The cord cutting phenomenon is getting pretty serious because top media executives are acknowledging it and looking towards a changing future in the industry. The cable bundle, a la carte pricing, over the top services, the sports rights bubble – these are all just a few pieces in this high stakes game of chess that’s developing as the cable and satellite era transforms into a digital one.
At the top of the mountain in the television world is ESPN and corporate overlord Disney. And because of the increase in sports rights fees, ESPN is fighting a two front war to sustain growth, profitabliitly, and attractiveness to investors. On the one side, ESPN is looking at an exponential growth in rights fees leading to exorbitant costs while at the same time cord cutters are cutting into their subscriber base. This means that ESPN is faced with drastically reducing their spending and slashing costs everywhere at the network.
On CNBC this morning, Disney CEO Bob Iger gave some enlightening comments envisioning a future where ESPN and Disney could restructure their business model by going straight to the consumer.
And keep in mind that ESPN makes 5-6 times more in subscriber fees than any other network, so if they’re feeling the squeeze and looking at alternative future strategies, nothing in the television industry is safe from significant change.
Could you envision a future where ESPN becomes a premium service like HBO? Or maybe they put all of their content online and make it available to anyone regardless of subscription status for $9.99 per month like WWE Network?
The a la carte debate is not one that’s easy to solve, although there are staunch advocates in both directions. Yes, you’re paying a lot of money for your cable bill that keeps going up and paying for a lot of channels that you don’t watch. But if ESPN does bypass the traditional model and go over-the-top or straight to the customer, they could justifiably charge some very high prices for their massive array of live sporting events.
Analysts have predicted that if ESPN were to go a la carte, the network could potentially cost $30-40 per subscriber per month. While that seems like a lot of coin, my guess is there are scores of sports fans who would deem it worth the cost so they didn’t miss out on Monday Night Football, the NBA, MLB, the College Football Playoff, college basketball, and much more.
ESPN built an empire largely on their ability to maximize profits from the cable industry. They’re going to do everything they can to do the same in the digital age.
[CNBC]
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