest additional cost and eventually, genres like sitcoms and drama series will be commissioned from producers for both platforms simultaneously---based on anticipated linear and CTV ad revenues as well as subscription and retransmission incomes. If the ABC TV network and the O&O stations were sold, Disney would be on its own regarding the funding of new sitcoms and drama series for Hulu andDisney+.
Of course, If "linear TV" suddenly disappeared, this type of synergy would also disappear---as would chances of selling the ABC TV network or the O&O stations for any reasonable amount of money. But that doesn't seem to be what's happening. Instead we are watching a slow migration to streaming in terms of viewing time spent that will be largely fueled by the incoming availability of masses of linearTV content and reruns of same. In time, it will all become "just TV", the main difference being that one method of access---streaming---- allows viewers to select content "on-demand"---if they want to and to choose which program sources they use while the other --- linear----bundles program sources together, including some that aren't wanted, and features what is dubbed "appointment viewing"----which many consumers have no problem with.
product placement wont replace the billions sports get from TV
It's basic math. Excluding advertising, ESPN generates ~ $6.25B in annual sub fee revenue (65.0m MVPD homes * $8 per month * 12 months). If they went OTT and charged $30 per month, they'd need 17.4m subscribers to match that (17.4m x $360 annually). They need to convert 27% of existing cable\sat homes who watch linear ESPN, or ~14% of all US homes. Given ad loads are less in OTT, they'd need a bit more than the 17.4m subscribers to compensate for the loss of that revenue.
Unfortunately, the picture is not so bright for streaming for Disney,ABC and ESPN. Most of these subs are due to the disney bundling. They are cutting costs to make it work for content and partnerships. They pay NBA 1.5b annually alone.
Can you imagine ESPN without linear viewers to watch those games? Ad free is costly
I am surprised that mavens believe Iger is somehow incapable of a misstep, especially when he admits unwise moves he made on his first go-round.