A look at Digital Center 2 on the ESPN Bristol, CT campus in June 2020. (Photo by Allen Kee / ESPN Images) Bristol, CT – June 10, 2020 – DC2: Side view of Digital Center 2 during the 2020 MLB Draft. (Photo by Allen Kee / ESPN Images)

There are many important milestones in the ongoing rise of direct-to-consumer streaming services and the associated rise of cord-cutting from multichannel video provider packages, but perhaps the biggest one is going to come when ESPN makes their linear feed available to customers as a standalone service. ESPN executives have been talking about that potential move for some time, but they have never made it sound particularly imminent. However, a new Wall Street Journal report from Jessica Toonkel and Sarah Krouse indicates that ESPN not only is actively working on an over-the-top offering of their linear channel, but already has deals to do so with at least two leagues, and has also started securing flexibility to do this in deals with MVPDs.

Here’s more from that piece, citing “people familiar with the matter”:

As consumers increasingly cut the cable-TV cord, the company is actively preparing for that shift under a project with the internal code name “Flagship,” the people said. The company has set no firm timeline for the change.

…ESPN would continue to offer the TV channel after launching a streaming option, the people familiar with the matter said.

…ESPN has begun securing flexibility in its deals with cable providers to offer the channel directly to consumers, the people said. The financial terms of those deals couldn’t be learned. The company is having similar discussions with pro sports leagues as those rights deals come up and has secured the same flexibility from at least two major leagues, the people said.

ESPN has long been a critical component of most MVPD bundles, and rakes in the industry’s highest per-subscriber fee (currently $9.42, as per Toonkel and Krouse). But there is also incentive for them to find a way to offer their linear ESPN channel (and also possibly the likes of ESPN2, ESPNEWS, ESPNU, SEC Network, ACC Network, and so on) to reach those who don’t have MVPD bundles, especially with the numbers of MVPD subscribers continuing to drop. At the moment, ESPN can only reach those customers through ESPN+, and while there’s a fair bit of exclusive content there, many of their highest-profile broadcasts remain on linear ESPN and not ESPN+. Some existing cord-cutters would certainly buy a package including an OTT feed of linear ESPN. And they then don’t need to worry about carriage battles, either.

However, that move comes with its own challenges. One is that being able to buy a DTC version of ESPN might convince many more people to cut the cord. That’s not a specific problem for ESPN, as those people would be buying subscriptions from them, but it’s a huge problem for the MVPD business. And ESPN still gets a lot of money there, so if that business fully tanked, that would cause problems for them.

The other associated hurdle there is that while ESPN would make more revenue on each individual subscription they can sell DTC rather than through MVPDs, they’re unlikely to get close to the number of DTC subscribers that they currently have for linear ESPN (which was estimated at 74 million households last September). That’s especially true when you factor in that many of those MVPD subscribers accounted for in that per-subscriber fee never watch ESPN.

Thus, the company would likely have to price the streaming product much higher for consumers than that $9.42 per-subscriber fee they charge MVPDs if they wanted to keep their revenue at least neutral. And we’ve seen that with the regional sports networks that have gone over the top to date, such as Bally Sports+ ($20 a month) , NESN+ ($30 a month), and MSG+ ($30 a month), with those prices all much higher than the per-subscriber fee they get from MVPDs. That’s why many of their executives, including Sinclair CEO Chris Ripley, have talked about having the hybrid of linear offerings and an OTT product “for years to come.”

But high DTC prices carry their own hurdles in terms of adding users. So the eventual price here (which is not yet finalized) is going to be a tough decision. And that’s part of why the comments here from executives have always been “We’re exploring it,” but without many specifics. The comments there over the last month have made it clear this will happen, including ESPN chairman Jimmy Pitaro calling it “a when, not an if” and Disney CEO Bob Iger saying “It’s a huge decision for us to make and we know that we’ve got to get it right both in terms of pricing and timing” earlier this month. So nothing here appears particularly imminent.

At any rate, it’s certainly notable that ESPN has an active internal group working on this, and that they’ve struck deals with leagues (very important; a big part of the Bally Sports+ issues so far have come from only having five MLB teams’ digital rights, at least according to their lawyers) and MVPDs. That suggests that while an OTT offering of linear ESPN still isn’t imminent, it’s maybe closer than many had thought.

[The Wall Street Journal; photo of Digital Center 2 on the ESPN Bristol, CT campus from Allen Kee/ESPN Images]

About Andrew Bucholtz

Andrew Bucholtz has been covering sports media for Awful Announcing since 2012. He is also a staff writer for The Comeback. His previous work includes time at Yahoo! Sports Canada and Black Press.