The Walt Disney Company is working on a streaming product that will offer live access to ESPN’s core cable channel for the first time, according to a report published by the Wall Street Journal on Thursday.
The report confirms remarks made by executives over the last several months that claimed the future of the sports-centric channel is rooted in streaming as more television viewers ditch expensive cable and satellite packages for cheaper online-only options.
Executives have offered no timetable on when the company will launch a streaming version of the ESPN channel — at the moment, affiliate revenue from cable and satellite companies is still one of the biggest parts of Disney’s business, and remains one of the few-profitable sectors — but the company isn’t waiting to develop its own direct-to-consumer service that offers live access to ESPN for when streaming revenue ultimately does overtake its traditional broadcast income.
According to the Journal, developers at Disney have given the project an internal code name of “Flagship,” referring to the core ESPN channel. The Journal acknowledges that the company doesn’t have a definitive timetable on when the streaming service would launch.
Disney currently operates a sports-centric streaming service called ESPN Plus that offers access to live hockey, cricket and soccer. But it reserves most of its premium sports — professional football, basketball and baseball — for its linear cable channel, which is only available on streaming services like Sling TV, YouTube TV and Vidgo that replicate the cable experience (and with similar pricing structures).
Launching a streaming product that includes live access to ESPN would almost certainly impair Disney’s ability to charge cable and satellite companies a premium for the sports channel, which already carries the highest price of any pay television channel (some estimates put the cost around $9 per subscriber, though the price also includes carriage of ESPN 2, ESPNews and college sports channels).
“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,” Bob Iger, Disney’s CEO, said on a conference call with investors earlier this month.
The Journal speculated that Disney might have to charge a high amount to recoup losses from its cable and satellite business once a standalone service with live ESPN launches. Other sports networks have had to take a similar approach: Sinclair Broadcast Group’s Diamond Sports charges $20 a month for online access to its Bally Sports-branded networks, while MSG Networks charges $30 a month for a streaming-only version of its channels.
Other companies have taken a different approach, leveraging existing pay television deals to extract premium pricing for its cable news and sports content. This week, Fox CEO Lachlan Murdoch said the company is keeping an eye on the streaming landscape, but still believed cable and satellite television was the “better business,” because it allowed viewers to get all the news and sports they wanted in one place while allowing Fox to charge higher fees than they would otherwise get from a streaming product.
“We are able to go to a distributor and say, look, we’re not competing with you,” Murdoch said. “We’re not asking our audience to choose between your distribution, your pay TV platform, and our own subscription video on demand platform. We are adding value, exclusive value, to your platform.”