There are a lot of exciting things currently happening and in the works at ESPN. But at its core — at least for now — the network remains a cable channel.
That obviously presents some obstacles in the current television climate, with subscriber rates continuing to plummet at a rapid rate. Jimmy Pitaro admitted as much during an interview with CNBC’s Alex Sherman, in which the ESPN president acknowledged the Worldwide Leader’s need to adapt.
“We’re navigating through a storm,” Pitaro said. “We all know people are cutting the chord at a higher clip than they have in the past. If you look at the past few years, seven, eight percent fewer households watching television. That’s a great business model, it has been a great business model, to ESPN and to the Walt Disney Company. And when that business model is in decline, you have to adjust and that’s what we’re doing right now.”
How?
The most obvious example is the ESPN’s upcoming direct-to-consumer streaming service — currently nicknamed “Flagship” — which is scheduled to launch at some point in the fall of 2025. Pitaro pointed to the project as one reason why it still makes sense for the network to pay for rising rights fees, despite the effect declining cable subscriptions has had on its bottom line.
“We just closed our NBA deal. If that deal delivers for us in terms of growing our ratings, growing our reach — we’ve got ‘flagship’ rights — if it delivers internationally… we should see an uptick [in financial performance],” Pitaro said. “… We are not sitting idle here. [Disney CEO Bob Iger] and I talk all the time about disrupting ourselves, which is what we are doing right now. We’re planning on launching [the streaming service] right around this time next year. And that will be even more disruptive to that traditional ecosystem.”
Over the course of Pitaro’s 35-minute conversation with Sherman, “Flagship” proved to be a reoccurring theme. He pointed to the ability to integrate ESPN Bet with the yet-to-be-launched streaming service as one of the paths forward for the sportsbook app, which has largely underwhelmed in its first year on the market.
The topic of ESPN’s streaming service also came up with regard to regional sports networks, which are currently in disarray amid Diamond Sports Group’s bankruptcy. To that end, Pitaro made it clear that his network wants to play a role in the reconstruction of RSNs, with “Flagship” standing out as an obvious fit.
“We want to be a part of the solution to the leagues,” Pitaro said. “Especially the leagues that have had so much success from a local and in-market perspective. And I have no hesitation in saying to you that we have made that abundantly clear to the league commissioners. Especially in a world where we have ‘flagship’ direct-to-consumer, we want to be helpful and part of the solution.
“And we would love the opportunity to leverage our technology, where we can geo-target and locate where a sports fan is, leverage our incredible reach… that should be the top of the funnel for the leagues. And they should be looking at the ESPN reach and saying, ‘OK, this is the best opportunity that we have to get our content in front of as many fans as possible.'”
Considering how many times “Flagship” came up over the course of Pitaro’s conversation with Sherman, it isn’t difficult to see where ESPN is heading. While the cable industry may very well be in the midst of a storm, it’s clear the Worldwide Leader is counting on its upcoming streaming service to be a much-needed life raft.
[CNBC]
