Many analysts believe that ESPN’s dropping cable subscriber base hasn’t hit bottom, and that is an issue for the worldwide leader as well as its parent company Disney. ESPN has already been doing some heavy cost-cutting through its shuttering of Grantland, job cuts, and release of well known talent, but that may not be enough as expensive media rights deals kick in and millennials continue to cut the cord in favor of streaming services. ESPN has already started thinking outside of typical cable packages with distribution deals with Sony Vue and Dish’s Sling, but it could make up for lost income by offering a la carte games for which it owns the rights.
It’s not the best option but any ancillary income will help. If ESPN is losing subscribers — fees of which are estimated to be around $7 per month — to cord cutting, offering games on an a la carte basis is a way to make up revenue. The NBA is offering a la carte games for $6.99, so that seems like a reasonable price-point for ESPN. If the contest is a big game like the Iron Bowl or Cavs v. Warriors, ESPN could probably charge more. ESPN could also offer different a la carte packages such as a MNF package or Bowl Championship package. ESPN would like have to check what type of distribution rights it owns in each deal, but the company has to start making up for lost income if subscriber fees keep falling. Cord cutters could actually be a more profitable market if millennials order more than one game a month a la carte. ESPN could even offer some of its original programming such as 30 for 30 or PTI for a lower fee.
For years the industry has said that sports are essentially DVR-proof, but that didn’t mean it was immune to cord cutters. DVR-proof means that advertisers will get more bang for their buck because of the captive audience. But if the audience essentially gives up cable because of the industry’s rising fees, DVR-proof doesn’t mean much. ESPN should think outside the box and do everything it can to get back any income it has lost over the past year to cord cutters.
Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.