As ESPN struggles Disney still bets big on sports

 

Maybe it’s thanks to the NFL public relations trouble, but ESPN is struggling to get viewers this year. The sports network is letting go of hundreds of staff as viewers, and subscribers leave in droves. But parent company Disney still believes in sports as entertainment and a revenue base.

The evidence for this is in the fact that, as part of the recently announced purchase of 21st Century Fox, Disney will also be getting 22 regional sports networks. So, there has to be something there.

That “something” is the “live” dynamic. While binge streaming and DVRing is all the rage with consumers these days, consumers are still willing to watch live sports. That makes their commercials, arguably, even more lucrative than they already were. And, even as profit centers are shifting, commercials are still important for TV. Now, in addition to the already planned ESPN streaming channels, Disney will also have a controlling interest in Hulu, as well as multiple local pay-TV channels. All of these could show live sports with commercials as well as subscriptions fees. These double dips may not make customers happy, but Hulu has proven it’s not only possible but also a profitable way to go, even in the era of Netflix and Amazon’s commercial-free content.

The new networks could bolster ESPN’s profit streams, because these 22 networks own significant rights to multiple MLB, NBA, and NHL teams. In fact, taken together, these collective networks have the rights to broadcast content of about half of each represented league’s teams. One of the biggest benefits of this deal, especially for ESPN, is that they come with a strong contingent of local fans that are dedicated to watching their teams on these channels. They are, collectively, more dedicated to watching their local team than the national leagues of which those teams are members. Viewer metrics back this up. In most cases, local team programming is more watched than national sports when they’re on head-to-head.

This dynamic could help get ESPN back on firmer footing. While the networks have long been one of the most profitable properties for Disney, the networks have been going through a downturn as of late. They need an interest boost and a money boost, and this deal may give them both, especially in the short term as viewers are introduced to the streaming services. Disney could use this bridge. Live sports has long been the holdout of the shift to streaming, but that is changing. At present, Disney has more invested in live play TV sports than streaming. The company, while it has big plans for being a player in streaming, still has a lot of work to do on that front.

In the meantime, this deal could help connect their present with the hoped-for future.

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