Disney is all-in on streaming, but ESPN can’t kick cable

In the last decade, ~25m Americans have ditched the cable bundle. During that time, streaming has exploded:

• Netflix has grown to ~209m subscribers
• Disney+ now has 116m subscribers
• Hulu has reached ~43m subscribers

But one Disney property is still clinging to the cable model: ESPN.

Live sports is keeping the cable bundle alive…

… and ESPN is one of the biggest holders of sports media rights. This gives the firm leverage when dealing with cable providers, and a massive one-two punch for revenue:

1. ESPN pulls in ~$10/mo per cable subscriber (compared with <$1 for most channels). In 2021, this will amount to ~$7.9B, per research group Kagan.
2. ESPN can also charge a premium for advertising during live sports coverage, which is expected to net ~$2.35B in 2021.

ESPN’s cash fuels content investments for Disney+ and Hulu

Which is why the company is still cool with cable — at least for now. Some analysts expect 25m more Americans to cut the cord in the next 4-5 years, which could force ESPN to reconsider streaming.

Even so, ESPN has other concerns about the streaming model, including:

• Uncertainty around consumer willingness to pay for an a la carte sports bundle
• Higher churn rates from subscribers that sign up for high-profile events
• Password sharing among users that could stunt subscriber numbers

There’s also the question of whether Gen Z will share the same interest in live sports as previous generations – but given how much Gen Z loves the ’90s, ESPN could be sitting on a gold mine with old SportsCenter reruns.