Since ESPN negotiated its last series of carriage agreements with cable and satellite TV providers, a lot has changed. Cord cutting has become prevalent, streaming services have emerged as a player for subscribers and over the top has also become a part of our vocabulary. With all this in mind, an industry analyst has found a couple of buttons ESPN can push to gain leverage with the pay TV providers.

MoffetNathanson says the upcoming ACC Network could have an impact on revenue growth just like the SEC Network did when it launched back in 2014. And there’s the planned ESPN over the top direct-to-consumer service that the Worldwide Leader is developing with BAMTech in which parent company Disney purchased a stake last year.

MoffetNathanson says the ACC Network can help ESPN in bringing in an increase in subscriber fees like the SEC Network did.

“The ACC is expecting as much revenue in its first year as the SEC generated per school in 2014. We forecast a haircut to the SEC Network’s success with an assumption that the ACC Network will only be carried in states where their schools are located, representing about 40% of the U.S. households on the Eastern coast of the U.S. This leads us to project total revenues of approximately $220 million in its first year and $80 million in EBIT,” the firm wrote.

EBIT meaning earnings before interest and taxes.

And with ESPN planning its over the top channel (no linear content from its TV networks willl appear on the service), there’s another potential revenue stream. MoffetNathanson says the OTT service could amass as many as four million subscribers in the first four years and with a $9.95/month fee, could bringing as much as $480 million in revenue.

“As long as there is little to no overlap of the existing linear ESPN content on the BAMTech ESPN OTT offering, we expect essentially no cannibalization of the existing ESPN Pay TV subscriber base,” the firm wrote. “However, if content begins to spill over from existing channels, this will be an area worth monitoring closely.”

In our story last year about ESPN’s planned OTT service, Andrew Bucholtz noted that it will provide content that isn’t seen on its channels and online:

As per ESPN’s standalone service, that will be a very interesting topic to watch as time goes on. It makes sense that they’re offering only a “WatchESPN lite,” as that’s what Disney executives’ public comments have suggested for some time, but will cord-cutters and cord-nevers actually buy in for something that only offers ESPN3 content? We’ll see as time goes on.

And could ESPN use that service as leverage with the pay TV providers? It could argue that if it doesn’t get the subscriber fees it wants, it could allow some events that are on TV to migrate to the OTT service. While it likely won’t happen, ESPN could lean hard on the providers to get what it wants.

So before you think ESPN might have trouble after suffering from falling subscriber numbers and recent layoffs, it does have a couple of cards it can play in order to increase its fees.


About Ken Fang

Ken has been covering the sports media in earnest at his own site, Fang's Bites since May 2007 and at Awful Announcing since March 2013.

He provides a unique perspective having been an award-winning radio news reporter in Providence and having worked in local television.

Fang celebrates the three Boston Red Sox World Championships in the 21st Century, but continues to be a long-suffering Cleveland Browns fan.

  • Chris

    I’m slowly cutting the cord and working my way through signing up for various OTT services. I went to sign up for PBS the other night and they asked for $5/month. I balked at even that small amount. Aside from HBO/Showtime, are there any examples of people paying $10/month for something they used to receive as part of a cable package? I find it hard to believe anyone under 50 would go for that, and no one over 50 who watches ESPN wants to go through the hassle of cord cutting. I’m curious to see how this plays out.

    • DinkSinger

      Cord cutters can stream many PBS shows for free shortly after they air for example Grantchester Season 3, Episodes 3 and 4 are currently available. If you have a member station membership you can access much more archived content for example all the episodes of Grantchester. Here in Connecticut the cheapest membership is $5 per month, although seniors can get an annual membership for $30.

      I am 67, cut the cord quite a while back, and pay $20 per month for Sling Orange (the original) which includes ESPN, ESPN2, ESPN3 and ACC and about 30 channels in all. The only other programming I watch on a regular basis from Sling is Better Call Saul on AMC. My Sling subscription also gives me streaming access to ESPN channels through the ESPN app on my FireTV box and on other devices. (Sling itself had a terrible app at first). The cheapest cable package that includes the same would be about $100 a month after the first year of a three year contract. It includes about 220 channels in all. Paying $20 for something that is included in a $100 cable package makes a lot of sense no matter your age.

      I also subscribe to Hulu, Netflix and Amazon Prime. This gives me access to lots of programing that cable does not offer and quite a bit that it does.

      • Chris

        What happens when ESPN is no longer available with Sling and you have to buy it as a stand-alone product for $10/month? Would you still be willing to pay $20/month for Sling?

        $10/month each for Hulu, Netflix, and Amazon Prime on top of $20/month for Sling…pretty soon you’re paying your cable bill again, but in drips and drabs. I’m giving Comcast $120/month for high-speed internet and cable, including HBO and Showtime. It’s starting to seem like a bargain.

        • Taz

          I would LOVE for Sling and everyone else to drop ESPN. I wish cable companies would stop tolerating their extortion and tell them where to stuff it – because considering they are THE single most expensive channel to carry by far, and they force providers to include them in all packages, it would mark a paradigm shift toward allowing á la carte programming and lower pricing.

          • DinkSinger

            Sling Blue does not include ESPN. It includes FS1, FS2 and NBCSN though.

        • DinkSinger

          ESPN is no more likely to be unavailable with Sling then with cable or satellite. (Sling is a service from DISH network). The new product is supposed to offer unique programming and won’t include ESPN, ESPN2 and the other broadcast channels. If Sling did drop ESPN, I would most likely cancel it. When Hulu with live TV becomes available for Fire TV, I may drop Sling. It is $40 a month, including Hulu, and includes a lot more networks including sports networks. It even includes most Red Sox and Yankee games. I’m a Mets fan and will certainly switch if they add SNY.

          Hulu (with commercials) is $8 a month and Amazon Prime is $8.25 (if you pay annually) but one of the benefits it includes, besides the streaming TV content, is 3% cash back on everything I buy at Amazon, so net it cost about $3.25 a month. You also get a free month every time a package is delivered late. Netflix is now $10. All three, just like HBO, offer original content, but their content is not available on cable so most of the more affluent folks I know have both cable and multiple streaming services.

          That certainly is a bargain. Comcast (who now call themselves Xfinity) is way more expensive than that here.

        • Carl Collie

          I think your logic is flawed, most people already subscribe to Netflix, Hulu or Prime along with their cable, so to say that adding those makes it higher is not fair. I cut cable and added PlayStation Vue, but I already subscribed to Prime and Netflix prior to that, so I save over $70 per month.

    • Respected Citizen

      PBS has a big library of commercial-free video, and it’s a great perk for your donation.

      CBS All-Access is $10/mo for limited commercials, and it has about 1.5 million subscribers. Turner is now offering just the Boomerang channel for $5/mo.

      Cord-cutting has become extremely easy in the past year, and the 50+ crowd loves to save money.

    • ua2

      you can get PBS with an indoor leaf antenna for free..why do you need to go OTT?

    • The diversity of standalone services doesn’t mean that bundling is irrelevant.

      NBC, ESPN, Fox, Viacom, Turner, etc can decide to provide standalone products. But services like Sling, PS Vue and DirecTV Now can offer bundled packages at lower prices.

      Some may refuse to offer discounts, like HBO. But when cord cutting and shaving gets intense, they will.