ESPN on TV—the way we know (love or hate) it—isn’t going anywhere. But sports fans may soon find the network in unexpected places. Like, say, as part of “skinny bundles” that may someday be served up through Amazon or Apple.
At Re/code’s media conference yesterday, ESPN president John Skipper repeated several times that the company will most definitely not be offering a standalone subscription streaming service anytime soon. “We can sell ESPN as a standalone business, but we don’t believe it right now to be good business,” Skipper said1, in a refrain he would repeat several times throughout the on-stage interview.
For Skipper, it seemed important to make clear that ESPN isn’t changing its business model drastically, at least in the near future. ESPN, after all, is one of the most-watched media properties right now. While most media giants seem in a near panic over the so-called cord-cutters, cord-nevers, and smartphone-obsessed-millennials, ESPN has largely stood by its traditional business, airing sports news programming on cable TV, which sports fans can only get by paying for pricey cable packages.
Despite his network losing 7 million subscribers in the past two years, Skipper maintains that the cable business, at least for ESPN, continues to work well. ESPN has long been sold as part of a cable bundle, and that structure brings in a huge amount of revenue for the sports giant, along with its parent corporation, The Walt Disney Company. (For reference, ESPN still has more than 90 million subscribers.) In addition to selling ads, the company makes its money by charging cable providers hefty fees per subscriber for the rights to broadcast ESPN. If ESPN were to offer a standalone service, those fees would likely drop significantly, impacting the company’s bottom line.
Here’s the Skinny
The counterpoint here is HBO, which began offering standalone service HBO Now last year. Skipper, for his part, doesn’t see the two networks as comparable. He argued yesterday evening that HBO has far fewer cable subscribers than ESPN. “We’ll be more aggressive about direct-to-consumer,” he added again, “when it makes sense for the business.”
All of which might explain why rather than ditch the bundle altogether, ESPN will evolve by embracing smaller ones. Skipper said that ESPN’s slimmed down service on Sling TV has proved successful at bringing in new viewers that might otherwise not watch ESPN. Meanwhile, the company recently folded live streaming into its main app for cable subscribers. The company is exploring more options, to be a part of more so-called “skinny bundles,” he said. It’s had further talks with Dish over Sling TV, he said, adding off-handedly that Amazon and Apple have been exploring skinny bundle services as well.
Whether ESPN would be a part of the slim bundles offered by either tech giant—or whether those over-the-top networks will come to fruition in the first place—was left an open question. “A number of people have expressed interest, and we’re in discussions with a large number of people,” Skipper said. “I think other people will enter into some markets with lighter packages in this calendar year.”
You might wonder then why ESPN is so hesitant to launch a standalone app, but is considering (or, at least, appears to be considering) the opportunity to be a part of a skinny bundle created by a giant tech company (not to mention the deal with Dish and Sling TV). In a sense, it is a contradiction. Couldn’t a skinny bundle provide an alternative to a cable package just as much as a whole range of standalone apps would? Of course! However, ESPN’s parent company Disney likely won’t make a deal to be part of a skinny bundle unless it, ahem, bundles ESPN along with other Disney channels (think: ABC Family and the Disney Channel), as it has with Sling TV.
Ultimately, Skipper maintained that, sure, ESPN is losing some subscribers as some cut cords and others move to a simplified cable package that doesn’t include ESPN. But the business is still intact and, no, it is not a “drag” on Disney. The skinny bundles could be a way to reach a different kind of viewer that will, by his measure, one day upgrade to the full cable package that ESPN offers on TV. “The cable package continues to be the greatest value in the history of entertainment,” he said. If he thinks that’s true at $100-plus per month, imagine what he thinks of a skinny-bundled $20.
1CORRECTION 4:40 PM ET 02/18/16: Due to a transcription error, a portion of ESPN President John Skipper’s quote assessing ESPN as a standalone product was omitted. “We can sell ESPN as a standalone product, but we do not believe it right now to be good business,” Skipper said (emphasis added). The story has been updated.