Here's what you need to know about ESPN's new steaming service and its deals with the NFL and WWE
The network announced Wednesday that its direct-to-consumer service and enhanced app will debut Aug. 21. The announcement coincided with Disney's quarterly earning report.
This week's expanded deals with the NFL and a new partnership with WWE provides ESPN the more inventory and offerings, which it hopes will bolster the company in a landscape that is divided among cable, satellite and streaming.
Will the ESPN service result in more subscribers?
According to Nielsen, streaming usage surpassed broadcast and cable combined in U.S. television usage for the first time. Streaming was at 44.8% compared to linear's 44.2%. When Nielsen started keeping track in May 2021 linear was at 64% compared to streaming's 26%.
The ESPN DTC will start out with around 25 million subscribers as those currently getting ESPN+ will migrate to the new platform. Many of those though are cable and satellite subscribers who get the service through deals with their provider. ESPN is hoping that more cord cutters will pay up to $29.95 per month since it will offer all the ESPN networks — ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, ESPN Deportes, ESPN on ABC, ESPN+, ESPN3, SECN+ and ACCNX — as well as being able to bundle NFL Network and NFL RedZone through a deal with NFL+ Premium.
Trying to determine how many of the DTC service subscribers are cord cutters will be more difficult though. Disney announced during its earnings call Wednesday that it will stop releasing ESPN streaming subscriber metrics beginning next quarter.
ESPN was in nearly 100 million households in 2013. Over the past 12 years due to cord cutting and streaming, that number has dropped to 60 million. Over the next two years, that is expected to decrease to fewer than 50 million.
What do the NFL and WWE deals mean for ESPN's market footprint?
Live sports remains valuable property, but the NFL is the beachfront house.
For taking over NFL Network, which had also been steadily losing subscribers, ESPN gets three additional NFL games along with another outlet to air Monday night games when there are more than one, as well as the ability for its app users to get specialty highlights of their favorite players or teams. There will also be ways to access stats, betting and fantasy sports info on the app while watching games.
The WWE premium live events (they're no longer called pay-per-views) also makes sense when ESPN takes over from Peacock next year. After all, the E in ESPN stands for entertainment. As Netflix chief content officer Bela Bajaria pointed out when it started carrying 'Monday Night Raw' earlier this year, the WWE has a multigenerational and loyal fan base that will flock to whoever carries the events.
The WWE deal applies only to the U.S. though. Netflix has the rights for overseas.
Can all of this turn around ESPN's financial outlook?
It does carry some risks. ESPN had $4.3 billion in revenue last quarter, an increase of 1% from last year, but the operating profit decreased 7% to $1 billion due to increased rights fees.
It is paying the NFL an average of $2.7 billion per year while the NBA 11-year deal that begins this upcoming season averages $2.6 billion per year. The five-year WWE deal will average $325 million per year.
This also comes at a time when the network opted out of its $550 million contract with Major League Baseball beginning next year and appears to be out of the running for Formula One rights. ESPN pays $75 million to $90 million per year under its three-year deal, but Liberty Media, which owns F1, is seeking at least $120 million for the next contract, which begins in 2026.
ESPN needs more than cable and satellite subscriber affiliate fees, which is also why it is launching a DTC product to gain more revenue. The past two years, it was been involved in prolonged negotiations with DirecTV and Spectrum before reaching deals.
How can viewers get the ESPN streaming service?
If cable and satellite subscribers already get ESPN+, they will automatically migrate to the new service. For cord cutters, there is an offer where they can get the ESPN unlimited plan with Disney+ and Hulu for $29.99/month for the first 12 months.
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