As ESPN navigates shifting media landscape, Jimmy Pitaro leads launch of new streaming era

New York Times

a day ago

ESPN chairman Jimmy Pitaro's big bet is not all-or-nothing.
On Thursday, Pitaro and the sports media behemoth will launch a highly anticipated direct-to-consumer streaming service that will allow fans to go straight to ESPN for all its offerings, including live games such as 'Monday Night Football' and studio shows such as 'First Take.' No longer will fans need another television subscription for cable, satellite or any other service to access ESPN, as long as they're willing to pay ESPN directly each month.
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It is a moment that Pitaro, ESPN and its parent company, Disney, have worked toward for eight years.
ESPN is not shy about what going direct-to-consumer means, as the network that once proclaimed itself 'The Worldwide Leader in Sports' — an immodest but accurate description among media companies — is now going with 'The Next Era' for its latest venture. The service's unveiling is a landmark moment for the company and the industry.
ESPN's dual cable revenue sources of subscription and advertising is arguably the greatest business model in media history. With its location in the lowest basic cable tier, it has meant that everyone, sports fans or not, paid for ESPN. By 2011, a little more than three decades into its existence, ESPN reached 100 million subscribers, generating hundreds of billions in revenue over the decades and allowing ESPN to keep pace on a spending spree of nonstop, wide-ranging rights and talent acquisitions to sustain the model's flywheel.
In the digital age, this subscriber number has eroded as cord-cutters (viewers leaving the cable bundle) and cord-nevers (younger people who never even subscribed to cable in the first place) have become more the norm than the exception during the digitized YouTube- and Netflix-ization of viewing habits. In May, for the first time, more viewers consumed streaming services than traditional networks, per Nielsen.
ESPN is in around 61 million homes today, between cable, satellite and services like YouTube TV. ESPN receives around $15 per subscriber monthly from distributors for all of its networks. That results in the still-not-too-shabby math of around a billion dollars per month of revenue, and that's before ESPN sells one commercial.
The model still allows the network to spend very big, which it has to do to protect the cable deals as much as possible — and to power its direct-to-consumer moment.
Pitaro, a diehard Yankees fan, has been compared to George Steinbrenner because he has outlayed in the neighborhood of $80 billion over his seven years in charge to create the greatest live-sports portfolio in media, while doling out hundreds of millions for on-air talents such as Stephen A. Smith, Peyton Manning, Joe Buck, Pat McAfee and others.
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Pitaro and ESPN's hand is very good — they have the best allotment of sports programming in the game — but they don't have everything. There are many examples, but NBC, owners of "Sunday Night Football," has the next Super Bowl. With the cable subscription numbers diminishing, ESPN had no choice but to offer fans a more modernized delivery platform.
The price of the new service, simply named "ESPN," will be $29.99 per month. Pitaro called the rate more of an art than a science, but it does seem notable that it is exactly double the wholesale cable fee. Without non-sports fans paying for ESPN (as they mostly do when they have cable) and with streaming subscribers more likely to cancel after any given month than cable subscribers, this potentially provides a revenue cushion.
It also could make the cable bundle more attractive. Cable and satellite subscribers will be able to access all of ESPN networks traditionally, and most will have access to the new direct-to-consumer product that will have enhanced features and programming to go along with ESPN's 12 networks and services. The new app will feature new betting and fantasy game integrations, among other items.
Pitaro describes it all as being in "the first inning," with new features coming monthly. The Steinbrenner-like checkbook is still out.
"The Next Era" is intended to reflect the company's current mission statement and serving fans "Anywhere. Anytime.' Before Thursday, the cord-cutters and cord-nevers had no legal way to access ESPN's programming.
The new service is also intended to create new bundles: A deal with the NFL to include RedZone in its packaging; a combo with Fox One (Fox Sports and News' new DTC product) for a 25 percent discount; and an in-house promotional bundle of ESPN, Disney+ and Hulu for $29.99 per month (eventually going to $35.99 per month).
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Pitaro and his team say they believe the new app will only be additive, another place to find sports fans and to offer even more to its longtime subscribers.
It is a big bet, and may very well determine ESPN's future. The plan aims to do two things at once: Preserve as much of the past as possible while addressing the present and future of sports consumption.
"We thought it was the right thing to do for the sports fan because the trends were not slowing down,' Pitaro told The Athletic. 'If anything, they were accelerating."
ESPN is facing more competition than ever before, from its traditional rivals at Fox, CBS and NBC, to streamers Amazon Prime Video, Netflix, YouTube and then, like everyone else in the industry, social media and the changing habits of younger generations.
To create a moat of live sports to keep its importance on cable systems and prepare to distribute itself directly to customers, Pitaro has outlayed at least $80 billion in rights acquisitions that have resulted in the network's first Super Bowl in February 2027, the NBA Finals every season, the College Football Playoff every year and more.
"I think it is fair to say that we have the deepest and best rights portfolio that we have ever had at ESPN, and I believe it is the best in the industry," Pitaro said.
Last week, the network announced a deal with WWE for its 10-12 top events per year, including Wrestlemania. Most importantly, ESPN made four separate agreements with the NFL that gave the league a 10 percent ownership stake in ESPN (at a valuation of an estimated $2.5 billion) in exchange for more games, NFL Network and access to RedZone, among the assets swapped. The full deal still needs regulatory approval — so NFL Network won't be part of the ESPN DTC until next year at the earliest, and maybe not until the beginning of 2027.
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Pitaro first began game-planning for Thursday's launch eight years ago, before he was in charge of ESPN. At the table were ESPN president John Skipper, Disney CFO Christine McCarthy and Disney head of strategy Kevin Mayer, all of whom reported to Disney CEO Bob Iger. Pitaro was Disney's leader of consumer products and interactive media.
It's been a while. Pitaro's old job doesn't even exist anymore, and Skipper, McCarthy and Mayer are all gone from the company. Iger has retired and unretired. The plan stayed on course.
"We decided to pursue a 'crawl, walk, run' strategy for ESPN in the direct-to-consumer world," Pitaro said.
ESPN began making moves to build for this moment. Disney invested in, then acquired MLB's BAMTech for nearly $4 billion, assuming full ownership in 2022. That technology powered the 2018 launch of ESPN+, a smaller direct-to-consumer service that has featured UFC and a sliver of ESPN programming. The company says ESPN+ currently has 24 million subscribers, and it will still be available for 'select' programming at $11.99 per month, while the full $29.99 ESPN app is described as "unlimited." ESPN+ will be included in the full app.
In 2019, Disney also created Disney+, its entertainment and kids DTC offering, gaining 128 million subscribers.
While all this was taking place, Iger and Pitaro targeted 2025 for ESPN's defining DTC move.
"It was probably 2023 where we really decided we were going to do this soon," Pitaro said.
ESPN has most of its cable and satellite platforms on-board to allow consumers with those subscriptions to freely "authenticate" when logging into ESPN's app when it launches Thursday. (Notably, YouTube TV consumers will not have access at launch, as ESPN and YouTube are still negotiating long-term rights.) Cable operators already offer authenticated access to ESPN+, and they can market access to the entirety of ESPN's relaunched app as a benefit of sticking with a cable subscription (call it "bundle+").
"They are aligned with our strategy," Pitaro said of the cable, satellite and digital multi-video providers.
In the 46-year history of ESPN, Pitaro is the first leader of the company who did not come up through Bristol, the Connecticut town that has unexpectedly been the capital of sports media for decades. For seven years now, Pitaro has made the regular drive past Dollar General, the last store before the network's sprawling complex, as ESPN's chairman.
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Pitaro, 56, has made some outsider moves, such as licensing Peyton and Eli Mannings' "Monday Night Football" alternative "ManningCast" broadcasts, McAfee's midday show and, coming this NBA season, importing Charles Barkley's "Inside The NBA" from TNT Sports. But among those who work with Pitaro, he is very much ESPN, with an around-the-clock work ethic and a sports obsession that sometimes makes him sound like a WFAN caller.
His chairmanship has probably come during the most tumultuous time in ESPN's history. After it picked up NFL game rights as a nine-year-old company in 1987, its fortunes rose; it became the most dominant force in sports media and the base of Disney's financial success for decades. Before the digital revolution, when cable reigned, ESPN appeared unstoppable.
Mark Shapiro, now the president of TKO and WME group, ran ESPN programming nearly a quarter century ago, playing a large role in creating hits such as Tony Kornheiser and Michael Wilbon's "PTI" and negotiating the rights to move Monday Night Football from Disney-owned ABC to ESPN, which exemplified the power of cable and the sports network in 2005.
With TKO, Shapiro was recently instrumental in the WWE deal that Pitaro hopes will prevent churn. An issue in moving from cable to the digital world is that subscribers are more likely to cancel in any given month, once the programming they are interested in is out of season. ESPN wanted WWE's recurring schedule of top events on ESPN's new service to help avoid that. It is part of the "crawl, walk, run" plan.
"Jimmy has created a new era for ESPN, and he's done it in difficult, unpredictable times with eyes wide open and the utmost integrity," Shapiro said. "He doesn't play games. What you see is always what you get. He truly embodies the ESPN culture."
ESPN has morphed into a lot of things over the years at the center of American life. It has been mixed in with politics, satirized on "Saturday Night Live" and had books written about it. At its core, though, it has been the place to watch the game. The new service will have 47,000 live events each year, starting with the NFL.
In 1987, when ESPN received a half-season package of Sunday night NFL games, it changed its fortunes and elevated how much it could charge all basic cable subscribers. Shapiro added Monday Night Football two decades ago; now Pitaro has picked up Super Bowls. He just spent years finalizing its expanded relationship with the NFL, allowing the league to take that 10 percent stake in the network.
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It is not a coincidence that ESPN direct-to-consumer service will start on the eve of the NFL and college football season. That was always the plan, Pitaro said.
The network may be betting on "The Next Era," but it doesn't care where fans subscribe, just as long as they do, be it direct-to-consumer, cable or wherever they want it.
"It is the first inning," Pitaro said. "I've been very clear, internally and externally, that this is a marathon, not a sprint. This is going to launch with significant enhancements, but not all the enhancements that we have on the roadmap. There is going to be a steady drumbeat of improvements weekly, monthly, annually."
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