We initially wrote about ESPN going direct-to-consumer in our first newsletter a little more than a year ago. We put the timeline at five years or fewer.
Our podcast partner, John Ourand, finally joined our side last week, saying he thinks it will happen within the next two years.
To reiterate from what I wrote a year ago: ESPN will go direct-to-consumer, but also will remain on cable and satellite providers, giving the customer options.
The next question is what it will cost. Disney hasn’t fully figured it out, but we have some educated conjecture that the opening price will be a little lower than what I’ve seen bandied about.
Let’s go through this:
1️⃣ At the moment, I would project that a standalone ESPN, which would include everything the network has to offer, would cost between $19.99 and $29.99 per month.
2️⃣ Here is what Disney/ESPN will use as a baseline to flip the switch and offer a full DTC product: when its cable subscribers decrease to around 50 million homes. ESPN is currently in 73.5 million homes, according to Nielsen.
3️⃣ But, you say, Mr. Clicker — very polite of you — how can ESPN possibly charge the same or even less than a regional sports network? NESN (home of the Red Sox), for example, has a direct-to-consumer product that is priced at $30 per month. I bet YES and SNY will have their own by the start of next baseball season, and I think they will be priced similarly to NESN’s.
These networks have much smaller potential audiences to draw on, compared to ESPN, but those audiences of diehard Red Sox, Yankees and Mets fans are very loyal, making it a sticky product. The regional sports networks (RSNs) have significantly lower expenditures, but as niche entities, their equation is different than ESPN’s.
4️⃣ ESPN, in contrast, wants a mass audience from all over the country, so the price has to work everywhere. It has nearly a hand in every major sport, but, in most cases, not every game of a certain sport, just many of the most important ones.
5️⃣ The beauty of the cable bundle is that everyone pays for everything. One day, it probably will be remembered fondly by customers. It has always been looked at fondly by ESPN, which still receives around $10 per month per cable customer for its family of networks.
6️⃣ Let’s do some math to get ESPN to its current cable subscriber revenue. I was a journalism major for a reason at Ithaca College, so I’m going to make the math a little easier: Let’s round up on ESPN’s cable subscription revenue — 75 million x $10 — and call it $750 million per month. That is less than it once made, but it’s still an enviable business.
7️⃣ We are not going to include the ESPN+ revenue. Disney says ESPN+ has 22.8 million subscribers, and it is priced at $9.99 per month (though it varies with the Disney+ bundle). But some of those folks in theory will fold into the larger, more expensive ESPN bundle because they signed up for a love of a certain sport(s) or league(s) that can only be found on ESPN and therefore are likely very sticky (like RSN customers).
8️⃣ With the difference of 25 million (I’m rounding up again) between 75 million to 50 million from ESPN’s current subscriber base to the threshold at which it will likely go direct-to-consumer, ESPN has to make up $250 million per month. Many of the cord-cutters that reduce the cable audience from 75 million to 50 million won’t want ESPN because they don’t like sports and now have given up cable. But a good amount presumably will still want to watch “Monday Night Football,” the NBA playoffs and college football’s biggest games.
If ESPN can get half of them — 12.5 million — to pay at let’s call it $20 per month, then it would make back the $250 million and have the benefit of an even more direct relationship with its fans.
It may start at $30 per month for ESPN, the whole enchilada, but I think the company will want to make the pool as big as possible and make a little less revenue, then raise the price later.
9️⃣ The idea that a direct-to-consumer ESPN will attract half of the people cutting cable might be too ambitious. Even so, to get to that $250 million per month back, it could go to $30 per month. I don’t know for sure, but I think it still will start a little lower and just inch up the price as it goes, which is what we have seen with Disney+, Hulu and ESPN+.
1️⃣0️⃣ In this equation, we didn’t put the ESPN+ subscribers in, and that group might include a lot of people who now have both ESPN and ESPN+, though not all do. Again, just conjecture, but of those 23 million current ESPN+ subscribers, ESPN may be able to squeeze another $10 a month from a third of them. That’s around eight million people, or an additional $80 million per month.
ESPN is working on parallel paths. With basically a piece of the rights to all of the major sports and most of the minor ones, a lot of people still will want the service.
The RSNs are going to move in this direction quickly, and ESPN is going to be right there with them.
Gus Johnson had to leave during the first half of Saturday’s Oklahoma-Nebraska game due to illness. Analyst Joel Klatt handled the play-by-play while Fox had studio analysts Brady Quinn and Urban Meyer join in during the blowout. Fox Sports expects Johnson to recover in time to return next Saturday. … CBS is on an early hot streak with the late-game switches. Last week, it was able to go to the Steelers’ overtime thriller over the Bengals, and this Sunday it had the Dolphins over the Ravens. It juiced the ratings last week, and could do the same this week. … Money is important, but you need distribution. There are no viewership numbers on Apple TV+’s Friday MLB doubleheaders, so there is no official way to know whether they have been successful or not. It doesn’t feel as if they have been very well-received. On Friday, Apple TV+ is scheduled to have the Yankees and Red Sox, which could feature Aaron Judge on the cusp of history, chasing Roger Maris’ American League record of 61 homers in a season. Stephen Nelson, Hunter Pence and Katie Nolan are scheduled to be on the call. If MLB doesn’t adjust and put the game on YES, Fox or ESPN, it could be a very tough look, especially in New York. …
Fox will have the Yankees-Red Sox nationally the night before on Thursday. It would be a good spot for Joe Davis, Fox’s Joe Buck replacement, to have a big stage, but as of right now, Aaron Goldsmith, who is more than capable, will be on the call with John Smoltz. … I reported last week that Dwyane Wade decided not to return to Turner Sports. Wade really liked working with TNT, according to sources, so maybe he returns one day. Wade has a lot of other business interests, including an ownership stake in the Jazz, though that journalistic conflict of interest did not factor into the equation.
The real question about Prime
In the memo NFL commissioner Roger Goodell sent to his employees about Amazon’s “Thursday Night Football,” which I published on Twitter, a lot of people focused on Goodell saying it was the “right decision for our fans.” This is funny, of course, because if that is what it is all about, TNF would be on broadcast for free with perfect distribution. The next clause was much more telling: saying it was the right decision “for our future and for the continued growth of Thursday Night Football.”
I bring this up because the ratings are going to come out this week for Thursday Night Football. The over-under is 7.5 million, and if it is in that range, it will be pretty good.
But this is the question to me when evaluating the first NFL regular-season game on Amazon Prime Video and where this is going: After one game, do you think 11 years from now, Amazon will be on its next deal with the NFL? I do.
Let’s go over some thoughts on Amazon’s debut on Thursday:
1️⃣ The fact that the video didn’t completely crash was a win. Amazon was confident, but this was new and that would have been a failure. So if you are looking for a grade on the first night? You grade it on a pass/fail scale, and Amazon and the NFL passed.
2️⃣ I had no difficulties whatsoever in my setup, but there were all kinds of reports on social media. These are hard to weigh fully, but the idea that this won’t improve over time seems a bit pessimistic. I don’t know the technology well enough, but would it surprise you if in 2033 the stream works just as well as your cable system does now?
3️⃣ Amazon is the best at selling other people’s products. It worked again. NBC’s Fred Gaudelli is producing the broadcast, and his crew is largely made up of NBC folks. Al Michaels was brought in from NBC, and Kirk Herbstreit is from ESPN. Kaylee Hartung was signed from ABC.
In the first half, I thought Michaels and Herbstreit lacked a bit of energy, but that improved and overall they were very good.
4️⃣ Here’s the thing on the telecast, and this may sound like a low bar: It wasn’t the story. That’s what you want. That’s a success.
5️⃣ The pregame probably has one person too many. I’d like to hear more from Ryan Fitzpatrick, Richard Sherman and Andrew Whitworth and less from Tony Gonzalez.
6️⃣ Hartung seems like a good hire on the sideline.
Pac-12 and ESPN are hundreds of millions apart
Negotiations between the Pac-12 and ESPN on a new broadcast rights deal have the two sides hundreds of millions apart, The Post has learned. That is a big gap in value.
That doesn’t mean a deal can’t be reached, but it shows the weakness of the Pac-12’s hand after the conference lost USC and UCLA, who both are jetting to the Big Ten.
This makes me think the Pac-12 may have to consider a digital player with deep-pocketed Apple in its West Coast backyard.
Apple likes exclusive rights and the idea of selling subscriptions. The issue for the Pac-12 — after a bad result with its own Pac-12 Network — is it very much wants to increase its exposure. Though Apple’s platforms are powerful and can reach people, how would a non-ESPN move play with alumni and future recruits?
Amazon’s model is trending more toward the traditional broadcast and cable-network model of just showing the games, rather than an exclusive subscription. If the Pac-12 wants to split the package for the most money, its problem is it currently doesn’t have enough elite games to get big money from two entities.
There has been engagement between the Pac-12 and Amazon, according to Jon Wilner of the Mercury News.
Meanwhile, the Big 12 is looking west to poach schools — Arizona and Arizona State are prime targets. The Big 12 has opened up negotiations with ESPN and Fox Sports. The serious game of chicken continues behind the scenes.