Disney and Sony have announced a partnership that will continue the trend toward providing more digital over-the-top (OTT) content for cord cutters. The distribution deal over Sony’s Playstation Vue network includes all of ESPN’s properties and will allow fans who subscribe to Vue access to ESPN and all of its secondary channels — including ESPNU, ESPN Classic and the SEC Network. The deal is just another means to reach customers that have dropped cable and can allow ESPN to make up for lost sub-fees as the market continues to change.
ESPN lost a significant amount of revenue to cord cutters over the past few fiscal quarters, and leaving these fans without access to its content is just not an option. Although Disney/ESPN have built strong relationships with cable and satellite providers over the years, the company can’t pretend that cord cutting isn’t impacting its bottom line. The more agreements Disney/ESPN can create with new distribution partners the better. In the end, its all about making up the ancillary revenue it is losing to millennials cutting the cord.
ESPN has done a great job of increasing subscriber fees throughout the company’s growth, but if it keeps on providing partnership deal to cable competitors, it may get some push back from the typical cable and satellite providers. It already has deals in place with Sling TV, and Vue just adds to the OTT services fans may turn to if they can get ESPN and sports content outside of the traditional cable package.
ESPN is making the right decision. It can’t stand pat and not try and generate revenue off cord cutters leaving for cheaper television alternatives, especially when ESPN has some large rights deals kicking in over the next few years. Vue is only offered in major markets — New York, Los Angeles, Chicago, Philadelphia, Dallas, San Francisco and Miami — making this a good test run for ESPN and the rest of the industry.
Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.